EXECUTION COPY
PURCHASE AND REGISTRATION RIGHTS AGREEMENT
PURCHASE AND REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), dated as
of November 9, 1998, between Algos Pharmaceutical Corporation, a Delaware
corporation (the "COMPANY"), and Biotech Target S.A., a Panamanian corporation
(the "PURCHASER").
RECITAL
The Purchaser desires to purchase from the Company, and the Company
desires to sell to Purchaser, shares of the Company's common stock, par value
$.01 per share (the "COMMON STOCK") and a warrant to purchase shares of the
Common Stock, on the terms set forth herein.
AGREEMENT
In consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
I. PURCHASE OF STOCK AND WARRANT, ETC.
1.1. Purchase of Stock and Warrant. Subject to all of the terms and
conditions of this Agreement, the Purchaser agrees to purchase from the Company,
and the Company agrees to sell to the Purