EXHIBIT 10.1
LA JOLLA PHARMACEUTICAL COMPANY
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October
6, 2005, is executed by and among La Jolla Pharmaceutical Company, a Delaware
corporation (the "COMPANY"), and the persons and entities listed on Schedule A
(each a "PURCHASER" and collectively, the "PURCHASERS").
RECITALS
WHEREAS, each Purchaser desires to purchase, and the Company desires to
issue and sell to each Purchaser, the number of shares set forth opposite such
Purchaser's name on Schedule A hereto (all such shares for all Purchasers, the
"SHARES") of the Company's common stock, $0.01 par value per share ("COMMON
STOCK") together with a Closing Warrant (as defined below) for each such
Purchaser, at a purchase price for each Purchaser equal to the product of
Seventy Five Cents ($0.75) multiplied by the number of Shares purchased by such
Purchaser;
WHEREAS, to induce the Purchasers to enter into this Agreement, the Company
has agreed to issue a Contingent Warrant (as defined below) to each Purchaser on
the date specified below, and has also agreed to take certain actions specified
in this Agreement in advance of the Closing (as defined below); and
WHEREAS, the Company and the Purchasers are entering into this Agreement to
reflect the terms and conditions with respect to each Purchaser's potential
investment in the Company represented by the Shares and the Warrants (as defined
below).
NOW, THEREFORE, in respect of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
SECTION 1. PURCHASE OF SHARES AND WARRANTS
1.1 On or prior to the date of this Agreement, the Company's Board of
Directors shall have authorized the sale and issuance of the Shares and Warrants
and the transactions contemplated by this Agreement, subject to the terms and
conditions contained herein.
1.2 Subject to the terms and conditions of this Agreement, the Company
agrees to sell to each Purchaser at the Closing, and each Purchaser agrees to
purchase, severally and not jointly, from the Company at the Closing, (a) that
number of Shares set forth opposite such Purchaser's name on Schedule A, and (b)
a Warrant in the form attached hereto as Exhibit A, appropriately completed with
the name of such Purchaser and the number of shares of Common Stock for which it
is potentially exercisable, as set forth opposite such Purchaser's name on
Schedule A and, if the Company shall not have obtained the Share Authorization
Approval, an
additional Warrant in the form attached hereto as Exhibit B, appropriately
completed with the name of such Purchaser and the number of shares of Common
Stock for which it is potentially exercisable, as set forth opposite such
Purchaser's name on Schedule A (the "CLOSING WARRANTS"), for an aggregate cash
purchase price for such Purchaser equal to the product of Seventy Five Cents
($0.75) (the "PER SHARE PURCHASE PRICE") multiplied by the number of Shares so
purchased by such Purchaser. In addition, for good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, and subject to the
terms and conditions of this Agreement, the Company agrees to issue to each
Purchaser on its applicable Issuance Date (as defined below) a Warrant in the
form attached hereto as Exhibit C, for no separate consideration, appropriately
completed with the name of such Purchaser and the number of shares of Common
Stock for which it is potentially exercisable, as set forth opposite such
Purchaser's name on Schedule A (the "CONTINGENT WARRANTS" and, together with the
Closing Warrants, the "WARRANTS"). As described in greater detail in each
Contingent Warrant, a Contingent Warrant will only be exercisable from and after
the "Warrant Trigger Date" (as defined in the Contingent Warrants) (the "WARRANT
TRIGGER"). The date on which a particular Contingent Warrant shall be issued
(its "ISSUANCE DATE") is (i) the date of this Agreement for the Purchasers
listed on Schedule B, and (ii) on the first Business Day (as defined below)
after the Warrant Trigger for all other Purchasers. Finally, on the date hereof,
the Company and each Purchaser shall enter into and deliver the Rights Agreement
(as defined below).
1.3 The Company will use substantially all of the net proceeds from the
sale of the Shares and the Warrants to pursue the registration and approval of
Riquent(R) for sale in world markets; provided, that to the extent the Company's
Board of Directors deems it appropriate, a portion of the proceeds may be used
to further other Company programs.
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of the Shares and Closing
Warrants (the "CLOSING") shall take place at 10:00 a.m. San Diego time on the
date (the "CLOSING DATE") that is five Business Days after the complete
satisfaction of all of the conditions to the Closing set forth in Section 6.1
and Section 6.2 (or waiver thereof in accordance with the terms of Section 6.1
or Section 6.2, as applicable), or at such other time or place, if any, as the
Company and the Purchasers may mutually agree; provided, that each Purchaser's
obligation to purchase Shares and a Closing Warrant under this Agreement shall
terminate and be of no further force or effect immediately after the occurrence
of a Warrant Trigger. As used herein, a "BUSINESS DAY" means any day which is
not (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in
California or New York are authorized or obligated by law or regulation to
close.
2.2 Delivery. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to each Purchaser a certificate representing the number
of Shares to be purchased by such Purchaser, and such Purchaser's Closing
Warrant, against payment of the purchase price therefor in immediately available
funds by check or wire transfer to an account designated by the Company.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to each Purchaser to enter into and perform its
obligations under this Agreement, and except as set forth on the Disclosure
Schedule (the "DISCLOSURE SCHEDULE") furnished to each Purchaser specifically
identifying the section(s) hereof to which such exception is applicable, which
exceptions shall be deemed to be a part of the representations and warranties as
if made hereunder, the Company hereby represents and warrants to each Purchaser
as of the date of this Agreement as follows:
3.1 Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as currently
conducted and to enter into and perform this Agreement and all other agreements
required to be executed by the Company at or prior to the Closing pursuant to
Section 6.1 (collectively, together with the Warrants, the "ANCILLARY
AGREEMENTS"), to issue the Shares and the Warrants and to carry out the
transactions contemplated by this Agreement and the Ancillary Agreements. The
Company is duly qualified or otherwise authorized to do business as a foreign
corporation or other organization and is in good standing as such in every
jurisdiction in which the failure so to qualify would have a material adverse
effect on (i) the business, assets, liabilities (contingent or otherwise),
operations, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, (ii) the enforceability or
binding effect of this Agreement and the Ancillary Agreements or (iii) the
ability of the Company to perform its obligations under this Agreement and the
Ancillary Agreements (a "COMPANY MATERIAL ADVERSE EFFECT"). The Company is
currently qualified to do business, and in good standing, as a foreign
corporation in California. The Company has made available to the Purchasers
complete and accurate copies of the Certificate of Incorporation (including all
certificates of designation), as amended to date and currently in effect (the
"CERTIFICATE"), and the by-laws of the Company, as amended to date and currently
in effect (the "BY-LAWS'), and the Company has at all times complied in all
material respects with all provisions of such documents and is not in default
under, or in violation of, any such provision.
3.2 Subsidiaries, Etc. Section 3.2 of the Disclosure Schedule sets forth
the name, jurisdiction of incorporation and authorized and outstanding
capitalization of each Subsidiary (as defined below). All of the outstanding
shares of capital stock of each of the Subsidiaries are duly and validly
authorized, are validly issued and are fully paid and nonassessable, have been
offered, issued, sold and delivered in compliance in all material respects with
applicable foreign, federal and state securities laws and are owned by the
Company free and clear of any Security Interest (as defined below). Except as
set forth in Section 3.2 of the Disclosure Schedule, the Company has, and upon
the Closing will have, no Subsidiaries and will not own of record or
beneficially any capital stock or equity interest or investment in any
corporation, association or business entity. Except as disclosed in Section 3.2
of the Disclosure Schedule, each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry on
its business as currently conducted. Except as set forth in Section 3.2 of the
Disclosure Schedule, no Subsidiary owns or leases any property or engages in any
activity in any jurisdiction which requires such Subsidiary to qualify to do
business as a foreign corporation in such jurisdiction and where the failure to
so qualify could reasonably be expected to have a Company Material
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Adverse Effect. As used in this Agreement, "SUBSIDIARY" means any corporation,
partnership, trust, limited liability company or other entity (i) in which the
Company directly or indirectly through one or more of its subsidiaries holds
stock or other ownership interests representing (a) more than 50% of the voting
power of all outstanding stock or ownership interests of such entity or (b) the
right to receive more than 50% of the net assets of such entity available for
distribution to the holders of outstanding stock or ownership interests upon a
liquidation or dissolution of such entity, or (ii) with respect to which the
Company directly or indirectly through one or more of its subsidiaries has the
right, pursuant to agreement or otherwise, to appoint 50% or more of the members
of the board of directors (or similar governing body).
3.3 Capitalization.
(A) The authorized capital stock of the Company (immediately
prior to the Closing) consists of, as of October 5, 2005, (i)
175,000,000 shares of Common Stock, of which 74,152,686 shares
are issued and outstanding, and (ii) 8,000,000 shares of
Preferred Stock, $0.01 par value per share, 100,000 of which were
designated Series A Junior Participating Preferred Stock, none of
which are issued or outstanding, and 7,900,000 of which remain
undesignated. The rights, preferences, privileges and
restrictions of the Common Stock and Preferred Stock are as
stated in the Certificate.
(B) Section 3.3(B) of the Disclosure Schedule includes a
complete and accurate list, based on public filings made with the
Commission (as defined below), as of the date of this Agreement,
of each person or entity that is known by the Company to be the
beneficial owner of at least 5% of the outstanding Common Stock,
showing the number of shares of Common Stock (and any options,
warrants or other rights to acquire capital stock of the Company)
held by each such person or entity. All of the issued and
outstanding shares of capital stock of the Company (i) have been
duly authorized and validly issued and are fully paid and
nonassessable, (ii) have not been issued in violation of
preemptive rights, voting agreements or rights of first offer or
refusal applicable to the Company's capital stock (collectively,
"PREEMPTIVE RIGHTS") and (iii) have been offered, issued and sold
by the Company in compliance in all material respects with all
applicable federal and state securities laws.
(C) Section 3.3(C) of the Disclosure Schedule includes a
complete and accurate list, as of the date of this Agreement of:
(i) all stock option plans and other stock or equity-related
plans of the Company or any Subsidiary currently in effect (the
"COMPANY STOCK PLANS"), indicating for each Company Stock Plan
the number of shares of Common Stock issued to date under such
Plan, the number of shares subject to outstanding options under
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such Plan and the number of shares reserved for future issuance
under such Plan; and (ii) all holders of securities or rights
exercisable for, convertible into, exchangeable for or otherwise
giving the holder thereof the right to subscribe for or acquire
any capital stock of the Company or any Subsidiary ("COMPANY
SECURITIES") (other than outstanding options to purchase shares
of Common Stock under the Company Stock Plans ("COMPANY STOCK
OPTIONS")), indicating with respect to each Company Security the
number of shares of capital stock, and the class or series of
such shares, subject to such Company Security, the exercise or
conversion price thereof, the date of issuance and the expiration
date thereof. The Company has made available to the Purchasers
complete and accurate copies of all Company Stock Plans, forms of
all stock option agreements evidencing Company Stock Options and
all Company Securities. All of the shares of capital stock of the
Company subject to Company Stock Options and Company Securities
will be, upon issuance pursuant to the proper exercise of such
instruments, duly authorized, validly issued, fully paid and
nonassessable.
(D) Except as disclosed in Section 3.3(D) of the Disclosure
Schedule or as required pursuant to the terms of this Agreement,
(i) no subscription, warrant, option, convertible security
(including convertible debt), participation right or other right
(contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company or any Subsidiary is authorized or
outstanding (other than Company Stock Options and Company
Securities that are disclosed pursuant to Section 3.3(C)), (ii)
neither the Company nor any Subsidiary has any obligation
(contingent or otherwise) to issue any subscription, warrant,
option, convertible security (including convertible debt) or
other such right, or to issue or distribute to holders of any
shares of its capital stock any evidences of indebtedness or
assets of the Company or any Subsidiary, (iii) neither the
Company nor any Subsidiary has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of
its capital stock or any interest therein or to pay any dividend
or to make any other distribution in respect thereof, and (iv)
there are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company or
any Subsidiary.
(E) Except for the Ancillary Agreements or as disclosed in
Section 3.14 of the Disclosure Schedule, there is no agreement,
written or oral, in effect between the Company or any Subsidiary
and any holders of its securities, or, to the Company's
knowledge, among any holders of its securities, relating to
Preemptive Rights or the sale or transfer (including without
limitation agreements relating to rights of first refusal,
co-sale rights
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or "drag-along" rights), registration under the Securities Act of
1933, as amended (the "SECURITIES ACT"), or voting, of the
capital stock of the Company or any Subsidiary.
3.4 Issuance of Shares. The issuance, sale and delivery of the Shares in
accordance with this Agreement, and the issuance and delivery of the shares of
Common Stock issuable upon exercise of Warrants (the "WARRANT SHARES"), have
been duly authorized by all necessary corporate action on the part of the
Company, subject to the required Share Authorization Approval (as defined below)
as contemplated by Section 5.14. The Shares when issued, sold and delivered in
accordance with the provisions of this Agreement, and the Warrant Shares when
issued in accordance with the provisions of the Warrants, will be duly and
validly issued, fully paid and nonassessable, and will not be issued in
violation of any Preemptive Rights. On or prior to the date hereof, the Company
shall have reserved and shall keep reserved all of its authorized but unissued
shares of Common Stock for issuance of the Shares and the Common Stock issuable
upon exercise of the Warrants (other than such shares which are already reserved
for the Company Stock Plans). The Company is eligible to register the Shares and
Warrant Shares for resale by the Purchasers on a registration statement on Form
S-3 under the Securities Act.
3.5 Authority for Agreement. The Company has full corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which it is a party, to issue the Shares, the Warrants and the
Warrant Shares (subject to obtaining the Share Authorization Approval) and to
perform its other obligations hereunder and thereunder. The execution, delivery
and performance by the Company of this Agreement and each of the Ancillary
Agreements to which it is a party (including the issuance of the Warrant Shares)
have been duly authorized by all requisite corporate action by the Company and,
when executed and delivered by the Company, this Agreement and each of the
Ancillary Agreements will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
3.6 No Conflict. The execution, delivery and performance of this Agreement
and the Ancillary Agreements, the issuance of the Shares, the Warrants and the
Warrant Shares (subject to obtaining the Share Authorization Approval) and the
consummation of the other transactions contemplated hereby and thereby by the
Company will not (a) conflict with or violate any provision of the Certificate
or By-laws of the Company, (b) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any material
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest (as defined below) or other material arrangement to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary is bound
or to which their respective assets are subject, (c) result in the imposition of
any Security Interest upon any assets of the Company or any Subsidiary, or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any Subsidiary or any of their properties or
assets. For purposes of this Agreement, "SECURITY INTEREST" means any mortgage,
pledge, security interest, encumbrance, charge, lien or similar right (whether
arising by contract or by operation of law).
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3.7 Consents. Except as disclosed in Section 3.7 of the Disclosure
Schedule, no consent, permit, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency, including any Self-Regulatory
Organization (including NASDAQ) (each of the foregoing is hereafter referred to
as a "GOVERNMENTAL ENTITY") or any other Person is required to be made or
obtained by the Company or any Subsidiary in connection with the offer,
issuance, sale and delivery of the Shares and the Warrants, the issuance and
delivery of the Warrant Shares or the other transactions to be consummated
hereunder, as contemplated by this Agreement and the Ancillary Agreements,
except such filings as shall have been made prior to and shall be effective on
and as of the Closing, and such filings required to be made after the Closing
under applicable federal and state securities laws. Based in part on the
representations made by each of the Purchasers in Section 4 of this Agreement,
the offer and sale of the Shares, the Warrants and the Warrant Shares to each of
the Purchasers will be in compliance with applicable federal and state
securities laws.
3.8 Litigation; Compliance. Except as disclosed in Section 3.8 of the
Disclosure Schedule, there is no material action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the Company's knowledge,
any threat thereof or any facts or circumstances that might reasonably be
expected to provide the basis therefor, against the Company or any Subsidiary.
There is no material action, suit or proceeding, or governmental inquiry or
investigation, pending, or, to the Company's knowledge, any threat thereof or
any facts or circumstances that might reasonably be expected to provide the
basis therefor, against the Company or any Subsidiary, or any of their employees
by reason of the past employment relationships of any employees, in connection
with or arising from the past or proposed activities or business affairs of the
Company or any Subsidiary, or negotiations by the Company or any Subsidiary with
possible investors in the Company or any Subsidiary. Neither the Company nor any
Subsidiary is subject to any outstanding judgment, order or decree. The Company
and each Subsidiary has, in all material respects, complied with all laws,
regulations and orders applicable to its business, including Pharmaceutical Laws
(as defined below), and has all material permits and licenses required thereby.
For purposes of this Agreement, "PHARMACEUTICAL LAW" shall mean any federal,
state, local or foreign law, statute, rule or regulation relating to the
development, commercialization and sale of pharmaceutical and biotechnology
products and devices, including all applicable regulations of the U.S. Food and
Drug Administration and comparable applicable foreign regulatory authorities.
3.9 SEC Documents; Financial Statements. Since June 30, 2004, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the Securities and Exchange Commission (the "COMMISSION")
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), (all of the foregoing filed prior to or on the
date of this Agreement and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC DOCUMENTS"). The Company has made
available to the Purchasers true, correct and complete copies of all SEC
Documents. As of the date of filing of such SEC Documents, each such SEC
Document, as it may have been subsequently amended by filings made by the
Company with the Commission prior to the date of this Agreement, complied in all
material respects with the requirements of the Exchange Act applicable to such
SEC
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Document and did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they are or were made, not misleading. As
of their respective dates, the financial statements of the Company included in
the SEC Documents complied as to form and substance in all material respects
with applicable accounting requirements and published rules and regulations of
the Commission with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied in the United States ("GAAP"), during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements),
correspond to the books and records of the Company and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended. Ernst &
Young LLP is a registered public accounting firm independent of the Company as
required by the Securities Act and Exchange Act. The Company is not aware of any
issues raised by the Commission with respect to any of the SEC Documents. No
other written information provided by or on behalf of the Company to the
Purchasers which is not included in the SEC Documents, including pursuant to
this Section 3, when taken as a whole, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading. The Company is not required to file and will not be
required to file any agreement, note, lease, mortgage, deed or other instrument
entered into prior to the date of this Agreement and to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound which
has not been previously filed as an exhibit to the SEC Documents. Except for the
issuance of the Shares and Warrants contemplated by this Agreement and the
planned special meeting of the Company's stockholders to vote on the issuance of
the Shares and the Warrant Shares issuable pursuant to the Closing Warrants, no
event, liability, development or circumstance has occurred or exists, with
respect to the Company, any Subsidiary or their business, properties, prospects,
operations or financial condition, that is required to be disclosed by the
Company under applicable securities laws and which has not been publicly
disclosed. The Company has no reason to believe that its independent auditors
will withhold their consent to the inclusion of their audit opinion concerning
the Company's financial statements that shall be included in a "Registration
Statement" (as such term is defined in the Rights Agreement) required pursuant
to Section 2(a) of the Rights Agreement. Except as disclosed in the SEC
Documents, there has been no change or development that has had or could
reasonably be expected to have, either individually or in the aggregate, a
Company Material Adverse Effect since December 31, 2004.
3.10 Taxes. The amount shown on the Condensed Consolidated Balance Sheet of
the Company as of June 30, 2005 that is included in the Company's Form 10-Q
filed with the Commission on August 9, 2005 (the "BALANCE SHEET") as provision
for taxes is sufficient in all material respects for payment of all accrued and
unpaid federal, state, county, local and foreign taxes for all periods. The
Company and each Subsidiary has filed or has obtained currently effective
extensions with respect to all federal, state, county, local and foreign tax
returns which are required to be filed by it, such returns are complete and
accurate in all material respects and all taxes shown thereon to be due have
been timely paid with exceptions not material to the Company or such Subsidiary.
No controversy with respect to taxes of any type with respect to the Company or
any Subsidiary is pending or, to the Company's knowledge, threatened. The
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Company and each Subsidiary has withheld or collected from each payment made to
its employees the amount of all taxes required to be withheld or collected
therefrom and has paid all such amounts to the appropriate taxing authorities
when due (including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes). The Company has
no knowledge of any material liability of any tax to be imposed upon the
properties or assets of the Company or any Subsidiary as of the Closing that is
not adequately provided for.
3.11 Property and Assets. Except as disclosed in Section 3.11 of the
Disclosure Schedule, the Company and each Subsidiary has good and marketable
title to, or a valid leasehold interest in, all of its material properties and
assets, including all properties and assets reflected in the Balance Sheet and
the SEC Documents, and none of such properties or assets is subject to any
Security Interest. Neither the Company nor any Subsidiary owns, or has ever
owned, any real estate.
3.12 Intellectual Property.
(A) The term "INTELLECTUAL PROPERTY ASSETS" means all
intellectual property owned or licensed by the Company or any
Subsidiary in which the Company or any Subsidiary has a
proprietary interest, including without limitation:
(1) the name of the Company and its Subsidiaries, all assumed
fictional business names, trademarks, service marks, trade dress, logos and
trade names, whether or not registered, including all common law rights,
and registrations and applications for registrations thereof (collectively,
"MARKS");
(2) all patents and patent applications (including divisions,
continuations, continuations-in-part, reissues, reexaminations and
extensions thereof) either granted or pending with a domestic,
international or foreign patent office or other governing body
(collectively, "PATENTS");
(3) all registered and unregistered copyrights in both published
works and unpublished works including the content of proprietary computer
software and internet web sites in which the Company or any Subsidiary has
rights (collectively, "COPYRIGHTS"); and
(4) all know-how, trade secrets, confidential or proprietary
information, customer lists, software, technical information, data,
compounds, compositions of matter, formulas, process technology, plans,
drawings and blue prints (collectively, "TRADE SECRETS"), which are not the
subject of Marks, Patents or Copyrights.
(B) Section 3.12(B) of the Disclosure Schedule contains a
complete and accurate list of all material contracts or
agreements relating to the Intellectual Property Assets,
including all research and development licenses and material
transfer agreements (but excluding any license implied by the
sale of a product). Section 3.12(B) of the Disclosure Schedule
also lists all material clinical,
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formulation and manufacturing agreements, and associated
regulatory consulting service agreements, relating to the
Company's or any Subsidiary's products and proposed products.
There are no outstanding and, to the knowledge of the Company, no
threatened disputes or disagreements with respect to any such
contract or agreement.
(C) No contract or agreement listed or required to be listed
in Section 3.12(B) of the Disclosure Schedule contains any
provision that would cause the terms of any such contract or
agreement to become invalid, be breached, terminate or otherwise
change as a result of any of the transactions contemplated by
this Agreement.
(D) To the knowledge of the Company, the Intellectual
Property Assets are all those necessary for the operation of the
business of the Company and its Subsidiaries as currently
conducted and currently proposed to be conducted in the
reasonably foreseeable future. Except as noted in Section 3.12(D)
of the Disclosure Schedule, the Company is the sole owner or
exclusive licensee of all right, title and interest in and to
each of the Intellectual Property Assets, free and clear of all
Security Interests, and has the exclusive right to use and
practice without payment to a third party all of the Intellectual
Property Assets for the operation of the business of the Company
and its Subsidiaries as currently conducted and as currently
proposed to be conducted in the reasonably foreseeable future,
other than in respect of licenses described in Section 3.12(B) of
the Disclosure Schedule. All former and current employees of the
Company or any Subsidiary (and all other agents, consultants and
contractors who contributed to or participated in the conception
or development of the Intellectual Property Assets) have executed
written contracts or agreements with the Company that assign to
the Company all rights to any inventions, improvements,
discoveries or information relating to the business of the
Company or any Subsidiary, including without limitation all
Intellectual Property Assets owned, controlled by or in the
possession of the Company or any Subsidiary. To the knowledge of
the Company, there is no unauthorized use, infringement or
misappropriation of any of the Intellectual Property Assets by
any third party, employee or former employee.
(E) Section 3.12(E) of the Disclosure Schedule contains a
complete and accurate list of all Patents that are owned by the
Company or any Subsidiary or used in the Company's or any
Subsidiary's current operations.
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(1) All of the Patents that the Company or any Subsidiary owns
and, to the knowledge of the Company, all of the Patents that either has
rights to pursuant to license agreements with third parties, are currently
in compliance with applicable formal legal requirements (including payment
of required filing, examination and maintenance fees and filing of required
proofs of working or use), and are valid and enforceable. To the knowledge
of the Company, there is no fact that would form a reasonable basis for
belief that the patent applications within the Patents would be
unenforceable or invalid if issued as patents. All of the Patents that
Company or any Subsidiary owns and, to the knowledge of the Company, all of
the Patents that either has rights to pursuant to license agreements with
third parties, were prosecuted or are being prosecuted in full compliance
with the Duty of Candor required by the United States Patent & Trademark
Office and any similar requirement of any corresponding foreign agencies,
specifically, all material information known to the Company, its subsidiary
or its licensors, as appropriate, during the prosecution of such Patents
was disclosed to the United States Patent & Trademark Office or
corresponding foreign agency during prosecution, and in connection with
such prosecution, the Company, its Subsidiary or its licensors, as
appropriate, did not make any material misstatements, material omissions or
material misleading statements.
(2) Except as otherwise indicated in Section 3.12(E) of the
Disclosure Schedule, no Patent within the Intellectual Property Assets has
been or is now involved in any interference proceeding, reissue proceeding,
reexamination proceeding, or opposition proceeding. To the knowledge of the
Company, there is no potentially interfering patent or patent application
of any third party with respect to the Patents.
(3) Except as otherwise indicated in Section 3.12(E) of the
Disclosure Schedule, (a) to the Company's knowledge, no Patent within the
Intellectual Property Assets is infringed or has been challenged or
threatened in any way, and (b) none of the products manufactured or sold or
currently contemplated to be manufactured or sold, nor any process or
know-how used or currently contemplated to be used, by the Company or any
Subsidiary infringes or is alleged in writing to infringe any patent or
other proprietary right of any other person or entity. Neither the Company
or any Subsidiary nor, to the Company's knowledge, its licensors has
received any notices or threats of infringement or conflict with the
intellectual property right of any third party, and there is no pending
Proceeding (as defined below) by others including any claim or allegation
that the Company or any Subsidiary is infringing any intellectual property
right of any third party. As used in this Section 3.12, "PROCEEDING" means
any action, arbitration, audit, examination, investigation, hearing,
litigation, or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal and whether public or private)
commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Entity or arbitrator.
(4) All products made, used or sold by or on behalf of the
Company or any Subsidiary under the Patents within the Intellectual
Property Assets have been or will be marked with the proper patent notice
to the extent feasible.
(5) The Company or, to the Company's knowledge, its licensors, as
applicable, own all right, title and interest in the Patents within the
Intellectual Property Assets
11
and are identified in the records of the United States Patent and Trademark
Office and corresponding foreign agencies as holders of record of such
Patents. All right, title and interest in the issued patents and pending
patent applications with the Patents have been assigned to the Company or,
to the Company's knowledge, its licensors, as applicable. Except as
otherwise set forth in the Disclosure Schedule, there is no other entity or
individual that has any right, title or interest in any of the issued
patents and pending patent applications within the Patents other than the
Company and, to the Company's knowledge, its licensors, as applicable.
(F) Section 3.12(F) of the Disclosure Schedule contains a
complete and accurate list of all Marks that are used in the
Company's or any Subsidiary's current operations.
(1) Except as set forth in Section 3.12(F) of the Disclosure
Schedule, all Marks have been registered with the United States Patent and
Trademark Office, are currently in compliance with all applicable formal
legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid
and enforceable.
(2) No Mark within the Intellectual Property Assets has been or
is now involved in any opposition proceeding, invalidation proceeding, or
cancellation proceeding and, to the knowledge of the Company, no such
action is threatened with respect to any of the Marks.
(3) To the knowledge of the Company, there is no potentially
interfering trademark or trademark application of any other person or
entity.
(4) No Mark within the Intellectual Property Assets has been
challenged or threatened in any way and none of the Marks within the
Intellectual Property Assets used by the Company or any Subsidiary
infringes or is alleged to infringe any trade name, trademark or service
mark of any other person or entity and, to the knowledge of the Company, no
Mark is infringed by any other person or entity.
(5) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(G) Currently, the Company has no ownership interest in any
registered Copyrights. There are no Copyrights which are material
to the business of the Company or any Subsidiary as currently
conducted.
(H) With respect to each Trade Secret:
(1) The Company and its Subsidiaries have taken all reasonable
precautions to protect the secrecy, confidentiality and value of its Trade
Secrets (including the enforcement by the Company or the Subsidiary of a
policy requiring each employee or contractor to execute proprietary
information and confidentiality agreements substantially in its standard
form, and all current and former employees and contractors of the Company
and its Subsidiaries who have had access to Trade Secrets or contributed to
or
12
participated in the conception or development of Trade Secrets have
executed such an agreement).
(2) The Company has good title to and an absolute right (but not
necessarily exclusive) to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature and, to the knowledge of the
Company, have not been used, divulged or appropriated either for the
benefit of any person or entity or to the detriment of the Company or any
Subsidiary. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in writing in any way or infringes any
intellectual property right of any other person or entity.
3.13 Insurance. The Company and its Subsidiaries maintain valid policies of
workers' compensation insurance and of insurance with respect to its properties
and business of the kinds and in the amounts not less than is customarily
obtained by corporations of established reputation engaged in the same or
similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability, clinical trial
liability and other risks.
3.14 Material Contracts and Obligations. Section 3.14 of the Disclosure
Schedule sets forth a list of all material agreements or commitments of any
nature (whether written or oral) to which the Company or any Subsidiary is a
party or by which either is bound, including without limitation (a) any
agreement which requires future expenditures by the Company in excess of
$500,000 or which might result in payments to the Company in excess of $500,000,
(b) any material employment agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and arrangements,
and any consulting agreements entered into or terminated within the 365 days
prior to the date hereof, (c) any material distributor, sales representative or
similar agreement, (d) any material agreement with any current or former
stockholder, officer or director of the Company or any Subsidiary, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, (e) any agreement under which the
Company or any Subsidiary is restricted from carrying on any business anywhere
in the world, (f) any material agreement relating to indebtedness for borrowed
money, (g) any agreement for the disposition of a material portion of the
Company's or any Subsidiary's assets (other than for the sale of inventory in
the ordinary course of business), (h) any material agreement concerning
research, development or testing of any product by or for the Company or any
Subsidiary; and (i) any agreement for the acquisition of the business or
securities or other ownership interests of another party. The Company has made
available to the Purchasers copies of the foregoing agreements. Each such
agreement and contract is a legal, valid, and binding obligation of the parties
thereto and is in full force and effect. Neither the Company or any Subsidiary,
nor, to the Company's knowledge, any other party thereto, is in default of any
of its obligations under any of the agreements or contracts listed in Section
3.14 of the Disclosure Schedule.
3.15 Compliance. There is no term or provision of any mortgage, indenture,
contract, agreement or instrument to which the Company or any Subsidiary is a
party or by which either is bound, or, to the Company's knowledge, of any
provision of any state, federal or foreign judgment, decree, order, statute,
rule or regulation applicable to or binding upon the Company or
13
any Subsidiary, which has had or is reasonably likely to have a Company Material
Adverse Effect. To the Company's knowledge, none of the employees of the Company
or any Subsidiary is in material violation of any term of any contract or
covenant (either with the Company or with another entity) relating to
employment, patents, assignment of inventions, proprietary information
disclosure, non-competition or non-solicitation.
3.16 Employees.
(A) All current and former employees of the Company or its
Subsidiaries who have performed development work or provided
technical services to the Company or any Subsidiary or have
otherwise had access to confidential or proprietary information
of the Company have executed and delivered a confidentiality,
proprietary information and inventions agreement in the forms
presented to the Purchasers (the "IP AGREEMENTS"), and all of
such agreements are in full force and effect. All current and
former consultants of the Company or its Subsidiaries who have
performed development work or provided technical services to the
Company or any Subsidiary or have otherwise had access to
confidential or proprietary information of the Company or any
Subsidiary have executed and delivered an IP Agreement to the
Company, and all of such agreements are in full force and effect.
(B) The Company is not aware that any key employee of the
Company or any Subsidiary has plans to terminate his or her
employment relationship with the Company or such Subsidiary. The
Company and its Subsidiaries have complied in all material
respects with all applicable laws relating to wages, hours, equal
opportunity, collective bargaining, layoffs, workers'
compensation insurance and the payment of social security and
other taxes. None of the employees of the Company or any
Subsidiary is represented by any labor union, and there is no
labor strike or other labor trouble pending with respect to the
Company or any Subsidiary or, to the Company's knowledge,
threatened. To the Company's knowledge, no employee of the
Company or any Subsidiary is obligated under any contract or
subject to any judgment, decree or administrative order that
would conflict or interfere with (i) the performance of the
employee's duties as an employee, director or officer of the
Company or any Subsidiary, or (ii) the Company's or any
Subsidiary's business as currently conducted or currently
proposed to be conducted.
3.17 Books and Records. The minute books of the Company made available to
the Purchasers or their counsel contain complete and accurate records of all
corporate actions of its stockholders and its Board of Directors and committees
thereof since January 1, 2005, whether taken at a meeting or by written consent.
14
3.18 Environmental Matters.
(A) The Company and each Subsidiary has complied in all
material respects with all applicable Environmental Laws (as
defined below). There is no pending or, to the Company's
knowledge, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving the Company
or any Subsidiary. For purposes of this Agreement, "ENVIRONMENTAL
LAW" shall mean any federal, state, local or foreign law,
statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including any
statute, regulation, administrative decision or order pertaining
to (i) treatment, storage, disposal, generation and
transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial,
toxic or hazardous materials or substances, or solid or hazardous
waste, including emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v)
the protection of wild life, marine life and wetlands, including
all endangered and threatened species; (vi) storage tanks,
vessels, containers, abandoned or discarded barrels and other
closed receptacles; (vii) health and safety of employees and
other persons; or (viii) manufacturing, processing, using,
distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants,
contaminants, toxic or hazardous materials or substances, or oil
or petroleum products or solid or hazardous waste. As used above,
the terms "release" and "environment" shall have the meaning set
forth in the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA").
(B) Neither the Company nor any Subsidiary has any material
liabilities or material obligations arising from the release of
any Materials of Environmental Concern (as defined below) into
the environment. For purposes of this Agreement, "MATERIALS OF
ENVIRONMENTAL CONCERN" shall mean any chemicals, pollutants or
contaminants, hazardous substances (as such term is defined under
CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the Resource Conservation and Recovery Act), toxic
materials, oil or petroleum and petroleum products or any other
material subject to regulation under any Environmental Law.
15
(C) Neither the Company nor any Subsidiary is a party to or
bound by any court order, administrative order, consent order or
other agreement between the Company or any Subsidiary and any
Governmental Entity entered into in connection with any legal
obligation or liability arising under any Environmental Law.
(D) The Company is not aware of any material environmental
liability of any solid or hazardous waste transporter or
treatment, storage or disposal facility that has been used by the
Company or any Subsidiary.
3.19 No Solicitation or Advertisement. Neither the Company or any
Subsidiary nor any person acting on either's behalf has engaged, in connection
with the offering or sale of the Shares or Warrants, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act.
3.20 Securities Act Registration. Assuming that the representations and
warranties of each of the Purchasers contained herein are true, it is not
necessary in connection with the offer, sale and delivery of the Shares,
Warrants and Warrant Shares, if any, in the manner contemplated by this
Agreement to register the Shares, the Warrants or the Warrant Shares under the
Securities Act or under applicable state securities or Blue Sky laws regulating
the issuance or sale of securities.
3.21 United States Real Property Holding Company. The Company is not now
and has never been a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as amended
(the "CODE"), and Treasury Regulation Section 1.897-2(b), and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns, which are required under Treasury Regulation Section
1.897-2(h).
3.22 Benefit Plans. Except as set forth in Section 3.22 of the Disclosure
Schedule, neither the Company, any Subsidiary nor any Plan Affiliate (as defined
below) has maintained, sponsored, adopted, made contributions to or obligated
itself to make contributions to or to pay any benefits or grant rights under or
with respect to any material Employee Benefit Plan (as defined below), whether
written, oral, voluntary or pursuant to a collective bargaining agreement or
law, which could give rise to or result in the Company, any Subsidiary or such
Plan Affiliate having any debt, liability, claim or obligation of any kind or
nature, whether accrued, absolute, contingent, direct, indirect, known,
perfected or inchoate or otherwise and whether or not due or to become due.
Correct and complete copies (or, if oral, descriptions) of all Employee Benefit
Plans have been made available to each Purchaser. As used herein, "PLAN
AFFILIATE" means any person or entity with which the Company or any Subsidiary
constitutes all or part of a controlled group of corporations, a group of trades
or businesses under common control or an affiliated service group, as each of
those terms are defined in Section 414 of the Code. As used herein, "EMPLOYEE
BENEFIT PLAN" means, collectively, each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay, health
or other medical, life, disability or other insurance, supplemental unemployment
benefit, profit sharing, pension, retirement, supplemental retirement or other
employee benefit plan, program, agreement or arrangement, whether written or
unwritten, formal or informal, maintained or contributed to or
16
required to be contributed to by any person for the benefit of any employee or
former employee of the Company, any Subsidiary or their affiliates or their
dependants or beneficiaries, as well as the compensation practices and policies
regarding vacations, sick leaves, leaves of absence and all perquisites of
employment other than those mandated by any legal requirement and shall include
to the extent applicable to Company or any Subsidiary, without limitation,
"Employee Pension Benefit Plans" (as defined in Section 3(2) of ERISA (as
defined below), "Employee Welfare Benefit Plan" (as defined in Section 3(1) of
ERISA) and "Multi-employer Plan" (as defined in section 3(37) of ERISA) ), but
shall exclude any such arrangements or perquisites that do not exceed,
individually or in the aggregate, $300 per month per any particular person. As
used herein, "ERISA" means the Employee Retirement Income Security Act of 1974
and any law of any foreign jurisdiction of similar import. The Company has made
all "matching" contributions required pursuant to the terms of the Company's
401(k) plan or otherwise promised to employees (in writing or orally).
3.23 Foreign Corrupt Practices Act; Etc. The Company, its Subsidiaries and
their respective officers, directors, employees and agents are in compliance
with and have not violated the Foreign Corrupt Practices Act of 1977, as
amended, or any rules and regulations thereunder, or any similar laws of any
foreign jurisdiction. To the Company's knowledge, no governmental or political
official in any country is or has been employed by, or acted as a consultant to
or held any material beneficial ownership interest in the Company. The Company,
its Subsidiaries and their respective officers, directors, employees and agents
are in compliance with and have not violated the U.S. money laundering laws or
regulations, the U.S. Bank Secrecy Act, as amended by the USA Patriot Act of
2001 (including any recordkeeping or reporting requirements thereunder), or the
anti-money laundering laws or regulations of any jurisdiction.
3.24 Certain Matters Related to Third Parties. Neither the Company nor any
Subsidiary has ever intentionally aided, facilitated or furthered (whether by
action or inaction), or intentionally participated in, any effort, scheme or
arrangement intended to (or having the foreseeable effect of) misleading or
defrauding any creditor or stockholder of the Company or any Subsidiary or any
creditor or stockholder of any third party. Neither the Company nor any
Subsidiary has ever received any direct or indirect indication, whether written
or oral, that the Commission (or any other Governmental Entity) is investigating
the Company or any Subsidiary in connection with its role in any such effort,
scheme or arrangement.
3.25 Brokers. Except as set forth in Section 3.25 of the Disclosure
Schedule, neither the Company nor any Subsidiary has engaged any brokers,
finders or agents, or incurred, or will incur, directly or indirectly, any
liability for brokerage or finder's fees or agents' commissions or any similar
charges in connection with this Agreement and the transactions contemplated
hereby.
3.26 Investment Company. Neither the Company nor any Subsidiary is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
3.27 Sarbanes-Oxley Act. The Company and its Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as
amended to date, that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission thereunder,
except where such noncompliance could not have, individually or in the
aggregate, a Company Material Adverse Effect.
17
3.28 Internal Accounting Controls. The Company and its Subsidiaries
maintain a system of accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.29 Insolvency Actions. Neither the Company nor any Subsidiary has made
any filing, or authorized any filing or similar formal action, to seek
protection pursuant to any bankruptcy law and the Company does not have any
knowledge or reason to believe that either's creditors intend to initiate
involuntary bankruptcy proceedings.
3.30 Dilutive Effect. The Company acknowledges that its obligation to issue
Warrant Shares upon the exercise of the Warrants that are issued, in accordance
with such Warrants (subject to the availability of sufficient authorized shares
of Common Stock), is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
3.31 Acknowledgment Regarding Purchaser's Purchase of Securities. The
Company acknowledges and agrees that each Purchaser is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby. The
Company further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement or the Ancillary Agreements and the transactions contemplated hereby
and thereby, and any advice given by a Purchaser or any of its representatives
or agents in connection therewith, if any, is merely incidental to such
Purchaser's purchase hereunder. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement and the Ancillary
Agreements has been based solely on the independent evaluation by the Company
and its representatives. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those expressly set forth in Section
4 or expressly set forth in the Ancillary Agreements.
3.32 Application of Takeover Protections. The Company and its Board of
Directors have taken (or will take prior to the Closing, if the Closing is the
event that would trigger such matters) all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate, the By-laws, a stockholder rights
agreement to which the Company is party, the laws of the state of its
incorporation or the laws of any other state which is applicable to the
Purchasers as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Shares, Warrants
and Warrant Shares and the Purchasers' ownership, voting (to the extent
applicable) or disposition of the Shares, Warrants and Warrant Shares.
18
3.33 No Integrated Offering. Neither the Company, any Subsidiary nor any of
their affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Shares, Warrants and Warrant Shares to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or any
Subsidiary take any action or steps that would cause the offering of the Shares,
Warrants or Warrant Shares to be integrated with other offerings.
3.34 Compliance with Nasdaq Continued Listing Requirements. Except as
disclosed in Section 3.34 of the Disclosure Schedule or in the SEC Documents,
the Company is in compliance with applicable Nasdaq National Market System
continued listing requirements. Except as disclosed in Section 3.34 of the
Disclosure Schedule or in the SEC Documents, (a) there are no proceedings
pending or, to the Company's knowledge, threatened against the Company relating
to the continued listing of the Common Stock on the Nasdaq National Market
System and (b) the Company has not received any notice of, nor to the Company's
knowledge is there any basis for, the delisting of the Common Stock from the
Nasdaq National Market System.
3.35 Transactions with Affiliates. Except as disclosed in the SEC
Documents, none of the officers or directors of the Company and, to the
Company's knowledge, none of the employees of the Company is currently a party
to any transaction with the Company or any Subsidiary (other than as holders of
stock options and/or warrants, and for services as employees, officers and
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,
director or such employee or, to the Company's knowledge, any entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company as
follows:
4.1 Investment. Such Purchaser is acquiring the Shares, its Warrants and
the Warrant Shares, if any, for his, her or its own account, for investment and
not with a view to, or for sale in connection with, any distribution thereof,
nor with any present intention of distributing or selling the same; and, except
as contemplated by this Agreement and the Exhibits hereto, such Purchaser has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. Such Purchaser
is an "accredited investor" as defined in Rule 501(a) under the Securities Act.
4.2 Authority. Such Purchaser has full power and authority to enter into
and to perform this Agreement and the Ancillary Agreements in accordance with
their terms. The execution, delivery and performance by such Purchaser of this
Agreement and each of the Ancillary Agreements to which it is a party have been
duly authorized by all requisite action by
19
such Purchaser and, when executed and delivered by such Purchaser, this
Agreement and each of the Ancillary Agreements to which it is party will be the
valid and binding obligations of such Purchaser, enforceable against it in
accordance with their respective terms. Any Purchaser which is a corporation,
limited liability company, partnership or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.3 Experience. Such Purchaser has carefully reviewed the representations
concerning the Company contained in this Agreement, and has made inquiry
concerning the Company, its business and its personnel; the officers of the
Company have made available to such Purchaser any and all written information
which he, she or it has requested and have answered to such Purchaser's
satisfaction all inquiries made by such Purchaser; and such Purchaser has
sufficient knowledge and experience in finance and business that he, she or it
is capable of evaluating the risks and merits of his, her or its investment in
the Company and such Purchaser is able financially to bear the risks thereof.
Such Purchaser acknowledges that an investment in the Company has a high degree
of risk. No investigation undertaken by or on behalf of the Purchaser shall
limit or restrict the Purchaser's right to rely on the representations and
warranties of the Company contained herein.
4.4 Restricted Shares. Such Purchaser understands that (a) the Shares, its
Warrants and the Warrant Shares have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 506
promulgated under the Securities Act, (b) the Shares, its Warrants and the
Warrant Shares must be held indefinitely unless a subsequent disposition thereof
is registered under the Securities Act or is exempt from such registration and
(c) the Company will make a notation on its transfer books to such effect. Such
Purchaser represents that it is familiar with Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act. Such Purchaser acknowledges that the Shares, its Warrants and the Warrant
Shares have not been registered under the Securities Act or qualified under any
applicable blue sky laws in reliance, in part, on the representations and
warranties herein.
4.5 Legend. Such Purchaser understands that any certificates evidencing the
Shares, the Warrants and the Warrant Shares may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO SUCH SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH
ACT."
The legend set forth above shall be removed and the Company hereby agrees
to issue the Shares or Warrant Shares, as applicable, without such legends to
the holder thereof, (i) if such Shares or Warrant Shares are registered for
resale under the Securities Act, (ii) if such holder provides the Company with
an opinion of counsel or other evidence reasonably acceptable to the Company to
the effect that a public sale, assignment or transfer of the such Shares or
Warrant
20
Shares, as applicable, may be made without registration under the Securities
Act, or (iii) upon expiration of the applicable period under Rule 144(k) of the
Securities Act (or any successor rule). When the Company is required to cause
legends to be removed from certificates pursuant to the foregoing sentence, if
unlegended certificates are not delivered to a Purchaser within three (3)
Business Days of submission by that Purchaser of (x) legended certificate(s) to
the Company's transfer agent (together with a representation letter in customary
form) and (y) written notification to the Company that the Purchaser has
requested the transfer agent to remove such legends, the Company shall be liable
to the Purchaser for liquidated damages in an amount equal to 1.0% of the
aggregate purchase price of the Shares or Warrant Shares evidenced by such
certificate(s) for each thirty (30) day period (or portion thereof) beyond such
three (3) Business Days that the unlegended certificates have not been so
delivered.
4.6 Brokers. Such Purchaser has not engaged any brokers, finders or agents
and has not incurred, and will not incur, directly or indirectly, any liability
for brokerage or finder's fees or agents' commissions or any similar charges in
connection with this Agreement and the transactions contemplated hereby.
4.7 Certain Purchasers. If any Purchaser is not a United States person,
such Purchaser hereby represents that such Purchaser is satisfied as to the full
observance of the laws of such Purchaser's jurisdiction in connection with any
invitation to subscribe for the Shares, its Warrants and the Warrant Shares,
including (i) the legal requirements of such Purchaser's jurisdiction for the
offer, purchase and sale of securities, (ii) any foreign exchange restrictions
applicable to such offer, purchase and sale, (iii) any governmental or other
consents that may need to be obtained and (iv) the income tax and other tax
consequences, if any, which may be relevant to the offer, purchase, holding,
redemption, sale or transfer of the Shares, its Warrants and the Warrant Shares.
Such Purchaser's exercise and payment for, and such Purchaser's continued
beneficial ownership of, the Shares, its Warrants and the Warrant Shares will
not violate any applicable securities or other laws of such Purchaser's
jurisdiction.
4.8 Organization and Standing. Such Purchaser, if an entity, is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation and has full power and authority to enter into and
perform this Agreement and all Ancillary Agreements to which it is party, and to
carry out the transactions contemplated by this Agreement and such Ancillary
Agreements.
SECTION 5. COVENANTS
5.1 Affirmative Covenants. The Company covenants and agrees that prior to
the Closing or Warrant Trigger it will (unless waived in whole or in part in
writing by Purchasers that have agreed to purchase at least a majority of the
Shares to be purchased at the Closing) perform and observe the following
covenants and provisions, and will cause each Subsidiary to perform and observe
such of the following covenants and provisions as are applicable to such
Subsidiary:
(A) The Company and each Subsidiary will pay and discharge
all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the date on
which penalties attach thereto, and all lawful
21
claims which, if unpaid, would become a material lien or charge
on any properties of the Company or any Subsidiary; provided,
however, that neither the Company nor any Subsidiary will be
required to pay any tax, assessment, charge, levy or claim which
is being contested in good faith and by appropriate proceedings
if the Company or the Subsidiary will have set aside on its books
reserves, if any, to the extent required by GAAP with respect
thereto.
(B) The Company shall maintain, or shall cause to be
maintained valid policies of workers' compensation insurance and
insurance with responsible and reputable insurance companies or
associations in such amounts, types and covering such risks as
are acceptable to the Board of Directors of the Company and are
customarily carried by similarly situated companies engaged in
similar businesses and owning similar properties in the same
general areas in which the Company or such Subsidiary operates,
including, without limitation, insurance against loss, damage,
fire, theft, public liability, products liability, clinical trial
liability and other risks.
(C) The Company and each Subsidiary shall preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and shall
qualify and remain qualified, and cause each Subsidiary to
qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is necessary or
desirable in view of its business and operations or the ownership
or lease of its properties and the failure to so qualify,
individually or in the aggregate, would have a Company Material
Adverse Effect. The Company shall, and shall cause each
Subsidiary to, secure, preserve and maintain all Intellectual
Property Assets owned or possessed by it, except where the
failure to so secure, preserve and maintain such Intellectual
Property Assets would not have a Company Material Adverse Effect.
(D) The Company and each Subsidiary shall keep adequate
records and books of account in which complete entries will be
made in accordance with GAAP, reflecting all financial
transactions of the Company and any Subsidiary, and in which, for
each fiscal year, all proper reserves for depreciation,
depletion, returns of merchandise, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its
business shall be made.
(E) The Company and each Subsidiary will comply with the
requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance could
have a Company Material Adverse Effect.
22
(F) The Company will take such actions as are necessary to
ensure that all material Patents are kept in force and maintained
in compliance with formal legal requirements (including payment
of required filing, examination and maintenance fees and filing
of required proofs of working or use), unless otherwise
determined by the Board of Directors in advance of the failure to
take any such actions with respect to any particular Patent.
(G) The Company will notify the Purchasers in writing of any
events, circumstances, facts or occurrences of which the Company
becomes aware that would result (i) in any representation or
warranty of the Company in this Agreement being untrue or
incorrect in any material respect (or, to the extent such
representation or warranty is already qualified as to materiality
in this Agreement, being untrue or incorrect in any respect) or
(ii) in the Company not complying in all material respects with
the agreements and conditions contained in this Agreement.
5.2 SEC Filings; Annual Budget and Other Information. The Company will
until December 31, 2008 (unless waived in whole or in part in writing by
Purchasers (i) that have agreed to purchase at least a majority of the Shares to
be purchased at the Closing, or (ii) if after the Closing, that hold at least a
majority of the Shares outstanding) deliver true, accurate and complete copies
of the following to each Purchaser that owns at least 75% of the Shares
originally purchased by it at the Closing:
(A) Promptly after they become public information, copies of
all filings (including exhibits thereto) made by the Company with
the Commission.
(B) Subject to the last sentence of this paragraph, a copy
of the Annual Budget (as defined below) at least 30 days prior to
the commencement of the applicable fiscal year. At least 30 days
prior to the commencement of each fiscal year, the Company will
prepare and submit to, and obtain in respect thereof the approval
from the Board of Directors, the operating budgets, operating
expenses, profit and loss projections, cash flow projections and
a capital expenditure budget (the "ANNUAL BUDGET") for the
succeeding fiscal year. If the Annual Budget contains any
material nonpublic information regarding the Company or its
securities ("NONPUBLIC INFORMATION"), the Company shall, prior to
providing the Annual Budget to a Purchaser, advise such Purchaser
of such fact (but not the Nonpublic Information itself) in
writing and, if the Purchaser thereafter elects in writing to
receive the Annual Budget, the Company shall provide the Annual
Budget to such Purchaser. Each Purchaser that receives Nonpublic
Information pursuant to this Section 5.2(B) shall keep such
information confidential to the extent
23
necessary to comply with applicable securities laws (including,
without limitation, Regulation FD).
5.3 Negative Covenants of the Company. The Company agrees that:
(A) At any time prior to December 31, 2008 when Essex or its
successor or affiliates continue to own at least 75% of the
Shares originally purchased by Essex at the Closing, the Company
will not enter into any material transaction that could result in
sale, transfer, assignment of, or grant of any exclusive or
non-exclusive license in or to, any Patent related to Riquent(R)
in the United States, in each case without the prior written
consent of Essex Woodlands Health Ventures Fund VI, LP ("ESSEX").
(B) Prior to the Closing, the Company shall not, and it
shall not authorize or permit any officer, director or employee
of or any investment banker, broker, attorney, accountant, or
other representative retained by the Company to, solicit,
initiate or encourage (including by way of furnishing
information) submission of any proposal or offer from any person
or entity which constitutes, or may reasonably be expected to
lead to, a Financing Proposal. As used herein, a "FINANCING
PROPOSAL" shall mean any proposal or offer to acquire in any
manner a direct or indirect equity interest in the Company or its
assets, or to finance the business or operations of the Company
(other than standard senior indebtedness for borrowed money from
a bank or similar financial institution, trade debt in the
ordinary course of business consistent with past practice, and
issuances under the Company Stock Plans in the ordinary course of
business). If the Company receives a Financing Proposal, the
Company shall notify the Purchasers immediately and shall provide
to the Purchasers a copy of any written documentation in
connection therewith. Prior to the Closing, the Company shall not
enter into any transaction pursuant to which any person or entity
would acquire in any manner a direct or indirect equity interest
in the Company or its assets, or would finance the business or
operations of the Company (other than standard senior
indebtedness for borrowed money from a bank or similar financial
institution, trade debt in the ordinary course of business
consistent with past practice, and issuances under the Company
Stock Plans in the ordinary course of business).
(C) The Company will not make any commitment or binding
obligation to take any action that would be prohibited under this
Section 5.3.
(D) The Company will not allow any Subsidiary to take any
action (or make a commitment or binding obligation to
24
take any action) that would be prohibited under this Section 5.3
if taken by the Company.
(E) Nothing contained in this Section 5.3 shall prevent the
Company's Board of Directors (the "BOARD") from (i) making any
disclosure to its stockholders, if, in the good faith judgment of
the Board, failure to so disclose would be inconsistent with its
obligations under applicable law; (ii) providing (or authorizing
the provision of) information to, or engaging in (or authorizing)
such discussions or negotiations with, any person who has made a
bona fide, detailed and non-contingent written Financing Proposal
received after the date hereof which did not result from a breach
of this Section 5.3; or (iii) recommending or consummating such a
Financing Proposal which did not result from such a breach to its
stockholders if and only to the extent that, in the case of
actions referred to in clause (ii) or (iii), (x) such Financing
Proposal is a Superior Proposal (as defined below), and (y) the
Board, after having consulted with and considered the advice of
outside counsel to the Board, determines in good faith that
providing such information or engaging in such negotiations or
discussions or making such recommendation is required in order to
discharge the directors' fiduciary duties to the Company and its
stockholders in accordance with the Delaware General Corporation
Law. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means
a bona fide, detailed and non-contingent written Financing
Proposal by a third party on terms that the Board determines in
its good faith judgment, after receiving the advice of its
financial advisors (and its legal advisors regarding the
prospects for regulatory approval), to be more favorable from a
financial point of view to the Company and its stockholders than
the transactions contemplated hereby, after taking into account
the likelihood of consummation of such transaction on the terms
set forth therein, taking into account all legal, financial
(including the financing terms of any such proposal), regulatory
and other aspects of such proposal and any other relevant factors
permitted under applicable law (including any costs, delays and
uncertainty regarding consummation of such Financing Proposal),
after giving the Purchasers at least ten (10) Business Days to
respond to such third-party Financing Proposal once the Board has
notified the Purchasers that in the absence of any further action
by the Purchasers it would consider such Financing Proposal to be
a Superior Proposal.
(F) Each Purchaser that receives Nonpublic Information
pursuant to this Section 5.3 shall keep such information
confidential to the extent necessary to comply with applicable
securities laws (including, without limitation, Regulation FD).
25
5.4 Indemnification. (a) In consideration of each Purchaser's execution and
delivery of this Agreement and the Ancillary Agreements to which it is a party
and acquiring the Shares and the Warrants hereunder and in addition to all of
the Company's other obligations under this Agreement and the Ancillary
Agreements, the Company shall defend, protect, indemnify and hold harmless each
Purchaser and each other holder of the Shares, Warrants or Warrant Shares and
all of their affiliates, stockholders, partners, members, officers, directors,
employees and direct or indirect investors and any of the foregoing persons'
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements
(collectively, "CLAIMS"), incurred by any Indemnitee as a result of, or arising
out of, or relating to any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under this
Agreement or any Ancillary Agreement. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Claims which is permissible under applicable law. Subject to Section 5.4(b)
of this Agreement, the Company shall reimburse the Indemnitees, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with the investigating or
defending any such Claim.
(b) Promptly after an Indemnitee has knowledge of any Claim as to which
such Indemnitee reasonably believes indemnity may be sought or promptly after
such Indemnitee receives notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnitee shall, if a Claim in respect thereof is to be made against the
Company under this Section 5.4, deliver to the Company a written notice of such
Claim, and the Company shall have the right to participate in, and, to the
extent the Company so desires, to assume control of the defense thereof with
counsel mutually satisfactory to the Company and the Indemnitee; provided, that
an Indemnitee shall have the right to retain its own counsel if, in the
reasonable opinion of such Indemnitee, the representation by such counsel of the
Indemnitee and the Company would be inappropriate due to actual or potential
conflicting interests between such Indemnitee and the Company; provided,
further, that the Company shall not be responsible for the reasonable fees and
expenses of more than one (1) separate legal counsel for such Indemnitee. In the
case of an Indemnitee, the separate legal counsel (if applicable) referred to in
the immediately preceding sentence (the "LEGAL COUNSEL") shall be selected by
the Purchasers holding at least a majority in interest of the Shares or Warrant
Shares to which the Claim relates. The Legal Counsel shall not represent any
Indemnitee that sends such counsel written notice that such Indemnitee does not
wish such counsel to represent it in connection with the matters discussed in
this Section. The Indemnitees, other than any Indemnitee that delivers the
notice discussed in the preceding sentence, hereby waive any conflict of
interest or potential conflict of interest that may arise as a result of the
representation of such Indemnitees by the Legal Counsel in connection with the
subject matter of the Claim. The Indemnitee shall cooperate fully with the
Company in connection with any negotiation or defense of any such action or
Claim by the Company and shall furnish to the Company all information reasonably
available to the Indemnitee which relates to such action or Claim. The Company
shall keep the Indemnitee fully apprised at all times as to the status of the
defense or
26
any settlement negotiations with respect thereto. The Company shall not be
liable for any settlement of any Claim effected without its prior written
consent; provided, however, that the Company shall not unreasonably withhold,
delay or condition its consent. The Company shall not, without the prior written
consent of the Indemnitee, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnitee of a full
release from all liability in respect to such Claim, action and proceeding. The
failure to deliver written notice to the Company as provided in this Agreement
shall not relieve the Company of any liability to the Indemnitee under this
Section 5.4, except to the extent that the Company is materially prejudiced in
its ability to defend such action.
5.5 Obligations. Each party shall use commercially reasonable efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Section 6 of this Agreement.
5.6 Form D and Blue Sky. The Company agrees to file timely a Form D with
the Commission with respect to the Shares, Warrants and Warrant Shares as
required under Regulation D and to provide, upon request, a copy thereof to each
Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Shares, Warrants and Warrant Shares for, sale to the Purchasers pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Purchasers on or prior to
the Closing Date. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 5.6.
5.7 Reservation of Shares. The Company shall take all actions necessary to
at all times have authorized, and reserved for the purpose of issuance, no less
than one hundred percent (100%) of the number of shares of Common Stock needed
to provide for the issuance of the Warrant Shares upon the exercise of all
issued and outstanding Warrants, without regard to any limitations on such
exercise of such Warrants; provided, that prior to obtaining the Share
Authorization Approval, (a) the Company shall reserve all of its authorized but
unissued shares, other than such shares which are already reserved for the
Company Stock Plans, for such purposes, and (b) the Company shall not be
required to take any other action under this Section so long as the Company is
complying with Section 5.14.
5.8 Filing of Form 8-K. On the date of this Agreement or the next Business
Day, the Company shall issue a press release, in form reasonably acceptable to
Essex and its counsel, announcing the transactions contemplated hereby. The
Company shall use reasonable efforts within one Business Day after the public
announcement of the transactions contemplated hereby to file (1) a Current
Report on Form 8-K with the Commission furnishing as an exhibit to such Current
Report on Form 8-K the press release announcing the signing of this Agreement,
and (2) a Current Report on Form 8-K with the Commission describing the terms of
the transactions contemplated by this Agreement and the Ancillary Agreements,
and including as exhibits to such Current Report on Form 8-K (i) this Agreement,
(ii) the form of Contingent Warrant, (iii) the form of Closing Warrant and (iv)
the Rights Agreement, each in the form required by the Exchange Act.
27
5.9 Waivers to Existing Registration Rights. With respect to any existing
agreements or arrangements under which the Company is obligated to register the
sale of any of its securities under the Securities Act (other than pursuant to
the Rights Agreement), the Company shall use its commercially reasonable best
efforts to obtain all waivers with respect to such agreements (i) at the time
any registration statement is filed pursuant to the Rights Agreement, and (ii)
through the period of effectiveness of each such registration statement, so that
the Company would not be required to register the sale of any of its securities
pursuant to such other agreements or arrangements as a result of any actions
taken by the Company to file any registration statements pursuant to the Rights
Agreement.
5.10 Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of each Purchaser or their respective
nominee(s), for the Shares and (upon exercise of the Warrants) the Warrant
Shares, in the appropriate amounts (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"), in form and substance reasonably acceptable to the Purchasers.
The Company agrees that no instruction inconsistent with the Irrevocable
Transfer Agent Instructions referred to in this Section will be given by the
Company to its transfer agent and that the Shares and Warrant Shares, if any,
shall be freely transferable on the books and records of the Company as and to
the extent provided in this Agreement, the Warrants and the Registration Rights
Agreement (but subject to the express transfer limitations set forth therein).
5.11 Board Nominees; Director Protections. The Company shall ensure that,
unless otherwise agreed in writing by Essex and Frazier Healthcare V, LP
("FRAZIER"), the Company's Board of Directors shall consist of no more than nine
authorized directors. If at any time fewer than two individuals designated by
Essex (the "ESSEX DESIGNEES"), one individual designated by Frazier (the
"FRAZIER DESIGNEE"), and one individual designated by mutual written consent of
Essex and Frazier (the "JOINT DESIGNEE") are then serving on the Board of
Directors, or if any of the Joint Designee's, Frazier Designee's, or Essex
Designees' term as a director is expiring at or prior to the next meeting of the
Company's stockholders, then in either case the Company shall ensure that each
individual or individuals (as the case may be) designated by Essex, Frazier or
the joint approval of Essex and Frazier, as applicable, to serve as a director
is properly nominated for election as a director by the stockholders at the next
meeting of the Company's stockholders (the "NEXT MEETING"), and that a vote on
such election is taken at such Next Meeting (or, if then permitted by the
Company's Bylaws and applicable law and requested by Essex or Frazier (or
jointly), as applicable, such designee(s) shall be appointed as a director by
the Board of Directors to serve until he or she may be so nominated at the Next
Meeting); provided, that in any case where such a designee is not already on the
Board and is to be elected at a stockholders meeting (as opposed to appointed by
the Board), the Company shall ensure that the Next Meeting is called as
expeditiously as is practicable. The Company shall also ensure that each
individual serving as an Essex Designee or Frazier Designee (each a "DESIGNEE")
is at all times covered and insured by the Company's directors and officers
liability insurance, under a valid policy with a responsible and reputable
insurance company or association in such amount, type and covering such risks as
are at least as protective of directors as is the Company's current such policy.
The Company shall promptly reimburse all reasonable expenses of each Designee
incurred in attending any meeting of the Board of Directors (or any committee
thereof), whether in person or by remote access, and in taking any other action
requested by the Company or the Board. The Company shall enter into an
indemnification agreement with each Designee at or prior to such
28
Designee becoming a director (or such later date as is requested by the
Designee), in form reasonable acceptable to Essex and Frazier, which agreement
shall be no less protective of the Designees than any other indemnification
agreement between the Company and any director. Essex and Frazier agree that
that the Company's current form of indemnification agreement is acceptable to
them given the current legal and business environment and applicable law (but
reserve the right to require that such agreement continue to be reasonably
acceptable to them as such environment or laws change). Unless waived in writing
by such Designee (or by Essex or Frazier, as applicable, on such Designee's
behalf), a Designee shall be entitled to receive the same compensation (whether
in the form of cash, securities or otherwise) for serving as a director as is
paid to any other director.
5.12 Preemptive Rights. (a) As used in this Section, the term "NEW
SECURITIES" means any shares of Common Stock, shares of Preferred Stock or any
other class of capital stock of the Company, whether or not now authorized, or
any securities of any type that are directly or indirectly convertible into
shares of such capital stock, or options, warrants, debt instruments or rights
to acquire shares of such capital stock; provided, that "New Securities" does
not include any (i) shares of Common Stock (or options therefor) issued to
officers, directors or employees of, or consultants to, the Company pursuant to
Company Stock Plans or agreements on terms approved by the Board of Directors;
(ii) shares of Common Stock, or options or warrants to purchase Common Stock,
issued to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings or similar transactions, provided such
issuances are primarily for other than equity financing purposes; (iii) shares
of Common Stock, or options or warrants to purchase Common Stock, issued
pursuant to (A) joint ventures, technology licensing or research and development
activities, (B) distribution or manufacture of the Company's products or
services, (C) the purchase of advertising placement, or (D) any other
transaction involving corporate partners, in each case that are primarily for
other than equity financing purposes; or (iv) shares of Common Stock, or options
or warrants to purchase Common Stock, issued in connection with bona fide
acquisitions, mergers or similar transactions.
(b) If, at any time and from time to time prior to December 31, 2008, the
Company should desire to issue New Securities, it shall give each Purchaser that
owns at least 75% of the Shares originally purchased by it (or its predecessor
or affiliates) at the Closing (a "QUALIFYING PURCHASER") the first right to
purchase its "PROPORTIONATE PORTION" of such securities, determined by
multiplying the total number of shares of New Securities available for purchase
by a fraction, the numerator of which is the total number of shares of Common
Stock then held by such Qualifying Purchaser, and the denominator of which is
the number of shares of Common Stock actually issued and outstanding on such
date, on the same terms as the Company is willing to sell such New Securities to
any other person or entity.
(c) Promptly prior to any sale or issuance by the Company of any New
Securities, the Company shall deliver to each Qualifying Purchaser a written
notice of its intention to issue and sell any New Securities (the "PRE-NOTICE"),
which Pre-Notice shall ask such Qualifying Purchaser if it desires to review the
terms of such proposed issuance (such additional notice, a "PARTICIPATION
NOTICE"). Within two (2) Business Days of receiving the Pre-Notice, a Qualifying
Purchaser must notify the Company whether it desires to receive a Participation
Notice. If a Qualifying Purchaser fails to respond to a Pre-Notice within such
time frame, such
29
Qualifying Purchaser will be deemed to have waived its right to receive such
Participation Notice and its right to purchase its Proportionate Portion. Upon
the request of a Qualifying Purchaser, and only upon a request by such
Qualifying Purchaser, for a Participation Notice, the Company shall promptly,
but no later than three (3) Business Days after such request, deliver a
Participation Notice to such Purchaser. The Participation Notice shall describe
in reasonable detail the proposed terms of the issuance of the New Securities,
the amount of proceeds intended to be raised thereunder, the Persons to whom the
New Securities are to be issued, and attached to which shall be a term sheet or
similar document relating thereto. Within five (5) days after receipt of the
Participation Notice (the "EXERCISE PERIOD"), each Qualifying Purchaser shall
notify the Company whether such Qualifying Purchaser desires to exercise its
option to purchase the Proportionate Portion (or any part thereof) of the New
Securities so offered. If a Qualifying Purchaser fails to respond to the
Participation Notice during the Exercise Period, such Qualifying Purchaser will
be deemed to have declined to exercise its option to purchase its Proportionate
Portion. In the event that the Qualifying Purchasers elect to purchase New
Securities offered by the Corporation under the Participation Notice during the
Exercise Period, then a closing of the sale and issuance of the New Securities
to the electing Qualifying Purchasers shall occur no later than the later of (i)
the date set forth in the Participation Notice, and (ii) the date that is
fifteen (15) Business Days after receipt of the Participation Notice.
(d) After the expiration of the Exercise Period, the Company may, during a
period of ninety (90) days immediately following the end of the Exercise Period,
sell and issue any New Securities not purchased hereunder to other persons or
entities, upon the same terms and conditions as those set forth in the
Participation Notice. In the event the Company has not sold the New Securities
within said ninety (90) day period, the Company shall not thereafter issue or
sell any New Securities without first offering such securities to the Qualifying
Purchaser in the manner provided above.
(e) Each Qualifying Purchaser that receives Nonpublic Information pursuant
to this Section 5.12 shall keep such information confidential to the extent
necessary to comply with applicable securities laws (including, without
limitation, Regulation FD).
5.13 Listing. The Company shall comply with all requirements of the
Principal Market or Capital Market (each as defined below), as applicable, with
respect to the issuance of the Shares and the Warrant Shares, if any, and shall
use its best efforts to (i) have the Shares and Warrant Shares, if any, listed
on the Principal Market on or before the date the applicable registration
statement with respect thereto under the Rights Agreement is declared effective
by the Commission, (ii) maintain the listing of the Company's Common Stock at
all times on the Principal Market until all Shares or Warrant Shares, if any,
have been sold on the Principal Market, and (iii) if such listing is for any
reason suspended by the Commission or the Principal Market, (A) take steps to
promptly obtain listing on the Principal Market again, and (B) take steps to
promptly obtain listing on the Capital Market until the listing on the Principal
Market is restored.
5.14 Stockholder Approvals. The Company shall use its best efforts to
satisfy the conditions to be satisfied by it as provided in Section 6.1(C) of
this Agreement. In addition, and without limiting the generality of the
foregoing, the Company shall:
30
(a) The Company shall, as promptly as practicable following the
execution and delivery of this Agreement, establish a record date, duly call,
give notice of, convene and hold a meeting of its stockholders (the
"STOCKHOLDERS MEETING") (it being agreed and understood that the Company shall
use its reasonable best efforts to duly call and give notice of such meeting by
no later than October 28, 2005, which meeting shall occur not later than 30
Business Days following the date on which the Proxy Statement (as defined below)
is first mailed to the stockholders of the Company) for the purpose of seeking
stockholder approval of (i) the sale and issuance of the Shares, the Closing
Warrants and the Warrant Shares and any other matters contemplated by this
Agreement or the Ancillary Agreements that are required to be approved by the
stockholders under applicable law or the rules of the Commission or the
Principal Market or Capital Market, as applicable (the "TRANSACTION APPROVAL"),
(ii) an amendment to the Certificate to authorize an increase in the number of
shares of Common Stock authorized by the Certificate by 50,000,000, which shares
are to be reserved for exercise in full of the Warrants, for issuance in
connection with the Company's existing equity incentive plans and for issuance
in connection with other corporate purposes (the "SHARE AUTHORIZATION
APPROVAL"), (iii) an amendment to the Certificate, to become effective following
the Closing, to authorize the combination of the Company's outstanding shares of
Common Stock into a lesser number of shares of Common Stock, using a ratio
approved by the Board and agreed upon prior to the filing of the Proxy Statement
by Purchasers who have agreed to purchase at least 50% of the Shares to be sold
at Closing (which ratio shall result in no more than 5 shares combining into a
single share, and no fewer than 2 shares combining into a single share) (the
"REVERSE SPLIT APPROVAL"), and (iv) an amendment to the La Jolla Pharmaceutical
Company 2004 Equity Incentive Plan to (A) increase the number of shares
available thereunder by 16 million shares; (B) amend the vesting requirements
with respect to restricted stock to accommodate the terms of the retention
agreements entered into in connection with the execution of this Agreement; and
(C) increase the maximum number of shares that may be granted to any person in
any calendar year from 1 million shares to 7 million shares. (the "OPTION
APPROVAL") (collectively, the "PROPOSALS"). In connection therewith, the Company
will, as promptly as practicable following the date hereof, prepare and file
with the Commission proxy materials (including a proxy statement and form of
proxy) for use at the Stockholders Meeting. The Company will use its reasonable
best efforts to have the Proxy Statement "cleared" by the Commission's staff as
promptly as practicable and, as promptly as practicable thereafter, cause the
Proxy Statement, in definitive form, to be mailed to the stockholders of the
Company. Each Purchaser shall promptly furnish in writing to the Company such
information relating to such Investor and its investment in the Company as the
Company may reasonably request for inclusion in the Proxy Statement. The Company
will comply in all material respects with Section 14(a) of the Exchange Act and
the rules promulgated thereunder in relation to any proxy statement (as amended
or supplemented, the "PROXY STATEMENT") and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders Meeting, and the
Proxy Statement shall not, on the date that the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies or the Stockholders Meeting which has
become false or misleading. No filing of, or amendment or supplement to, the
Proxy Statement will be made by the Company without providing the
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Purchasers a reasonable opportunity to review and comment thereon. If the
Company should discover at any time prior to the Stockholders Meeting, any event
relating to the Company or any of its Subsidiaries or any of their respective
affiliates, officers or directors that is required to be set forth in a
supplement or amendment to the Proxy Statement, in addition to the Company's
obligations under the Exchange Act, the Company will promptly inform the
Purchasers thereof.
(b) Following the Closing, if the Company shall not have obtained the
Share Authorization Approval, the Reverse Split Approval or the Option Approval,
the Company shall, as promptly as practicable following the Closing Date,
establish a record date, duly call, give notice of, convene and hold a meeting
of its stockholders (the "SECOND STOCKHOLDERS MEETING") which shall occur not
later than the 45th day following the date of the Closing, subject to any delays
that may result from the Commission's review, if any, of the proxy statement
with respect to such Second Stockholders Meeting (the "SECOND STOCKHOLDERS
MEETING DEADLINE") for the purpose of seeking each of such approvals that was
not obtained at the Stockholders Meeting. In connection therewith, the Company
will, as promptly as practicable following the Closing Date, prepare and file
with the Commission proxy materials (including a proxy statement and form of
proxy) for use at the Second Stockholders Meeting. The Company will use its
reasonable best efforts to have the such proxy statement "cleared" by the
Commission's staff as promptly as practicable and, as promptly as practicable
thereafter, cause such proxy statement, in definitive form, to be mailed to the
stockholders of the Company. Each Purchaser shall promptly furnish in writing to
the Company such information relating to such Investor and its investment in the
Company as the Company may reasonably request for inclusion in the Second Proxy
Statement (as defined below). The Company will comply in all material respects
with Section 14(a) of the Exchange Act and the rules promulgated thereunder in
relation to any proxy statement (as amended or supplemented, the "SECOND PROXY
STATEMENT") and any form of proxy to be sent to the stockholders of the Company
in connection with the Second Stockholders Meeting, and the Second Proxy
Statement shall not, on the date that the Second Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders or at
the time of the Second Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies or the Second Stockholders Meeting which
has become false or misleading. No filing of, or amendment or supplement to, the
Second Proxy Statement will be made by the Company without providing the
Purchasers a reasonable opportunity to review and comment thereon. If the
Company should discover at any time prior to the Second Stockholders Meeting,
any event relating to the Company or any of its Subsidiaries or any of their
respective affiliates, officers or directors that is required to be set forth in
a supplement or amendment to the Second Proxy Statement, in addition to the
Company's obligations under the Exchange Act, the Company will promptly inform
the Purchasers thereof.
(c) The Company acknowledges that, prior to the date hereof, the Board
of Directors of the Company has approved the calling of the Stockholders Meeting
and, if necessary, the Second Stockholders Meeting. Subject to their fiduciary
obligations under applicable law (as determined in good faith by the Company's
Board of Directors after consultation with the Company's outside counsel), the
Company's Board of Directors shall recommend to the Company's stockholders that
the stockholders vote in favor of the Proposals (the "COMPANY BOARD
RECOMMENDATION") at both the Stockholders Meeting and the Second
32
Stockholders Meeting (if any) and take all commercially reasonable action
(including, without limitation, hiring McKenzie Partners or another proxy
solicitation firm of nationally recognized standing) to solicit the approval of
the stockholders for the Proposals at both the Stockholders Meeting and the
Second Stockholders Meeting (if any) unless the Board of Directors shall have
modified, amended or withdrawn the Company Board Recommendation pursuant to the
provisions of the immediately succeeding sentence. The Company covenants that
the Board of Directors of the Company shall not modify, amend or withdraw the
Company Board Recommendation at either the Stockholders Meeting or the Second
Stockholders Meeting (if any) unless the Board of Directors (after consultation
with the Company's outside counsel) shall determine in the good faith exercise
of its business judgment that maintaining the Company Board Recommendation would
violate its fiduciary duty to the Company's stockholders. Whether or not the
Company's Board of Directors modifies, amends or withdraws the Company Board
Recommendation pursuant to the immediately preceding sentence, the Company shall
in accordance with Section 146 of the Delaware General Corporation Law and the
provisions of the Certificate and Bylaws, (i) take all action necessary to
convene the Stockholders Meeting (and, if necessary, the Second Stockholders
Meeting) to consider and vote upon the approval of the Proposals in accordance
with the requirements of Section 5.14(a) and 5.14(b) and (ii) submit the
Proposals at the Stockholders Meeting (and, as necessary, at the Second
Stockholders Meeting) to the stockholders of the Company for their approval in
accordance with the requirements of Section 5.14(a) and 5.14(b).
SECTION 6. CONDITIONS TO CLOSING
6.1 The obligation of each of the Purchasers to purchase Shares at the
Closing is subject to the fulfillment to the Purchaser's reasonable
satisfaction, or the waiver in writing by the Purchaser (as to itself only), of
each of the following conditions on or before such Closing:
(A) The representations and warranties contained in Section
3 shall be true, correct and complete in all material respects
(except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3,
in which case such representations and warranties shall be true,
correct and complete without further qualification) on and as of
the Closing Date (except for representations and warranties that
speak only as of a specific date (which shall be true, correct
and complete as of such date)), with the same effect as though
such representation and warranty had been made on and as of that
date.
(B) The Company shall have performed and complied in all
material respects with all agreements and conditions contained in
this Agreement required to be performed or complied with by the
Company prior to or at the Closing.
(C) The Company shall have obtained the Transaction Approval
from its stockholders, and shall have complied in all material
respects with the terms of Section 5.14 with respect to the Share
Authorization Approval.
33
(D) Each Purchaser shall have received (i) an opinion from
Gibson, Dunn & Crutcher LLP, counsel for the Company, dated the
Closing Date and addressed to the Purchasers, in form and
substance reasonably acceptable to Purchasers who have committed
to purchase a majority of the Shares, and (ii) a "freedom to
operate" opinion from Morrison & Foerster, counsel for the
Company, dated the Closing Date and addressed to the Purchasers,
in form and substance reasonably acceptable to Purchasers who
have committed to purchase a majority of the Shares.
(E) The Company, each of the Purchasers and the other
parties identified therein shall have entered into the
Registration Rights Agreement in the form attached hereto as
Exhibit D (the "RIGHTS AGREEMENT").
(F) The Company shall have expanded the number of authorized
directors of its Board of Directors to nine and, conditioned only
upon the Closing, (i) Martin P. Sutter and James Topper shall
each have been elected or appointed as a "Class 3 Director" (as
defined in the Certificate), with Mr. Sutter being the initial
Essex Designee and Mr. Topper being the initial Frazier Designee,
(ii) Frank Young shall have been elected or appointed as a "Class
2 Director" (as defined in the Certificate), as an initial Essex
Designee, and (iii) Nader Naini shall have been elected or
appointed as a "Class 1 Director" (as defined in the
Certificate), as the initial Joint Designee.
(G) Subject to each being deemed eligible to serve on the
compensation committee of the Board of Directors pursuant to the
terms of the charter of the compensation committee and applicable
listing standards, conditioned only upon the Closing, Martin P.
Sutter and James Topper shall each have been elected or appointed
to the compensation committee of the Board of Directors of the
Company.
(H) The Company shall have delivered to the Purchasers: (i)
the Certificate, as in effect as of the Closing Date, which shall
be in the form of the Certificate on the date of this Agreement
(or as amended by an amendment made in compliance with Section
5.14), certified by the Secretary of State of the State of
Delaware; (ii) certificates, as of a recent practicable date, as
to the corporate good standing of the Company issued by the
Secretaries of State of the States of Delaware and California and
the Secretary of each other State in which the Company is
qualified to do business; (iii) a certificate of the Secretary or
Assistant Secretary of the Company, dated as of the Closing Date,
certifying as to (a) the By-laws of the Company (which shall be
in the same form as the By-
34
laws on the date of this Agreement), (b) the signatures and
titles of the officers of the Company executing this Agreement or
any of the Ancillary Agreements, and (c) resolutions of the Board
of Directors and stockholders of the Company, authorizing and
approving all matters in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and
thereby, in each case that is respectively required to be
approved by them; and (iv) a certificate, executed by the
President of the Company, dated the Closing Date, certifying to
the fulfillment of the conditions specified in Section 6.1.
(I) The Company will have paid or made adequate arrangements
for payment in accordance with the provisions of Section 7.3, the
fees and disbursements of the Purchasers and their counsel at the
Closing.
(J) All authorizations, approvals, filings or permits, if
any, of or with any governmental authority or regulatory body of
the United States or of any state or any Self-Regulatory
Organizations (including NASDAQ) that are required in connection
with the lawful issuance and sale of the Shares, Warrants and
Warrant Shares shall be duly made, obtained and effective as of
the Closing Date.
(K) The Common Stock shall be designated for quotation on
the NASDAQ National Market (the "PRINCIPAL MARKET") or the NASDAQ
Capital Market (the "CAPITAL MARKET"), and shall not have been
suspended by the Commission or the Principal Market from trading
on the Principal Market (unless, in connection with a suspension
by the Principal Market, the Company shall have been designated
for quotation on the Capital Market and not later been suspended
therefrom).
(L) No stop order or suspension of trading shall have been
imposed by the applicable Principal Market or Capital Market on
which the Common Stock is listed for trading or approved for
quotation, the Commission or any other governmental or regulatory
body with respect to public trading in the Common Stock.
(M) The Company shall have delivered the Irrevocable
Transfer Agent Instructions to the Company's transfer agent.
(N) From the date of this Agreement through the Closing
Date, no Company Material Adverse Effect shall have occurred or
become known (whether or not arising in the ordinary course of
business).
35
(O) The Company shall have taken all corporate and other
action and proceedings in connection with the Rights Agreement
between the Company and American Stock Transfer & Trust Company,
as amended (the "RIGHTS PLAN") and the "Rights" (as defined in
the Rights Plan) or otherwise, as is necessary to ensure that the
Company's stockholders do not receive or become entitled to
receive any Series A Junior Participating Preferred Stock (or
other securities or rights) as a result of the transactions
contemplated by this Agreement and the Ancillary Agreements, and
all such actions and proceedings, and all documentation incident
thereto, shall be reasonably satisfactory in substance and form
to Essex and its counsel.
(P) The Company shall have taken all corporate and other
action and proceedings necessary to ensure that no material
change in control provision or restriction is triggered (and not
waived) as a result of the transactions contemplated by this
Agreement and the Ancillary Agreements (excluding the payment of
the incentive bonuses pursuant to the terms of the retention
agreements entered into on the date hereof in connection with the
execution of this Agreement), and all such actions and
proceedings, and all documentation incident thereto, shall be
reasonably satisfactory in substance and form to Essex and its
counsel.
(Q) Such Purchaser, together with all other Purchasers that
have fulfilled the conditions of Section 6.2, shall have
committed to purchase at least $66,000,000 of Shares in the
aggregate at the Closing.
6.2 The obligation of the Company to sell Shares to a Purchaser under this
Agreement is subject to fulfillment, or the waiver in writing by the Company, of
the following condition on or before the Closing:
(A) The representations and warranties of such Purchaser
contained in Section 4 shall be true, correct and complete in all
material respects (except to the extent that any of such
representations and warranties is already qualified as to
materiality in Section 4, in which case such representations and
warranties shall be true, correct and complete without further
qualification) on and as of the Closing Date, with the same
effect as though such representations and warranties had been
made on and as of that date.
(B) Such Purchaser shall have performed and complied in all
material respects with all agreements and conditions contained in
this Agreement required to be performed or complied with by such
Purchaser prior to or at the Closing.
36
(C) The Company shall have obtained the Transaction Approval
from its stockholders.
6.3 The obligation of a Purchaser to purchase Shares at the Closing may be
terminated at any time prior to the Closing by such Purchaser if (i) the Company
shall have breached or failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in Section
6.1(A) or 6.1(B) and (B) is not cured by the Company within 10 days following
receipt of written notice of such breach or failure to perform and (ii) such
Purchaser gives written termination notice to the Company (a "TERMINATION
NOTICE"). If a Purchaser delivers a Termination Notice to the Company, it shall
concurrently deliver of copy of the Termination Notice to the other Purchasers.
If a Termination Notice is delivered to the Company in accordance with the terms
of this Section 6.3, this Agreement shall automatically become void and have no
effect with respect to such Purchaser.
SECTION 7. MISCELLANEOUS
7.1 This Agreement, and the rights and obligations of each Purchaser
hereunder, may be assigned by such Purchaser to (a) any person or entity to
which Shares are transferred by such Purchaser, or (b) to any affiliate,
partner, member, stockholder or subsidiary of such Purchaser, and, in each case,
such transferee shall be deemed a "Purchaser" for purposes of this Agreement;
provided, that such assignment of rights shall be contingent upon the transferee
providing a written instrument to the Company certifying its status as an
"accredited investor" and notifying the Company of such transfer and assignment
and agreeing in writing to be bound by the terms of this Agreement. The Company
may not assign or delegate its rights or obligations under this Agreement.
Except as otherwise provided herein, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the respective successors,
assigns, heirs, executors, and administrators of the parties hereto.
7.2 All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Closing of the transactions
contemplated hereby, and the transfer of the Shares, Warrants and Warrant Shares
by the Purchasers, for a period of three (3) years after the date of this
Agreement. All covenants (including indemnification obligations with respect to
breaches of representations and warranties if a claim with respect thereto is
made prior to the third anniversary of the date of this Agreement) contained
herein shall survive the execution and delivery of this Agreement and the
Closing of the transactions contemplated hereby, and the transfer of the Shares,
Warrants and Warrant Shares by the Purchasers (except to the extent expressly
provided in this Agreement).
7.3 Each party to the Agreement will pay its own expenses in connection
with the transactions contemplated by this Agreement, whether or not the
transactions are consummated; provided, that upon the earlier of the Closing or
occurrence of the Warrant Trigger, the Company shall pay up to $400,000 of the
fees and disbursements of Essex, Frazier and their counsel in connection with
the due diligence, negotiation, drafting of, and closing of the transactions
contemplated by, this Agreement and the Ancillary Agreements. In addition, after
the Closing
37
the Company will pay the reasonable fees and disbursements (a) of a single
counsel for the Purchasers in connection with any subsequent amendment, waiver
or consent of or under this Agreement, the Ancillary Agreements or any related
document or agreement initiated by the Company, and (b) of any Purchaser's
counsel in connection with successful enforcement of this Agreement, any of the
Ancillary Agreements or any related document or agreement.
7.4 The Company and each Purchaser will indemnify and save the other
parties harmless from and against any and all claims, liabilities or obligations
with respect to investment banking, brokerage or finders' fees or commissions,
or consulting fees in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements asserted by any person on the basis of
any agreement, statement or representation alleged to have been made by such
indemnifying party.
7.5 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement. Any provision of this Agreement held invalid or unenforceable only in
part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
7.6 In addition to any and all other remedies that may be available at law
in the event of any breach of this Agreement, each party shall be entitled to
specific performance of the agreements and obligations of the other parties
hereunder and to such other injunctive or other equitable relief, without the
necessity of showing economic loss and without any bond or other security being
required, as may be granted by a court of competent jurisdiction. Each party
acknowledges and agrees that the other parties could be damaged irreparably if
any of the provisions of this Agreement are not performed according to their
specific terms and that any breach of this Agreement could not be adequately
compensated in all cases by monetary damages alone.
7.7 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware and the laws of the United States applicable
therein (in each case without giving effect to any choice or conflict of laws
provision or rule that would cause the application of the laws of any other
jurisdiction) and shall be treated in all respects as a Delaware contract. Any
action, suit or proceeding arising out of or relating to this Agreement shall be
brought in San Diego County, California or, if it has or can acquire
jurisdiction, any Federal court located in such State and County, and EACH OF
THE PARTIES HERETO, AFTER CONSULTING WITH OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND WAIVES
TRIAL BY JURY (AND AGREES NOT TO REQUEST TRIAL BY JURY), IN EACH CASE IN
CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby in the courts of the State of California or the United
States of America, in each case located in San Diego County, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such matter brought in any such court has been brought in an
inconvenient forum. Each party hereby irrevocably waives personal service of
process and
38
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
7.8 All notices, requests, consents, and other communications under this
Agreement shall be in writing and shall be deemed delivered (a) three business
days after being sent by registered or certified mail, return receipt requested,
postage prepaid, (b) one business day after being sent via a reputable
nationwide overnight courier service guaranteeing next business day delivery or
(c) upon delivery when sent by facsimile (with confirmation of receipt), in each
case to the intended recipient as set forth below:
If to the Company:
La Jolla Pharmaceutical Company
6455 Nancy Ridge Drive
San Diego, CA 92121
Attention: Chief Executive Officer
Fax: (858) 626-2851
or at such other address as may have been furnished in writing by the Company to
the other parties hereto, with a copy to:
Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, CA 92614
Attention: Mark W. Shurtleff, Esq.
Fax: (949) 451-4220
If to a Purchaser, at its address set forth on Schedule A, or at such other
address as may have been furnished in writing by such party to the Company, with
a copy to its legal counsel set forth on Schedule A, if any.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service or electronic mail), but no such notice,
request, consent or other communication shall be deemed to have been duly given
unless and until it is actually received by the party for whom it is intended.
Any party may change the address to which notices, requests, consents or other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Section.
7.9 This Agreement and the Ancillary Agreements (and the schedules and
exhibits hereto and thereto) contain the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings, written or oral.
39
7.10 This Agreement may be amended or terminated and the observance of any
term of this Agreement may be waived with respect to all parties to this
Agreement (either generally or in a particular instance and either retroactively
or prospectively), with the written consent of the Company and the holders of at
least a majority of the Shares then held by all Purchasers (or, if prior to
Closing, by the Purchasers who have agreed to purchase a majority of the Shares
to be purchased at Closing). Notwithstanding the foregoing, this Agreement may
not be amended or terminated and the observance of any term hereunder may not be
waived with respect to any Purchaser without the written consent of such
Purchaser unless such amendment, termination or waiver applies to all Purchasers
in the same fashion. The Company shall give prompt written notice of any
amendment or termination hereof or waiver hereunder to any party hereto that did
not consent in writing to such amendment, termination or waiver. Any amendment,
termination or waiver effected in accordance with this Section 7.10 shall be
binding on all parties hereto, even if they do not execute such consent.
7.11 The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Except as set forth in this Agreement, no
failure or delay by any party in exercising any right, power, or privilege under
this Agreement will operate as a waiver of the right, power, or privilege, and
no single or partial exercise of any right, power, or privilege will preclude
any other or further exercise of the right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law (a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing, (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given and (c)
no notice to or demand on one party will be deemed to be a waiver of any
obligation of that party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
7.12 The Company hereby agrees to provide prompt notice to each Purchaser
following any "determination date" (as defined in Treasury Regulation Section
1.897-2(c)(1)) on which the Company becomes a United States real property
holding corporation. In addition, upon a written request by a Purchaser, the
Company shall provide such Purchaser with a written statement informing the
Purchaser whether the Purchaser's interest in the Company constitutes a United
States real property interest. The Company's determination shall comply with the
requirements of Treasury Regulation Section 1.897-2(h)(1) or any successor
regulation, and the Company shall provide timely notice to the Internal Revenue
Service, in accordance with and to the extent required by Treasury Regulation
Section 1.897-2(h)(2) or any successor regulation, that such statement has been
made. The Company's written statement to the Purchaser shall be delivered to the
Purchaser within ten (10) Business Days of the Purchaser's written request
therefor.
7.13 Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural, and vice versa.
7.14 This Agreement may be executed in identical 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
each other party hereto by facsimile
40
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
7.15 The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit or restrict the contractual obligations of the
parties. Any reference in this Agreement to a particular section or subsection
shall refer to a section or subsection of this Agreement, unless specified
otherwise.
7.16 All transfer, excise or other taxes payable to any jurisdiction (in
the United States and outside of the United States) or by reason of the sale or
issuance of the Shares (except for such taxes payable by reason of any
subsequent transfer of the Shares) shall be paid or provided for by the Company.
7.17 The obligations of each Purchaser under this Agreement and any
Ancillary Agreement to which such Purchaser is a party are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement or any Ancillary Agreement. Nothing contained
herein or in any Ancillary Agreement, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions. Each Purchaser
confirms that it has independently participated in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors.
Except as provided by this Agreement or the Ancillary Agreements, each Purchaser
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any
Ancillary Agreements, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
7.18 The obligations of each Purchaser under this Agreement and any
Ancillary Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement or any Ancillary
Agreement. The decision of each Purchaser to purchase Shares, Warrants and
Warrant Shares to this Agreement and the Ancillary Agreements has been made by
such Purchaser independently of any other Purchaser. Nothing contained herein or
in any Ancillary Agreement, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement or the Ancillary Agreements. Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with making its
investment hereunder and that no Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment in the Shares, Warrants
and Warrant Shares or enforcing its rights under this Agreement or the Ancillary
Agreements. Each Purchaser shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of the other Ancillary Agreements, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the
Purchasers has been provided with the same Agreement and
41
Ancillary Agreements for the purpose of closing a transaction with multiple
Purchasers and not because it was required or requested to do so by any
Purchaser.
7.19 Except to the extent required to comply with applicable law, no
announcement regarding any Purchaser in a press release, conference,
advertisement, announcement, professional or trade publication, mass marketing
materials or otherwise to the general public may be made without the prior
consent of such Purchaser. Prior to the Closing, no announcement regarding the
Company in a press release, conference, advertisement, announcement,
professional or trade publication, mass marketing materials or otherwise to the
general public may be made by a Purchaser without the prior consent of the
Company. Notwithstanding the foregoing, the Company shall be permitted to make
the press release pursuant to Section 5.8 above, and thereafter any Purchaser
may at any time post a notice on its website that includes information about the
Company and/or the financing that was contained in such press release.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
42
EXHIBIT 10.1
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first set forth above.
THE COMPANY: LA JOLLA PHARMACEUTICAL COMPANY
a Delaware corporation
By: /s/ Steven B. Engle
------------------------------------
Name: Steven B. Engle
----------------------------------
Title: Chairman and CEO
---------------------------------
PURCHASERS: ESSEX WOODLANDS HEALTH VENTURES
FUND VI, LP
By: Essex Woodlands Health Ventures VI,
L.P., its General Partner
By: Essex Woodlands Health Ventures VI,
L.L.C., its General Partner
By: /s/ Martin P. Sutter
------------------------------------
Martin P. Sutter, Managing Director
FRAZIER HEALTHCARE V, LP
By: FHMV, LP, its General Partner
By: FHMV, LLC, its General Partner
By: /s/ James N. Topper
------------------------------------
James N. Topper,
Authorized Representative
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
DOMAIN PUBLIC EQUITY PARTNERS, L.P.
By: Domain Public Equity Associates,
L.L.C., its General Partner
By: /s/ Lisa A. Kraeutler
------------------------------------
Lisa A. Kraeutler, Attorney-in-Fact
/s/ Alejandro Gonzalez Cimadevilla
----------------------------------------
Alejandro Gonzalez Cimadevilla
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
SPECIAL SITUATIONS FUND III, L.P.
By: /s/ Austin W. Marxe
------------------------------------
Austin W. Marxe, its General Partner
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: /s/ Austin W. Marxe
------------------------------------
Austin W. Marxe, its General Partner
SPECIAL SITUATIONS PRIVATE EQUITY FUND,
L.P.
By: /s/ Austin W. Marxe
------------------------------------
Austin W. Marxe, its General Partner
SPECIAL SITUATIONS LIFE SCIENCES FUND,
L.P.
By: /s/ Austin W. Marxe
------------------------------------
Austin W. Marxe, its General Partner
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
SUTTER HILL VENTURES,
a California limited partnership
By: /s/ William H. Younger, Jr.
------------------------------------
Name: William H. Younger, Jr.
----------------------------------
Managing Director of the
General Partner
ANVEST, L.P.
By: /s/ David Anderson
------------------------------------
David Anderson, General Partner
G. LEONARD BAKER, JR. AND MARY ANNE
BAKER, CO-TRUSTEES OF THE BAKER
REVOCABLE TRUST U/A/D 2/3/03
By: /s/ G. Leonard Baker, Jr. By David E. Sweet
--------------------------------------------------------
G. Leonard Baker, Jr., Trustee Under Power of Attorney
WILLIAM H. YOUNGER, JR. AND LAUREN L.
YOUNGER, CO-TRUSTEES OF THE YOUNGER
LIVING TRUST U/A/D 1/20/95
By: /s/ William H. Younger, Jr.
------------------------------------
William H. Younger, Jr., Trustee
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
TENCH COXE AND SIMONE OTUS COXE,
CO-TRUSTEES OF THE COXE REVOCABLE TRUST
U/A/D 4/23/98
By: /s/ Tench Coxe By David E. Sweet
-----------------------------------------------------
Tench Coxe, Trustee Under Power of Attorney
/s/ James C. Gaither By David E. Sweet
---------------------------------------------------------
James C. Gaither Under Power of Attorney
JEFFREY W. BIRD AND CHRISTINA R. BIRD
AS TRUSTEES OF JEFFREY W. AND CHRISTINA
R. BIRD TRUST AGREEMENT DATED 10/31/00
By: /s/ Jeffrey W. Bird
------------------------------------
Jeffrey W. Bird, Trustee
SAUNDERS HOLDINGS, L.P.
By: /s/ G. Leonard Baker, Jr. By David E. Sweet
-----------------------------------------------------
G. Leonard Baker, Under Power of Attorney
Jr., General Partner
ROBERT YIN AND LILY YIN AS TRUSTEES OF
YIN FAMILY TRUST DATED MARCH 1, 1997
By: /s/ Robert Yin
------------------------------------
Robert Yin, Trustee
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO SHERRYL W.
HOSSACK
/s/ Vicki M. Bandel
----------------------------------------
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO DAVID L.
ANDERSON
/s/ Vicki M. Bandel
----------------------------------------
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO WILLIAM H.
YOUNGER
/s/ Vicki M. Bandel
----------------------------------------
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO TENCHE COXE
/s/ Vicki M. Bandel
----------------------------------------
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO DAVID E.
SWEET
/s/ Vicki M. Bandel
----------------------------------------
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO DAVID E.
SWEET (ROLLOVER)
/s/ Vicki M. Bandel
----------------------------------------
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO LYNNE M.
BROWN
/s/ Vicki M. Bandel
----------------------------------------
WELLS FARGO BANK, N.A. FBO
SHV PROFIT SHARING PLAN FBO PATRICIA
TOM (POST)
/s/ Vicki M. Bandel
----------------------------------------
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
EXHIBIT 10.1
SCHEDULE A
SCHEDULE OF PURCHASERS
Shares under Closing Shares under Closing
Warrant (if Share Warrant (if Share
Number of Shares under Authorization Authorization Approval
Shares Contingent Approval received not received prior to Aggregate
Purchaser Name and Address Purchased Warrant prior to Closing) Closing) Purchase Price
- -------------------------- ---------- ------------ -------------------- ---------------------- --------------
Essex Woodlands Health Ventures 33,333,334 1,404,407 8,333,334 Warrant A: See Ft. 1 $25,000,000
Fund VI, L.P. Warrant B: See Ft. 2
10001 Woodloch Forest Drive
Waterway Plaza Two, Suite 175
The Woodlands, TX 77380
Attn: Martin P. Sutter
Fax: (281) 364-9755
with a copy to (which shall not
constitute notice):
Baker & McKenzie LLP
130 E. Randolph Drive
Chicago, IL 60601
Attn: Bruce Zivian, Esq.
Fax: (312) 698-2469
Frazier Healthcare V, LP 20,000,000 842,644 5,000,000 Warrant A: See Ft. 1 $15,000,000
601 Union Street, Warrant B: See Ft. 2
Suite 3200
Seattle, WA 98101
Attn: James Topper
Fax: (206) 621-1848
Alejandro Gonzalez Cimadevilla 14,666,666 617,939 3,666,666 Warrant A: See Ft. 1 $11,000,000
Ruben Dario #223 5-A Warrant B: See Ft. 2
Chapultepec Morales
Mexico D.F. ZIP 11570
Fax: (5255) 52818008
Domain Public Equity Partners, L.P. 6,000,000 252,793 1,500,000 Warrant A: See Ft. 1 $ 4,500,000
One Palmer Square, Suite 515 Warrant B: See Ft. 2
Princeton, NJ 08542
Attn: Nicole Vitullo
Fax: (609) 683-4581
Shares under Closing Shares under Closing
Warrant (if Share Warrant (if Share
Number of Shares under Authorization Authorization Approval
Shares Contingent Approval received not received prior to Aggregate
Purchaser Name and Address Purchased Warrant prior to Closing) Closing) Purchase Price
- -------------------------- ---------- ------------ -------------------- ---------------------- --------------
Special Situations Fund III, L.P. 4,766,667 200,830 1,191,667 Warrant A: See Ft. 1 $3,575,000
153 E. 53rd Street, 55th Floor Warrant B: See Ft. 2
New York, NY 10022
Attn: Marianne Hicks
Fax: 212-207-6515
with a copy to (which shall not
constitute notice):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Fax: (973) 597-2383
Special Situations Cayman Fund, 1,283,333 54,070 320,833 Warrant A: See Ft. 1 $ 962,500
L.P. Warrant B: See Ft. 2
153 E. 53rd Street, 55th Floor
New York, NY 10022
Attn: Marianne Hicks
Fax: 212-207-6515
with a copy to (which shall not
constitute notice):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Fax: (973) 597-2383
Special Situations Private Equity 1,283,333 54,070 320,833 Warrant A: See Ft. 1 $ 962,500
Fund, L.P. Warrant B: See Ft. 2
153 E. 53rd Street, 55th Floor
New York, NY 10022
Attn: Marianne Hicks
Fax: 212-207-6515
with a copy to (which shall not
constitute notice):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Fax: (973) 597-2383
Shares under Closing Shares under Closing
Warrant (if Share Warrant (if Share
Number of Shares under Authorization Authorization Approval
Shares Contingent Approval received not received prior to Aggregate
Purchaser Name and Address Purchased Warrant prior to Closing) Closing) Purchase Price
- -------------------------- ---------- ------------ -------------------- ---------------------- --------------
Special Situations Life Sciences 666,667 28,088 166,667 Warrant A: See Ft. 1 $ 500,000
Fund, L.P. Warrant B: See Ft. 2
153 E. 53rd Street, 55th Floor
New York, NY 10022
Attn: Marianne Hicks
Fax: 212-207-6515
with a copy to (which shall not
constitute notice):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom, Esq.
Fax: (973) 597-2383
Sutter Hill Ventures, 4,474,935 188,539 1,118,734 Warrant A: See Ft. 1 $3,356,201.25
a California Limited Partnership Warrant B: See Ft. 2
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
Anvest, L.P. 33,334 1,404 8,334 Warrant A: See Ft. 1 $ 25,000.50
c/o Sutter Hill Ventures Warrant B: See Ft. 2
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
G. Leonard Baker, Jr. and Mary Anne 136,038 5,732 34,010 Warrant A: See Ft. 1 $ 102,028.50
Baker, Co-Trustees of The Baker Warrant B: See Ft. 2
Revocable Trust U/A/D 2/3/03
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
Shares under Closing Shares under Closing
Warrant (if Share Warrant (if Share
Number of Shares under Authorization Authorization Approval
Shares Contingent Approval received not received prior to Aggregate
Purchaser Name and Address Purchased Warrant prior to Closing) Closing) Purchase Price
- -------------------------- ---------- ------------ -------------------- ---------------------- --------------
Saunders Holdings, L.P. 136,038 5,732 34,010 Warrant A: See Ft. 1 $102,028.50
c/o Sutter Hill Ventures Warrant B: See Ft. 2
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
William H. Younger, Jr. and 156,026 6,574 39,007 Warrant A: See Ft. 1 $117,019.50
Lauren L. Younger, Co-Trustees of Warrant B: See Ft. 2
The Younger Living Trust U/A/D
1/20/95
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
Tench Coxe and Simone Otus Coxe, 241,089 10,156 60,267 Warrant A: See Ft. 1 $180,816.75
Co-Trustees of The Coxe Revocable Warrant B: See Ft. 2
Trust U/A/D 4/23/98
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
James C. Gaither 63,246 2,665 15,812 Warrant A: See Ft. 1 $ 47,434.50
c/o Sutter Hill Ventures Warrant B: See Ft. 2
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
Shares under Closing Shares under Closing
Warrant (if Share Warrant (if Share
Number of Shares under Authorization Authorization Approval
Shares Contingent Approval received not received prior to Aggregate
Purchaser Name and Address Purchased Warrant prior to Closing) Closing) Purchase Price
- -------------------------- ---------- ------------ -------------------- ---------------------- --------------
Jeffrey W. Bird and Christina R. 104,415 4,399 26,104 Warrant A: See Ft. 1 $ 78,311.25
Bird as Trustees of Jeffrey W. and Warrant B: See Ft. 2
Christina R. Bird Trust Agreement
Dated 10/31/00
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
Robert Yin and Lily Yin as Trustees 5,640 238 1,410 Warrant A: See Ft. 1 $ 4,230.00
of Yin Family Trust Dated March 1, Warrant B: See Ft. 2
1997
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: Robert Yin
Fax (650) 493-5600
Wells Fargo Bank, N.A. FBO 7,500 316 1,875 Warrant A: See Ft. 1 $ 5,625.00
SHV Profit Sharing Plan FBO Warrant B: See Ft. 2
Sherryl W. Hossack
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Wells Fargo Bank, N.A. FBO 166,547 7,017 41,637 Warrant A: See Ft. 1 $124,910.25
SHV Profit Sharing Plan FBO Warrant B: See Ft. 2
David L. Anderson
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Wells Fargo Bank, N.A. FBO 156,026 6,574 39,007 Warrant A: See Ft. 1 $117,019.50
SHV Profit Sharing Plan FBO Warrant B: See Ft. 2
William H. Younger, Jr.
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Shares under Closing Shares under Closing
Warrant (if Share Warrant (if Share
Number of Shares under Authorization Authorization Approval
Shares Contingent Approval received not received prior to Aggregate
Purchaser Name and Address Purchased Warrant prior to Closing) Closing) Purchase Price
- -------------------------- ---------- ------------ -------------------- ---------------------- --------------
Wells Fargo Bank, N.A. FBO 266,666 11,235 66,667 Warrant A: See Ft. 1 $199,999.50
SHV Profit Sharing Plan FBO Tench Warrant B: See Ft. 2
Coxe
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Wells Fargo Bank, N.A. FBO SHV 6,666 281 1,667 Warrant A: See Ft. 1 $ 4,999.50
Profit Sharing Plan FBO Warrant B: See Ft. 2
David E. Sweet
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Wells Fargo Bank, N.A. FBO SHV 25,554 1,077 6,389 Warrant A: See Ft. 1 $ 19,165.50
Profit Sharing Plan FBO Warrant B: See Ft. 2
David E. Sweet (Rollover)
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Wells Fargo Bank, N.A. FBO SHV 9,000 379 2,250 Warrant A: See Ft. 1 $ 6,750.00
Profit Sharing Plan FBO Warrant B: See Ft. 2
Lynne M. Brown
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Wells Fargo Bank, N.A. FBO SHV 11,280 475 2,820 Warrant A: See Ft. 1 $ 8,460.00
Profit Sharing Plan FBO Warrant B: See Ft. 2
Patricia Tom (Post)
Attention: Vicki Bandel
420 Montgomery Street, 2nd Fl.
San Francisco, CA 94101
Total: 88,000,000 3,707,634 22,000,000 $66,000,000
Ft. 1 Warrant A equals (Aggregate Purchase Price)/$66,000,000 * Number of
Warrant Shares Authorized to Be Issued on Closing Date.
Ft. 2 Warrant B equals Number of Shares under Closing Warrant (if Share
Authorization Approval received prior to Closing) minus Number of Shares under
Warrant A.
EXHIBIT 10.1
SCHEDULE B
PURCHASERS RECEIVING CONTINGENT WARRANTS AT EXECUTION
Domain Public Equity Partners, L.P.
Special Situations Fund III, L.P.
Special Situations Cayman Fund, L.P.
Special Situations Private Equity Fund, L.P.
Special Situations Life Sciences Fund, L.P.
EXHIBIT A
FORM OF CLOSING WARRANT (WARRANT A)
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS WARRANT
NOR THE SHARES ISSUABLE HEREUNDER MAY BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
LA JOLLA PHARMACEUTICAL COMPANY
WARRANT TO PURCHASE COMMON STOCK
(VOID AFTER THE TERMINATION TIME, AS DEFINED IN SECTION 3 BELOW)
Warrant No.: [_____]
Number of Shares: [_____]
CUSIP No.: [_____]
Date of Issuance: _______________, 2005
La Jolla Pharmaceutical Company, a Delaware corporation (the "COMPANY"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [_________], the registered holder
hereof or its permitted assigns is entitled, subject to the terms and conditions
set forth below, to purchase from the Company upon surrender of this Warrant (as
defined below), at any time on or after the issuance hereof, but not after 5:00
p.m., Eastern Time, on the Expiration Date (as defined below), [________] fully
paid nonassessable shares of Common Stock (as defined below) of the Company at
the Exercise Price (as defined below) per share, subject to adjustment as
provided below. Capitalized terms used herein but not defined shall have the
same meanings assigned to them in the Securities Purchase Agreement by and among
the Company and the parties listed on Schedule A attached thereto (the
"PURCHASERS"), dated as of October 6, 2005 (as such agreement may be amended,
supplemented and modified from time to time as provided in such agreement, the
"SECURITIES PURCHASE AGREEMENT").
This Warrant (as defined below) is one of a series of "Closing Warrants"
issued in connection with the transactions described in the Securities Purchase
Agreement and the Registration Rights Agreement among the Company and the
Purchasers, dated as of October 6, 2005 (as such agreement may be amended,
supplemented and modified from time to time as provided in such agreement, the
"REGISTRATION RIGHTS AGREEMENT"). The Warrant Shares (as defined below) issued
upon exercise of this Warrant and the holder hereof and thereof shall be
entitled to all of the rights and privileges set forth in the Registration
Rights Agreement.
1. DEFINITIONS.
The following terms as used in this Warrant shall have the following
meanings:
(a) "BUSINESS DAY" means any day, which is not (i) a Saturday or a Sunday,
or (ii) a day on which banking institutions in California or New York are
authorized or obligated by law or regulation to close.
(b) "COMMON STOCK" means (i) the common stock, $0.01 par value per share,
of the Company, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(c) "COMMON STOCK AUTHORIZATION DATE" means the first Business Day after an
amendment to the "Certificate" (as defined in the Securities Purchase Agreement)
to increase the number of authorized shares of Common Stock becomes effective
(which in any event shall occur no later than 3 Business Days after the date on
which the "Share Authorization Approval" (as defined in the Securities Purchase
Agreement) occurs).
(d) "CLOSING PRICE" with respect to a share of Common Stock on any day
shall mean the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the NASDAQ National Market ("NASDAQ") or,
if the Common Stock is not listed or admitted to trading on the NASDAQ, on the
principal national security exchange or quotation system on which the Common
Stock is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
average of the closing bid and asked prices of the Common Stock on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service.
(e) "EXERCISE PRICE" shall be equal to $1.00 per Warrant Share, subject to
further adjustment as hereinafter provided.
(f) "EXPIRATION DATE" means the fifth anniversary of the Common Stock
Authorization Date.
(g) "EXTRAORDINARY TRANSACTION" has the meaning provided in Section 10
hereof.
(h) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or association and a government or any department or agency
thereof.
(i) "PRINCIPAL MARKET" means NASDAQ or if the Common Stock is not traded on
NASDAQ, then the principal securities exchange or trading market for the Common
Stock.
(j) "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2
(k) "TERMINATION TIME" has the meaning set forth in Section 3(a) hereof.
(l) "TRADING DAY" shall mean (x) a day on which the Principal Market is
open for business or (y) if the applicable security is not so listed on a
Principal Market or admitted for trading or quotation, a Business Day.
(m) "WARRANTS" means this Warrant and, where the context so indicates, each
other "Closing Warrant" to purchase shares of Common Stock issued pursuant to
the Securities Purchase Agreement and all warrants issued in exchange, transfer
or replacement thereof.
(n) "WARRANT SHARES" means all shares of Common Stock issuable upon
exercise of the Warrants.
2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, including the early
termination of this Warrant pursuant to Section 3 of this Warrant, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time and from time to time, from and after
the Warrant Date (as defined below) and prior to the Termination Time by (i)
delivery of a written notice, in the form attached as Exhibit A hereto or a
reasonable facsimile thereof (the "EXERCISE NOTICE"), to the Company at the
principal corporate office of the Company (or such office or agency of the
Company as the Company may designate in writing to the holder hereof) and to the
Company's designated transfer agent (the "TRANSFER AGENT"), of such holder's
election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased, (ii) (A) payment to the Company of an amount
equal to the Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the "AGGREGATE EXERCISE PRICE") in cash
or delivery of a certified check or bank draft payable to the order of the
Company or wire transfer of immediately available funds or (B) notification to
the Company at the principal corporate office of the Company (or such office or
agency of the Company as the Company may designate in writing to the holder
hereof) and to the Transfer Agent that this Warrant is being exercised pursuant
to a Cashless Exercise (as defined in Section 2(d) of this Warrant), and (iii)
the surrender of this Warrant to a common carrier for overnight delivery to the
Company (or such office or agency of the Company as the Company may designate in
writing to the holder hereof) as soon as practicable following such date (or an
indemnification undertaking or other form of security reasonably satisfactory to
the Company with respect to this Warrant in the case of its loss, theft or
destruction, or an affidavit of lost Warrant, in accordance with Section 11 of
this Warrant); provided, however, that if such Warrant Shares are to be issued
in any name other than that of the registered holder of this Warrant, such
issuance shall be deemed a transfer and the provisions of Section 8 of this
Warrant shall be applicable. In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), the Company
shall use its best efforts on or before the third Business Day, but in no event
later than the fifth Business Day (the "WARRANT SHARE DELIVERY Date") following
the date of receipt by the Company (or such office or agency of the Company as
the Company may designate in writing to the holder hereof) of the Exercise
Notice, the Aggregate Exercise Price (or notice of Cashless Exercise) and this
Warrant (or an indemnification undertaking or other form of security reasonably
satisfactory to the Company
3
with respect to this Warrant in the case of its loss, theft or destruction, or
an affidavit of lost Warrant, in accordance with Section 11) (the "EXERCISE
DELIVERY DOCUMENTS"), (A) in the case of a public resale of such Warrant Shares,
subject to any restrictions that may be imposed by applicable securities laws,
at the holder's request, to credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with The Depository Trust Company ("DTC") through its Deposit
Withdrawal Agent Commission system or (B) to issue and deliver to the address as
specified in the Exercise Notice, a certificate or certificates in such
denominations as may be requested by the holder in the Exercise Notice,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled upon such exercise. Upon
delivery of the Exercise Delivery Documents, the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of this Warrant as required by clause (iii)
above or the certificates evidencing such Warrant Shares. In the case of a
dispute as to the determination of the Exercise Price or the calculation of the
number of Warrant Shares, the Company shall promptly issue to the holder the
number of shares of Common Stock that is not disputed and shall submit the
disputed determination or calculation to the holder via facsimile within five
(5) Business Days after receipt of the Exercise Delivery Documents. If the
holder and the Company are unable to agree upon the determination of the
Exercise Price or calculation of the number of Warrant Shares within two (2)
Business Days of such disputed determination or calculation being submitted to
the holder, then the Company shall immediately submit via facsimile (i) the
disputed determination of the Exercise Price or the Closing Price to an
independent, reputable investment banking firm selected jointly by the Company
and the holder or (ii) the disputed calculation of the number of Warrant Shares
to its independent, outside auditor. The Company shall cause the investment
banking firm or the auditor, as the case may be, to perform the determination or
calculation and notify the Company and the holder of the results no later than
ten (10) Business Days from the time such entity receives the disputed
determination or calculation. Such investment banking firm's or auditor's
determination or calculation, as the case may be, shall be deemed final, binding
and conclusive absent manifest error. All fees and expenses of such
determinations shall be borne solely by the Company. Notwithstanding anything to
the contrary contained in this Warrant, if the holder elects to exercise this
Warrant after the holder has received notice of a contemplated Extraordinary
Transaction, and the holder has notified the Company that such exercise is
conditioned upon the consummation of such Extraordinary Transaction, then the
holder shall not be deemed to have exercised this Warrant until the time
immediately preceding the consummation of the Extraordinary Transaction. If such
Extraordinary Transaction is not consummated or is abandoned, then the holder
shall not be deemed to have exercised this Warrant and shall not be entitled to
receive any shares of Common Stock and the Company shall refund to such holder
any amounts actually delivered on account of the Aggregate Exercise Price and
shall return to the holder all other Exercise Delivery Documents received by the
Company from or on behalf of such holder (including this Warrant which shall
remain in effect and be unaffected by such events, except that if the Expiration
Date shall have occurred during the period between such attempted exercise and
such failure to consummate the Extraordinary Transaction, the Expiration Date
shall be extended until the date that is ten (10) Business Days after the holder
is notified that the attempted exercise has been deemed null and void).
4
(b) Notwithstanding anything contained in this Warrant to the contrary, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of this Warrant or to distribute certificates which evidence such
fractional shares. If more than one Warrant shall be presented for exercise at
the same time by the same holder, the number of full shares of Common Stock
which shall be issuable upon the exercise thereof shall be computed on the basis
of the aggregate number of shares of Common Stock purchasable on exercise of all
Warrants so presented. In lieu of any fractional shares, the Company shall pay
to the holder an amount of cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 2(b), the current
market value of a share of Common Stock shall be the Closing Price of a share of
Common Stock for the Trading Day immediately prior to the date of such exercise
or, if the Closing Price is not determinable due to the failure of the Company
to maintain the listing of the Common Stock on a national securities exchange or
NASDAQ and the Common Stock is not quoted in the over-the-counter market, as
determined in good faith by a majority of the Company's Board of Directors,
whose determination shall be final, binding and conclusive.
(c) If the Company shall fail for any reason or for no reason (except in
the case of a dispute as to the Exercise Price or the Closing Price which is
being resolved in accordance with Section 2(a) of this Warrant) to issue to the
holder within five (5) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder is entitled or, subject to applicable securities laws, to credit the
holder's or its designee's balance account with DTC, in accordance with Section
2 of this Warrant, for such number of shares of Common Stock to which the holder
is entitled upon the holder's exercise of this Warrant, the Company shall, in
addition to any other remedies under this Warrant or the Securities Purchase
Agreement or otherwise available to such holder, including any indemnification
under the Securities Purchase Agreement, pay as additional damages in cash to
such holder on each day after the Warrant Share Delivery Date if such exercise
is not timely effected an amount equal to one-half percent (0.5%) per month
multiplied by the product of (I) the number of shares of Common Stock not issued
to the holder on or prior to the Warrant Share Delivery Date and to which such
holder is entitled and (II) the Closing Price of the Common Stock on the Warrant
Share Delivery Date, provided that if the Closing Price is not determinable due
to the failure of the Company to maintain the listing of the Common Stock on a
national securities exchange or NASDAQ and the Common Stock is not quoted on
over-the-counter market, then the Closing Price shall be as determined in good
faith by a majority of the Company's Board of Directors, whose determination
shall be final, binding and conclusive.
(d) Notwithstanding anything contained herein to the contrary, the holder
of this Warrant may, at its election, exercised in its sole discretion, in lieu
of making the cash payment otherwise contemplated to be made to the Company upon
its exercise of this Warrant in payment of the Aggregate Exercise Price, elect
instead to receive upon such exercise the "NET NUMBER" of shares of Common Stock
determined according to the following formula (a "CASHLESS EXERCISE"):
Net Number = (A x B) - (A x C)
-----------------
B
5
For purposes of the foregoing formula:
A = the total number of shares with respect to which this Warrant is then
being exercised.
B = the Closing Price of the Common Stock on the Trading Day
immediately preceding the date of the Exercise Notice.
C = the Exercise Price then in effect for the applicable Warrant Shares
at the time of such exercise.
3. DATE; DURATION; MANDATORY EXCHANGE; REDEMPTION AND CANCELLATION.
The date of this Warrant is ______________, 2005 (the "WARRANT DATE"). This
Warrant, in all events, shall be wholly void and of no effect at and after the
first to occur of (i) 5:00 pm, Eastern Time, on the Expiration Date; and (ii)
the time immediately following the consummation of an Extraordinary Transaction
of any type described in clauses (ii), (iii) or (iv) of Section 10 hereof so
long as notice to the holder of such Extraordinary Transaction was properly
given in accordance with Section 9 hereof (or waived by such holder) (as
applicable, the "TERMINATION TIME"). At the Termination Time, or as soon as
practicable thereafter, the holder of this Warrant shall surrender to the
Company for cancellation this Warrant. Failure to deliver this Warrant shall not
affect its automatic cancellation.
4. COVENANTS AS TO COMMON STOCK.
The Company hereby covenants and agrees as follows:
(a) Issuance of Warrants and Warrant Shares. This Warrant is, and any
Warrants issued in substitution for or replacement of this Warrant will, upon
issuance, be, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof, and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company. All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and payment hereof or Cashless
Exercise in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by or through
the Company with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock.
(b) Certain Actions. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock issuable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) will take all such actions as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant and (iii) will not take any action which results
6
in any adjustment of the Exercise Price if the total number of shares of Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation and available for the purpose of issue
upon such exercise.
(c) Obligations Binding on Successors. This Warrant will be binding upon
any entity succeeding to the Company in one or a series of transactions by
merger, consolidation or acquisition of all or substantially all of the
Company's assets or other similar transactions.
(d) Reservation of Shares. During the period within which the rights
represented by this Warrant may be exercised, the Company will take all actions
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than the number of shares of Common Stock needed to
provide for the issuance of the Warrant Shares upon exercise of all of the
Warrants without regard to any limitations on exercise; provided, that prior to
the Common Stock Authorization Date (i) the Company shall reserve all of its
authorized but unissued shares, other than such shares which are already
reserved for the Company Stock Plans (as defined in the Securities Purchase
Agreement), for such purposes, and (ii) the Company shall not be required to
take any other action under this Section 4(d) prior to the Common Stock
Authorization Date so long as the Company is complying with Section 5.14 of the
Securities Purchase Agreement.
5. TAXES.
The Company shall pay any and all documentary, stamp, transfer and other
similar taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.
Except as otherwise specifically provided herein, prior to the exercise of
the Warrants represented hereby, the holder of this Warrant shall not be
entitled, as such, to any rights of a stockholder of the Company with respect to
the Warrant Shares, including, without limitation, the right to vote or to
consent to any action of the stockholders of the Company, to receive dividends
or other distributions, or to receive any notice of meetings of stockholders of
the Company, and shall not be entitled to receive any notice of any proceedings
of the Company. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on such holder to purchase any securities
(except only as to the Warrant Shares upon exercise of this Warrant in the
holder's discretion) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
7. COMPLIANCE WITH SECURITIES LAWS.
(a) The initial holder of this Warrant and each subsequent holder of this
Warrant which acquires this Warrant in any transfer other than a transfer
pursuant to an effective registration statement under the Securities Act, by the
acceptance hereof, represents and warrants that (i) it is acquiring this Warrant
and (ii) upon exercise of this Warrant will acquire the Warrant Shares then
issuable upon exercise thereof, in each case for its own account, for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution
7
thereof, except pursuant to sales registered or exempted from registration under
the Securities Act; provided, however, that by making the representations
herein, the holder does not agree to hold this Warrant or any of the Warrant
Shares for any minimum or other specific term and reserves the right to dispose
of this Warrant and the Warrant Shares at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
Each holder of this Warrant which acquires this Warrant in any transfer other
than a transfer pursuant to an effective registration statement under the
Securities Act further represents, by acceptance hereof, that, as of the date of
such acceptance, such holder is either a "qualified institutional buyer" within
the meaning of Rule 144A under the Securities Act or an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act, and was not organized for the specific purpose of acquiring the
Warrants or Warrant Shares.
(b) Any certificate evidencing the Warrant Shares issued upon exercise
hereof (and all securities issued in exchange therefor or in substitution
thereof) shall, until the registration of the Warrant Shares under the
Securities Act or the expiration of the holding period applicable to sales of
the Warrant Shares under Rule 144(k) under the Securities Act (or any successor
provision), bear a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO SUCH SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
The legend set forth above shall be removed and the Company hereby agrees to
issue a certificate for the Warrant Shares without such legend to the holder
thereof, (i) if such Warrant Shares are registered for resale under the
Securities Act, (ii) if such holder provides the Company with an opinion of
counsel reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of the such Warrant Shares may be made without
registration under the Securities Act, or (iii) upon expiration of the
applicable period under Rule 144(k) of the Securities Act (or any successor
rule).
8. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain or cause to be maintained a register for
this Warrant (the "WARRANT REGISTER"), containing the record name and address of
the Person in whose name this Warrant has been issued, as well as the name and
address of each transferee. The Company may treat the Person in whose name any
Warrant is registered on the Warrant Register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this Warrant. The
Company may appoint an agent for the purpose of maintaining the Warrant
Register, issuing the Common Stock or other securities then issuable upon the
exercise of this Warrant, exchanging
8
this Warrant, replacing this Warrant or any or all of the foregoing. Thereafter,
any such registration, issuance, exchange, or replacement, as the case may be,
may be made at the office of such agent. In the event the Company so appoints
such an agent, the Company shall send written notice to the holder of this
Warrant of such appointment, the name of the agent and the address of the office
at which the Warrant Register will be maintained.
(b) This Warrant and all rights hereunder shall be assignable and
transferable by the holder to any transferee without the consent of the Company
upon surrender of this Warrant with a properly executed assignment (in the form
of Exhibit B attached hereto) at the principal corporate office of the Company
(or such office or agency of the Company as the Company may designate in writing
to the holder hereof) if: (i) such holder 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 rights are being transferred or
assigned; and (iii) such transfer shall have been conducted in accordance with
all applicable federal and state securities laws. By accepting the transfer or
assignment of all or any portion of this Warrant, the transferee agrees to be
bound by all of the provisions of this Warrant.
9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE.
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 9.
(a) In case the Company shall after October 6, 2005 (the "REFERENCE DATE")
pay a dividend in shares of Common Stock, or make a distribution of shares of
Common Stock, to all holders of the outstanding Common Stock, the Exercise Price
in effect at the opening of business on the date following the date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Exercise Price by a fraction
of which (i) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of the
stockholders of record entitled to receive such dividend or distribution,
whether such date is fixed by the Company's Board of Directors or by statute,
contract or otherwise (the "RECORD DATE"), and (ii) the denominator shall be the
sum of such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction in the Exercise Price to become
effective immediately after the opening of business on the day following the
Record Date. If any dividend or distribution of the type described in this
Section 9(a) of this Warrant is declared but not so paid or made, the Exercise
Price shall again be adjusted to the Exercise Price which would then be in
effect if such dividend or distribution had not been declared.
(b) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock after the Reference Date, the
Exercise Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be proportionately reduced,
and conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the
9
Exercise Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(c) No adjustment in the Exercise Price shall be required under this
Section 9 unless the aggregate of all such adjustments would require an increase
or decrease of at least one percent (1%) in the Exercise Price; provided,
however, that any adjustments which by reason of this Section 9(c) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 9 shall be made by
the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. No adjustment need be made for a
change in the par value of the Common Stock.
(d) In case: (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Exercise Price pursuant to this Section 9; or (ii) the Company shall authorize
the granting to the holders of its Common Stock of rights or warrants to
subscribe for or purchase any share of any class or any other rights or
warrants; or (iii) of any Extraordinary Transaction; or (iv) of the voluntary or
involuntary dissolution, liquidation or winding-up of the Company: the Company
shall mail or cause to be mailed to the holder at such address appearing in the
Warrant Register a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution or rights are to be determined,
which notice shall be so mailed as promptly as possible but in any event at
least five (5) days prior to such record date, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such event, which notice shall be mailed as promptly as
possible but in any event at least ten (10) days prior to the date the
applicable event becomes effective. In addition, whenever the Exercise Price is
adjusted as provided in this Section 9, the Company shall prepare a notice of
such adjustment of the Exercise Price setting forth the adjusted Exercise Price
and the date on which each adjustment becomes effective and shall mail such
notice of such adjustment of the Exercise Price to the holder of each Warrant at
the holder's last address in the Warrant Register within twenty (20) days of the
effective date of such adjustment. Failure to deliver such notice shall not
affect the legality or validity of any such adjustment.
(e) In any case in which this Section 9 provides that an adjustment shall
become effective immediately after a Record Date for an event, the Company may
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such Record Date and before the occurrence of such event
the additional shares of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such holder any amount in cash in lieu of any fractions of shares of Common
Stock pursuant to Section 2(b) of this Warrant.
(f) For purposes of this Section 9, the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company but shall include
10
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(g) Upon each adjustment of the Exercise Price pursuant to this Section 9,
each Warrant shall thereupon evidence the right to purchase that number of
shares of Common Stock (calculated to the nearest hundredth of a share) obtained
by multiplying the number of shares of Common Stock purchasable immediately
prior to such adjustment upon exercise of the Warrant by the Exercise Price in
effect immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment. The
adjustment pursuant to this Section 9(g) to the number of shares of Common Stock
purchasable upon exercise of a Warrant shall be made each time an adjustment of
the Exercise Price is made pursuant to this Section 9 (or would be made but for
Section 9(c) of this Warrant).
10. EXTRAORDINARY TRANSACTION DEFINED.
The occurrence of any of the following events is referred to herein as an
"EXTRAORDINARY TRANSACTION": (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination, including a reverse stock split), (ii) any
consolidation, merger or combination of the Company with another Person as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock (other than as a result of a change in name, a
change in par value or a change in the jurisdiction of incorporation), (iii) any
statutory exchange, as a result of which holders of Common Stock generally shall
be entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, or (iv) any sale or
conveyance of the properties and assets of the Company as, or substantially as,
an entirety to any other person as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock.
11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS.
If this Warrant is lost, stolen, mutilated or destroyed, the Company shall
promptly, on receipt of an indemnification undertaking or other form of security
reasonably acceptable to the Company (or in the case of a mutilated Warrant, the
Warrant), cause the Warrant Agent to issue a new Warrant of like denomination
and tenor as this Warrant so lost, stolen, mutilated or destroyed. In every
case, the applicant for a replacement Warrant shall furnish to the Company such
security or indemnity as may be required by the Company to save it harmless,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company evidence to its satisfaction of the destruction, loss or
theft of the applicant's Warrant and of the ownership thereof.
12. NOTICE.
All notices, requests, consents, and other communications under this
Agreement shall be
11
in writing and shall be deemed delivered (a) three business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
(b) one business day after being sent via a reputable nationwide overnight
courier service guaranteeing next business day delivery or (c) upon delivery
when sent by facsimile (with confirmation of receipt), in each case to the
intended recipient as set forth below:
If to the Company:
La Jolla Pharmaceutical Company
6455 Nancy Ridge Drive
San Diego, CA 92121
Attention: Chief Executive Officer
Fax: (858) 626-2851
With a copy to:
Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, CA 92614
Attention: Mark W. Shurtleff, Esq.
Fax: (949) 451-4220
or at such other address as may have been furnished in writing by the Company to
the holder.
If to the Transfer Agent:
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Fax: (718) 921-8124
If to the holder, at its address set forth on Schedule A to the Securities
Purchase Agreement, or at such other address as shall be delivered to the
Company upon the issuance or transfer of this Warrant, or at such other address
as may have been furnished in writing by such party to the Company, in each case
with a copy to its legal counsel set forth on such Schedule A or otherwise
furnished to the Company, if any.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service or electronic mail), but no such notice,
request, consent or other communication shall be deemed to have been duly given
unless and until it is actually received by the party for which it is intended.
Any party may change the address to which notices, requests, consents or other
communications hereunder are to be delivered by giving the other party notice in
the manner set forth in this Section.
12
13. AMENDMENTS.
This Warrant and any term hereof may be amended, changed or waived only by
an instrument in writing signed by the Company and the holder of this Warrant;
provided, that any term in either of Section 3 or Section 4 or both may be
amended, changed or waived by an instrument in writing signed by the Company and
holders of Closing Warrants to purchase a majority of Warrant Shares represented
by all Closing Warrants; provided, that (x) any such amendment, change or waiver
must apply to all Closing Warrants; and (y) the number of Warrant Shares subject
to this Warrant, the Exercise Price and the Expiration Date may not be amended,
and the right to exercise this Warrant may not be altered or waived, without the
written consent of the holder.
14. GOVERNING LAW; JURISDICTION; VENUE; WAIVER OF JURY TRIAL.
This Warrant shall be governed by and construed in accordance with the laws
of the State of Delaware and the laws of the United States applicable therein
(in each case without giving effect to any choice or conflict of laws provision
or rule that would cause the application of the laws of any other jurisdiction)
and shall be treated in all respects as a Delaware contract. Any action, suit or
proceeding arising out of or relating to this Warrant shall be brought in San
Diego County, California or, if it has or can acquire jurisdiction, any Federal
court located in such State and County, and THE COMPANY AND THE HOLDER HEREOF,
AFTER CONSULTING WITH OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY (AND AGREE NOT TO
REQUEST TRIAL BY JURY), IN EACH CASE IN CONNECTION WITH ANY ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT. The Company and the
holder hereof each hereby irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby in the courts
of the State of California or the United States of America, in each case located
in San Diego County, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such matter brought
in any such court has been brought in an inconvenient forum. The Company and the
holder hereof each hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
By accepting this Warrant from the Company or its previous holder, the holder
agrees to be bound by the terms of this Section 14.
15. DESCRIPTIVE HEADINGS.
The headings of this Warrant are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized as of the date hereof.
LA JOLLA PHARMACEUTICAL COMPANY
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ACCEPTED:
[INSERT HOLDER SIGNATURE BLOCK]
14
EXHIBIT A
EXERCISE NOTICE
(TO BE EXECUTED BY THE HOLDER OF WARRANT IF SUCH HOLDER
DESIRES TO EXERCISE WARRANT)
The undersigned holder hereby exercises the right to purchase
[________________________] shares of Common Stock ("WARRANT SHARES") of La Jolla
Pharmaceutical Company, a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
[This exercise is contingent upon the consummation of the contemplated
Extraordinary Transaction of which the undersigned has been notified by the
Company.]
1. Form of Exercise. The holder intends that payment of the Exercise Price
shall be made (SELECT ONE AND COMPLETE):
[ ] "Cash Exercise" with respect to [_________________] Warrant Shares;
and/or
[ ] "Cashless Exercise" with respect to [_________________] Warrant Shares
(to the extent permitted by the terms of the Warrant).
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the sum of [$________________] the Company
in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The holder of this Warrant has sold or will
sell the shares of Common Stock issuable pursuant to this Notice pursuant to a
registration statement or an exemption from registration under the Securities
Act of 1933, as amended.
4. Private Placement Representations. The holder of this Warrant confirms
the continuing validity of, and reaffirms as of the date hereof, its
representations and warranties set forth in Section 7 of the Warrant.
5. The undersigned requests that certificates for such shares be issued in
the name of:
________________________________________________________________________________
(Please print name, address and social security or federal
employer identification number (if applicable)
________________________________________________________________________________
________________________________________________________________________________
6. Replacement Warrant. If the shares issuable upon this exercise of the
Warrant are not all of the Warrant Shares which the Holder is entitled to
acquire upon the exercise of the Warrant, the undersigned requests that a new
Warrant evidencing the rights not so exercised be issued in the name of and
delivered to:
________________________________________________________________________________
(Please print name, address and social security or federal
employer identification number (if applicable)
________________________________________________________________________________
________________________________________________________________________________
Name of Holder (print):
-------------------------------
(Signature):
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(By:)
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(Title:)
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Tax ID No.
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Dated: ,
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EXHIBIT A
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
[______________] to issue the above indicated number of shares of Common Stock
in accordance with the Irrevocable Transfer Agent Instructions dated
[_________________] 2005 from the Company and acknowledged and agreed to by
[_________________]
LA JOLLA PHARMACEUTICAL COMPANY
By:
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Name:
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Title:
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EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers to each assignee set forth below all of the rights of the
undersigned under the Warrant to acquire La Jolla Pharmaceutical Company Common
Stock (as defined in the attached Warrant) to acquire the number of Warrant
Shares set opposite the name of such assignee below and in and to the foregoing
Warrant with respect to said acquisition rights and the shares of Common Stock
issuable upon exercise of the Warrant:
Name and Address of Assignee Federal Tax Identification Number Number of Warrant Shares
- ---------------------------- --------------------------------- ------------------------
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
If the total of the Warrant Shares are not all of the Warrant Shares
evidenced by the foregoing Warrant, the undersigned requests that a new Warrant
evidencing the right to acquire the Warrant Shares not so assigned be issued in
the name of and delivered to the undersigned.
In connection with any transfer of the Warrant prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that the Warrant is being transferred:
[ ] Inside the United States to a Qualified Institutional Purchaser pursuant to
and in compliance with the Securities Act of 1933, as amended; or
[ ] Inside the United States to an Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended;
Name of Holder (print):
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(Signature):
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(By:)
-------------------------------
(Title:)
-------------------------------
Dated: ,
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EXHIBIT B
FORM OF CLOSING WARRANT (WARRANT B)
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS WARRANT
NOR THE SHARES ISSUABLE HEREUNDER MAY BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
LA JOLLA PHARMACEUTICAL COMPANY
WARRANT TO PURCHASE COMMON STOCK
(VOID AFTER THE TERMINATION TIME, AS DEFINED IN SECTION 3 BELOW)
Warrant No.: [___]
Number of Shares: [___]
CUSIP No.: [___]
Date of Issuance: _______________, 2005
La Jolla Pharmaceutical Company, a Delaware corporation (the "COMPANY"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [_________], the registered holder
hereof or its permitted assigns is entitled, subject to the terms and conditions
set forth below, to purchase from the Company upon surrender of this Warrant (as
defined below), at any time on or after the issuance hereof, but not after 5:00
p.m., Eastern Time, on the Expiration Date (as defined below), [__________]
fully paid nonassessable shares of Common Stock (as defined below) of the
Company at the Exercise Price (as defined below) per share, subject to
adjustment as provided below. Capitalized terms used herein but not defined
shall have the same meanings assigned to them in the Securities Purchase
Agreement by and among the Company and the parties listed on Schedule A attached
thereto (the "PURCHASERS"), dated as of October 6, 2005 (as such agreement may
be amended, supplemented and modified from time to time as provided in such
agreement, the "SECURITIES PURCHASE AGREEMENT").
This Warrant (as defined below) is one of a series of "Closing Warrants"
issued in connection with the transactions described in the Securities Purchase
Agreement and the Registration Rights Agreement among the Company and the
Purchasers, dated as of October 6, 2005 (as such agreement may be amended,
supplemented and modified from time to time as provided in such agreement, the
"REGISTRATION RIGHTS AGREEMENT"). The Warrant Shares (as defined below) issued
upon exercise of this Warrant and the holder hereof and thereof shall be
entitled to all of the rights and privileges set forth in the Registration
Rights Agreement.
1. DEFINITIONS.
The following terms as used in this Warrant shall have the following
meanings:
(a) "BUSINESS DAY" means any day, which is not (i) a Saturday or a Sunday,
or (ii) a day on which banking institutions in California or New York are
authorized or obligated by law or regulation to close.
(b) "COMMON STOCK" means (i) the common stock, $0.01 par value per share,
of the Company, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(c) "COMMON STOCK AUTHORIZATION DATE" means the first Business Day after an
amendment to the "Certificate" (as defined in the Securities Purchase Agreement)
to increase the number of authorized shares of Common Stock becomes effective
(which in any event shall occur no later than 3 Business Days after the date on
which the "Share Authorization Approval" (as defined in the Securities Purchase
Agreement) occurs).
(d) "CLOSING PRICE" with respect to a share of Common Stock on any day
shall mean the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the NASDAQ National Market ("NASDAQ") or,
if the Common Stock is not listed or admitted to trading on the NASDAQ, on the
principal national security exchange or quotation system on which the Common
Stock is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
average of the closing bid and asked prices of the Common Stock on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service.
(e) "EXERCISE PRICE" shall be equal to $1.00 per Warrant Share, subject to
further adjustment as hereinafter provided.
(f) "EXPIRATION DATE" means the fifth anniversary of the Common Stock
Authorization Date.
(g) "EXTRAORDINARY TRANSACTION" has the meaning provided in Section 10
hereof.
(h) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or association and a government or any department or agency
thereof.
(i) "PRINCIPAL MARKET" means NASDAQ or if the Common Stock is not traded on
NASDAQ, then the principal securities exchange or trading market for the Common
Stock.
(j) "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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(k) "TERMINATION TIME" has the meaning set forth in Section 3(a) hereof.
(l) "TRADING DAY" shall mean (x) a day on which the Principal Market is
open for business or (y) if the applicable security is not so listed on a
Principal Market or admitted for trading or quotation, a Business Day.
(m) "WARRANTS" means this Warrant and, where the context so indicates, each
other "Closing Warrant" to purchase shares of Common Stock issued pursuant to
the Securities Purchase Agreement and all warrants issued in exchange, transfer
or replacement thereof.
(n) "WARRANT SHARES" means all shares of Common Stock issuable upon
exercise of the Warrants.
2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, including the early
termination of this Warrant pursuant to Section 3 of this Warrant, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time and from time to time, from and after
the Common Stock Authorization Date and prior to the Termination Time by (i)
delivery of a written notice, in the form attached as Exhibit A hereto or a
reasonable facsimile thereof (the "EXERCISE NOTICE"), to the Company at the
principal corporate office of the Company (or such office or agency of the
Company as the Company may designate in writing to the holder hereof) and to the
Company's designated transfer agent (the "TRANSFER AGENT"), of such holder's
election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased, (ii) (A) payment to the Company of an amount
equal to the Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the "AGGREGATE EXERCISE PRICE") in cash
or delivery of a certified check or bank draft payable to the order of the
Company or wire transfer of immediately available funds or (B) notification to
the Company at the principal corporate office of the Company (or such office or
agency of the Company as the Company may designate in writing to the holder
hereof) and to the Transfer Agent that this Warrant is being exercised pursuant
to a Cashless Exercise (as defined in Section 2(d) of this Warrant), and (iii)
the surrender of this Warrant to a common carrier for overnight delivery to the
Company (or such office or agency of the Company as the Company may designate in
writing to the holder hereof) as soon as practicable following such date (or an
indemnification undertaking or other form of security reasonably satisfactory to
the Company with respect to this Warrant in the case of its loss, theft or
destruction, or an affidavit of lost Warrant, in accordance with Section 11 of
this Warrant); provided, however, that if such Warrant Shares are to be issued
in any name other than that of the registered holder of this Warrant, such
issuance shall be deemed a transfer and the provisions of Section 8 of this
Warrant shall be applicable. In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), the Company
shall use its best efforts on or before the third Business Day, but in no event
later than the fifth Business Day (the "WARRANT SHARE DELIVERY DATE") following
the date of receipt by the Company (or such office or agency of the Company as
the Company may designate in writing to the holder hereof) of the Exercise
Notice, the Aggregate Exercise Price (or notice of Cashless Exercise) and this
Warrant (or an indemnification undertaking or other form of security reasonably
satisfactory to the Company
3
with respect to this Warrant in the case of its loss, theft or destruction, or
an affidavit of lost Warrant, in accordance with Section 11) (the "EXERCISE
DELIVERY DOCUMENTS"), (A) in the case of a public resale of such Warrant Shares,
subject to any restrictions that may be imposed by applicable securities laws,
at the holder's request, to credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with The Depository Trust Company ("DTC") through its Deposit
Withdrawal Agent Commission system or (B) to issue and deliver to the address as
specified in the Exercise Notice, a certificate or certificates in such
denominations as may be requested by the holder in the Exercise Notice,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled upon such exercise. Upon
delivery of the Exercise Delivery Documents, the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of this Warrant as required by clause (iii)
above or the certificates evidencing such Warrant Shares. In the case of a
dispute as to the determination of the Exercise Price or the calculation of the
number of Warrant Shares, the Company shall promptly issue to the holder the
number of shares of Common Stock that is not disputed and shall submit the
disputed determination or calculation to the holder via facsimile within five
(5) Business Days after receipt of the Exercise Delivery Documents. If the
holder and the Company are unable to agree upon the determination of the
Exercise Price or calculation of the number of Warrant Shares within two (2)
Business Days of such disputed determination or calculation being submitted to
the holder, then the Company shall immediately submit via facsimile (i) the
disputed determination of the Exercise Price or the Closing Price to an
independent, reputable investment banking firm selected jointly by the Company
and the holder or (ii) the disputed calculation of the number of Warrant Shares
to its independent, outside auditor. The Company shall cause the investment
banking firm or the auditor, as the case may be, to perform the determination or
calculation and notify the Company and the holder of the results no later than
ten (10) Business Days from the time such entity receives the disputed
determination or calculation. Such investment banking firm's or auditor's
determination or calculation, as the case may be, shall be deemed final, binding
and conclusive absent manifest error. All fees and expenses of such
determinations shall be borne solely by the Company. Notwithstanding anything to
the contrary contained in this Warrant, if the holder elects to exercise this
Warrant after the holder has received notice of a contemplated Extraordinary
Transaction, and the holder has notified the Company that such exercise is
conditioned upon the consummation of such Extraordinary Transaction, then the
holder shall not be deemed to have exercised this Warrant until the time
immediately preceding the consummation of the Extraordinary Transaction. If such
Extraordinary Transaction is not consummated or is abandoned, then the holder
shall not be deemed to have exercised this Warrant and shall not be entitled to
receive any shares of Common Stock and the Company shall refund to such holder
any amounts actually delivered on account of the Aggregate Exercise Price and
shall return to the holder all other Exercise Delivery Documents received by the
Company from or on behalf of such holder (including this Warrant which shall
remain in effect and be unaffected by such events, except that if the Expiration
Date shall have occurred during the period between such attempted exercise and
such failure to consummate the Extraordinary Transaction, the Expiration Date
shall be extended until the date that is ten (10) Business Days after the holder
is notified that the attempted exercise has been deemed null and void).
4
(b) Notwithstanding anything contained in this Warrant to the contrary, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of this Warrant or to distribute certificates which evidence such
fractional shares. If more than one Warrant shall be presented for exercise at
the same time by the same holder, the number of full shares of Common Stock
which shall be issuable upon the exercise thereof shall be computed on the basis
of the aggregate number of shares of Common Stock purchasable on exercise of all
Warrants so presented. In lieu of any fractional shares, the Company shall pay
to the holder an amount of cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 2(b), the current
market value of a share of Common Stock shall be the Closing Price of a share of
Common Stock for the Trading Day immediately prior to the date of such exercise
or, if the Closing Price is not determinable due to the failure of the Company
to maintain the listing of the Common Stock on a national securities exchange or
NASDAQ and the Common Stock is not quoted in the over-the-counter market, as
determined in good faith by a majority of the Company's Board of Directors,
whose determination shall be final, binding and conclusive.
(c) If the Company shall fail for any reason or for no reason (except in
the case of a dispute as to the Exercise Price or the Closing Price which is
being resolved in accordance with Section 2(a) of this Warrant) to issue to the
holder within five (5) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder is entitled or, subject to applicable securities laws, to credit the
holder's or its designee's balance account with DTC, in accordance with Section
2 of this Warrant, for such number of shares of Common Stock to which the holder
is entitled upon the holder's exercise of this Warrant, the Company shall, in
addition to any other remedies under this Warrant or the Securities Purchase
Agreement or otherwise available to such holder, including any indemnification
under the Securities Purchase Agreement, pay as additional damages in cash to
such holder on each day after the Warrant Share Delivery Date if such exercise
is not timely effected an amount equal to one-half percent (0.5%) per month
multiplied by the product of (I) the number of shares of Common Stock not issued
to the holder on or prior to the Warrant Share Delivery Date and to which such
holder is entitled and (II) the Closing Price of the Common Stock on the Warrant
Share Delivery Date, provided that if the Closing Price is not determinable due
to the failure of the Company to maintain the listing of the Common Stock on a
national securities exchange or NASDAQ and the Common Stock is not quoted on
over-the-counter market, then the Closing Price shall be as determined in good
faith by a majority of the Company's Board of Directors, whose determination
shall be final, binding and conclusive.
(d) Notwithstanding anything contained herein to the contrary, the holder
of this Warrant may, at its election, exercised in its sole discretion, in lieu
of making the cash payment otherwise contemplated to be made to the Company upon
its exercise of this Warrant in payment of the Aggregate Exercise Price, elect
instead to receive upon such exercise the "NET NUMBER" of shares of Common Stock
determined according to the following formula (a "CASHLESS EXERCISE"):
Net Number = (A x B) - (A x C)
-----------------
B
5
For purposes of the foregoing formula:
A = the total number of shares with respect to which this Warrant is then
being exercised.
B = the Closing Price of the Common Stock on the Trading Day immediately
preceding the date of the Exercise Notice.
C = the Exercise Price then in effect for the applicable Warrant Shares
at the time of such exercise.
3. DATE; DURATION; MANDATORY EXCHANGE; REDEMPTION AND CANCELLATION.
The date of this Warrant is ______________, 2005. This Warrant, in all
events, shall be wholly void and of no effect at and after the first to occur of
(i) 5:00 pm, Eastern Time, on the Expiration Date; and (ii) the time immediately
following the consummation of an Extraordinary Transaction of any type described
in clauses (ii), (iii) or (iv) of Section 10 hereof so long as notice to the
holder of such Extraordinary Transaction was properly given in accordance with
Section 9 hereof (or waived by such holder) (as applicable, the "TERMINATION
TIME"). At the Termination Time, or as soon as practicable thereafter, the
holder of this Warrant shall surrender to the Company for cancellation this
Warrant. Failure to deliver this Warrant shall not affect its automatic
cancellation.
4. COVENANTS AS TO COMMON STOCK.
The Company hereby covenants and agrees as follows:
(a) Issuance of Warrants and Warrant Shares. This Warrant is, and any
Warrants issued in substitution for or replacement of this Warrant will, upon
issuance, be, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof, and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company. All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and payment hereof or Cashless
Exercise in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by or through
the Company with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock.
(b) Certain Actions. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock issuable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) will take all such actions as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant and (iii) will not take any action which results
6
in any adjustment of the Exercise Price if the total number of shares of Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation and available for the purpose of issue
upon such exercise.
(c) Obligations Binding on Successors. This Warrant will be binding upon
any entity succeeding to the Company in one or a series of transactions by
merger, consolidation or acquisition of all or substantially all of the
Company's assets or other similar transactions.
(d) Reservation of Shares. During the period within which the rights
represented by this Warrant may be exercised, the Company will take all actions
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than the number of shares of Common Stock needed to
provide for the issuance of the Warrant Shares upon exercise of all of the
Warrants without regard to any limitations on exercise; provided, that prior to
the Common Stock Authorization Date (i) the Company shall reserve all of its
authorized but unissued shares, other than such shares which are already
reserved for the Company Stock Plans (as defined in the Securities Purchase
Agreement), for such purposes, and (ii) the Company shall not be required to
take any other action under this Section 4(d) prior to the Common Stock
Authorization Date so long as the Company is complying with Section 5.14 of the
Securities Purchase Agreement.
5. TAXES.
The Company shall pay any and all documentary, stamp, transfer and other
similar taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.
Except as otherwise specifically provided herein, prior to the exercise of
the Warrants represented hereby, the holder of this Warrant shall not be
entitled, as such, to any rights of a stockholder of the Company with respect to
the Warrant Shares, including, without limitation, the right to vote or to
consent to any action of the stockholders of the Company, to receive dividends
or other distributions, or to receive any notice of meetings of stockholders of
the Company, and shall not be entitled to receive any notice of any proceedings
of the Company. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on such holder to purchase any securities
(except only as to the Warrant Shares upon exercise of this Warrant in the
holder's discretion) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
7. COMPLIANCE WITH SECURITIES LAWS.
(a) The initial holder of this Warrant and each subsequent holder of this
Warrant which acquires this Warrant in any transfer other than a transfer
pursuant to an effective registration statement under the Securities Act, by the
acceptance hereof, represents and warrants that (i) it is acquiring this Warrant
and (ii) upon exercise of this Warrant will acquire the Warrant Shares then
issuable upon exercise thereof, in each case for its own account, for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution
7
thereof, except pursuant to sales registered or exempted from registration under
the Securities Act; provided, however, that by making the representations
herein, the holder does not agree to hold this Warrant or any of the Warrant
Shares for any minimum or other specific term and reserves the right to dispose
of this Warrant and the Warrant Shares at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
Each holder of this Warrant which acquires this Warrant in any transfer other
than a transfer pursuant to an effective registration statement under the
Securities Act further represents, by acceptance hereof, that, as of the date of
such acceptance, such holder is either a "qualified institutional buyer" within
the meaning of Rule 144A under the Securities Act or an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act, and was not organized for the specific purpose of acquiring the
Warrants or Warrant Shares.
(b) Any certificate evidencing the Warrant Shares issued upon exercise
hereof (and all securities issued in exchange therefor or in substitution
thereof) shall, until the registration of the Warrant Shares under the
Securities Act or the expiration of the holding period applicable to sales of
the Warrant Shares under Rule 144(k) under the Securities Act (or any successor
provision), bear a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO SUCH SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
The legend set forth above shall be removed and the Company hereby agrees to
issue a certificate for the Warrant Shares without such legend to the holder
thereof, (i) if such Warrant Shares are registered for resale under the
Securities Act, (ii) if such holder provides the Company with an opinion of
counsel reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of the such Warrant Shares may be made without
registration under the Securities Act, or (iii) upon expiration of the
applicable period under Rule 144(k) of the Securities Act (or any successor
rule).
8. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain or cause to be maintained a register for
this Warrant (the "WARRANT REGISTER"), containing the record name and address of
the Person in whose name this Warrant has been issued, as well as the name and
address of each transferee. The Company may treat the Person in whose name any
Warrant is registered on the Warrant Register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this Warrant. The
Company may appoint an agent for the purpose of maintaining the Warrant
Register, issuing the Common Stock or other securities then issuable upon the
exercise of this Warrant, exchanging
8
this Warrant, replacing this Warrant or any or all of the foregoing. Thereafter,
any such registration, issuance, exchange, or replacement, as the case may be,
may be made at the office of such agent. In the event the Company so appoints
such an agent, the Company shall send written notice to the holder of this
Warrant of such appointment, the name of the agent and the address of the office
at which the Warrant Register will be maintained.
(b) This Warrant and all rights hereunder shall be assignable and
transferable by the holder to any transferee without the consent of the Company
upon surrender of this Warrant with a properly executed assignment (in the form
of Exhibit B attached hereto) at the principal corporate office of the Company
(or such office or agency of the Company as the Company may designate in writing
to the holder hereof) if: (i) such holder 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 rights are being transferred or
assigned; and (iii) such transfer shall have been conducted in accordance with
all applicable federal and state securities laws. By accepting the transfer or
assignment of all or any portion of this Warrant, the transferee agrees to be
bound by all of the provisions of this Warrant.
9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE.
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 9.
(a) In case the Company shall after October 6, 2005 (the "REFERENCE DATE")
pay a dividend in shares of Common Stock, or make a distribution of shares of
Common Stock, to all holders of the outstanding Common Stock, the Exercise Price
in effect at the opening of business on the date following the date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Exercise Price by a fraction
of which (i) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of the
stockholders of record entitled to receive such dividend or distribution,
whether such date is fixed by the Company's Board of Directors or by statute,
contract or otherwise (the "RECORD DATE"), and (ii) the denominator shall be the
sum of such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction in the Exercise Price to become
effective immediately after the opening of business on the day following the
Record Date. If any dividend or distribution of the type described in this
Section 9(a) of this Warrant is declared but not so paid or made, the Exercise
Price shall again be adjusted to the Exercise Price which would then be in
effect if such dividend or distribution had not been declared.
(b) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock after the Reference Date, the
Exercise Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be proportionately reduced,
and conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the
9
Exercise Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(c) No adjustment in the Exercise Price shall be required under this
Section 9 unless the aggregate of all such adjustments would require an increase
or decrease of at least one percent (1%) in the Exercise Price; provided,
however, that any adjustments which by reason of this Section 9(c) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 9 shall be made by
the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. No adjustment need be made for a
change in the par value of the Common Stock.
(d) In case: (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Exercise Price pursuant to this Section 9; or (ii) the Company shall authorize
the granting to the holders of its Common Stock of rights or warrants to
subscribe for or purchase any share of any class or any other rights or
warrants; or (iii) of any Extraordinary Transaction; or (iv) of the voluntary or
involuntary dissolution, liquidation or winding-up of the Company: the Company
shall mail or cause to be mailed to the holder at such address appearing in the
Warrant Register a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution or rights are to be determined,
which notice shall be so mailed as promptly as possible but in any event at
least five (5) days prior to such record date, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such event, which notice shall be mailed as promptly as
possible but in any event at least ten (10) days prior to the date the
applicable event becomes effective. In addition, whenever the Exercise Price is
adjusted as provided in this Section 9, the Company shall prepare a notice of
such adjustment of the Exercise Price setting forth the adjusted Exercise Price
and the date on which each adjustment becomes effective and shall mail such
notice of such adjustment of the Exercise Price to the holder of each Warrant at
the holder's last address in the Warrant Register within twenty (20) days of the
effective date of such adjustment. Failure to deliver such notice shall not
affect the legality or validity of any such adjustment.
(e) In any case in which this Section 9 provides that an adjustment shall
become effective immediately after a Record Date for an event, the Company may
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such Record Date and before the occurrence of such event
the additional shares of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such holder any amount in cash in lieu of any fractions of shares of Common
Stock pursuant to Section 2(b) of this Warrant.
(f) For purposes of this Section 9, the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company but shall include
10
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(g) Upon each adjustment of the Exercise Price pursuant to this Section 9,
each Warrant shall thereupon evidence the right to purchase that number of
shares of Common Stock (calculated to the nearest hundredth of a share) obtained
by multiplying the number of shares of Common Stock purchasable immediately
prior to such adjustment upon exercise of the Warrant by the Exercise Price in
effect immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment. The
adjustment pursuant to this Section 9(g) to the number of shares of Common Stock
purchasable upon exercise of a Warrant shall be made each time an adjustment of
the Exercise Price is made pursuant to this Section 9 (or would be made but for
Section 9(c) of this Warrant).
10. EXTRAORDINARY TRANSACTION DEFINED.
The occurrence of any of the following events is referred to herein as an
"EXTRAORDINARY TRANSACTION": (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination, including a reverse stock split), (ii) any
consolidation, merger or combination of the Company with another Person as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock (other than as a result of a change in name, a
change in par value or a change in the jurisdiction of incorporation), (iii) any
statutory exchange, as a result of which holders of Common Stock generally shall
be entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, or (iv) any sale or
conveyance of the properties and assets of the Company as, or substantially as,
an entirety to any other person as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock.
11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS.
If this Warrant is lost, stolen, mutilated or destroyed, the Company shall
promptly, on receipt of an indemnification undertaking or other form of security
reasonably acceptable to the Company (or in the case of a mutilated Warrant, the
Warrant), cause the Warrant Agent to issue a new Warrant of like denomination
and tenor as this Warrant so lost, stolen, mutilated or destroyed. In every
case, the applicant for a replacement Warrant shall furnish to the Company such
security or indemnity as may be required by the Company to save it harmless,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company evidence to its satisfaction of the destruction, loss or
theft of the applicant's Warrant and of the ownership thereof.
12. NOTICE.
All notices, requests, consents, and other communications under this
Agreement shall be
11
in writing and shall be deemed delivered (a) three business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
(b) one business day after being sent via a reputable nationwide overnight
courier service guaranteeing next business day delivery or (c) upon delivery
when sent by facsimile (with confirmation of receipt), in each case to the
intended recipient as set forth below:
If to the Company:
La Jolla Pharmaceutical Company
6455 Nancy Ridge Drive
San Diego, CA 92121
Attention: Chief Executive Officer
Fax: (858) 626-2851
With a copy to:
Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, CA 92614
Attention: Mark W. Shurtleff, Esq.
Fax: (949) 451-4220
or at such other address as may have been furnished in writing by the Company to
the holder.
If to the Transfer Agent:
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Fax: (718) 921-8124
If to the holder, at its address set forth on Schedule A to the Securities
Purchase Agreement, or at such other address as shall be delivered to the
Company upon the issuance or transfer of this Warrant, or at such other address
as may have been furnished in writing by such party to the Company, in each case
with a copy to its legal counsel set forth on such Schedule A or otherwise
furnished to the Company, if any.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service or electronic mail), but no such notice,
request, consent or other communication shall be deemed to have been duly given
unless and until it is actually received by the party for which it is intended.
Any party may change the address to which notices, requests, consents or other
communications hereunder are to be delivered by giving the other party notice in
the manner set forth in this Section.
12
13. AMENDMENTS.
This Warrant and any term hereof may be amended, changed or waived only by
an instrument in writing signed by the Company and the holder of this Warrant;
provided, that any term in either of Section 3 or Section 4 or both may be
amended, changed or waived by an instrument in writing signed by the Company and
holders of Closing Warrants to purchase a majority of Warrant Shares represented
by all Closing Warrants; provided, that (x) any such amendment, change or waiver
must apply to all Closing Warrants; and (y) the number of Warrant Shares subject
to this Warrant, the Exercise Price and the Expiration Date may not be amended,
and the right to exercise this Warrant may not be altered or waived, without the
written consent of the holder.
14. GOVERNING LAW; JURISDICTION; VENUE; WAIVER OF JURY TRIAL.
This Warrant shall be governed by and construed in accordance with the laws
of the State of Delaware and the laws of the United States applicable therein
(in each case without giving effect to any choice or conflict of laws provision
or rule that would cause the application of the laws of any other jurisdiction)
and shall be treated in all respects as a Delaware contract. Any action, suit or
proceeding arising out of or relating to this Warrant shall be brought in San
Diego County, California or, if it has or can acquire jurisdiction, any Federal
court located in such State and County, and THE COMPANY AND THE HOLDER HEREOF,
AFTER CONSULTING WITH OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY (AND AGREE NOT TO
REQUEST TRIAL BY JURY), IN EACH CASE IN CONNECTION WITH ANY ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT. The Company and the
holder hereof each hereby irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby in the courts
of the State of California or the United States of America, in each case located
in San Diego County, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such matter brought
in any such court has been brought in an inconvenient forum. The Company and the
holder hereof each hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
By accepting this Warrant from the Company or its previous holder, the holder
agrees to be bound by the terms of this Section 14.
15. DESCRIPTIVE HEADINGS.
The headings of this Warrant are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized as of the date hereof.
LA JOLLA PHARMACEUTICAL COMPANY
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ACCEPTED:
[INSERT HOLDER SIGNATURE BLOCK]
14
EXHIBIT A
EXERCISE NOTICE
(TO BE EXECUTED BY THE HOLDER OF WARRANT IF SUCH HOLDER
DESIRES TO EXERCISE WARRANT)
The undersigned holder hereby exercises the right to purchase
[________________________] shares of Common Stock ("WARRANT SHARES") of La Jolla
Pharmaceutical Company, a Delaware corporation (the "COMPANY"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
[This exercise is contingent upon the consummation of the contemplated
Extraordinary Transaction of which the undersigned has been notified by the
Company.]
1. Form of Exercise. The holder intends that payment of the Exercise Price
shall be made (SELECT ONE AND COMPLETE):
[ ] "Cash Exercise" with respect to [_________________] Warrant Shares;
and/or
[ ] "Cashless Exercise" with respect to [_________________] Warrant Shares
(to the extent permitted by the terms of the Warrant).
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the sum of [$________________] the Company
in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The holder of this Warrant has sold or will
sell the shares of Common Stock issuable pursuant to this Notice pursuant to a
registration statement or an exemption from registration under the Securities
Act of 1933, as amended.
4. Private Placement Representations. The holder of this Warrant confirms
the continuing validity of, and reaffirms as of the date hereof, its
representations and warranties set forth in Section 7 of the Warrant.
5. The undersigned requests that certificates for such shares be issued in
the name of:
________________________________________________________________________________
(Please print name, address and social security or federal employer
identification number (if applicable)
________________________________________________________________________________
________________________________________________________________________________
6. Replacement Warrant. If the shares issuable upon this exercise of the
Warrant are not all of the Warrant Shares which the Holder is entitled to
acquire upon the exercise of the Warrant, the undersigned requests that a new
Warrant evidencing the rights not so exercised be issued in the name of and
delivered to:
________________________________________________________________________________
(Please print name, address and social security or federal employer
identification number (if applicable)
________________________________________________________________________________
________________________________________________________________________________
Name of Holder (print):
------------------------------------
(Signature):
------------------------------------
(By:)
------------------------------------
(Title:)
------------------------------------
Tax ID No.
------------------------------------
Dated: ,
-------------- ----
EXHIBIT B
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
[______________] to issue the above indicated number of shares of Common Stock
in accordance with the Irrevocable Transfer Agent Instructions dated
[_________________] 2005 from the Company and acknowledged and agreed to by
[_________________]
LA JOLLA PHARMACEUTICAL COMPANY
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers to each assignee set forth below all of the rights of the
undersigned under the Warrant to acquire La Jolla Pharmaceutical Company Common
Stock (as defined in the attached Warrant) to acquire the number of Warrant
Shares set opposite the name of such assignee below and in and to the foregoing
Warrant with respect to said acquisition rights and the shares of Common Stock
issuable upon exercise of the Warrant:
Name and Address of Assignee Federal Tax Identification Number Number of Warrant Shares
- ---------------------------- --------------------------------- ------------------------
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
____________________________ _________________________________ ________________________
If the total of the Warrant Shares are not all of the Warrant Shares
evidenced by the foregoing Warrant, the undersigned requests that a new Warrant
evidencing the right to acquire the Warrant Shares not so assigned be issued in
the name of and delivered to the undersigned.
In connection with any transfer of the Warrant prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that the Warrant is being transferred:
[ ] Inside the United States to a Qualified Institutional Purchaser pursuant to
and in compliance with the Securities Act of 1933, as amended; or
[ ] Inside the United States to an Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended;
Name of Holder (print):
-----------------------------------
(Signature):
-----------------------------------
(By:)
-----------------------------------
(Title:)
-----------------------------------
Dated: ,
------------- ----
EXHIBIT C
FORM OF CONTINGENT WARRANT
[See Form of Contingent Warrant
Attached to This Form 8-K
at Exhibit 4.2.]
EXHIBIT 10.1
EXHIBIT D
RIGHTS AGREEMENT
[See Registration Rights Agreement attached to this Form 8-K at Exhibit 4.1.]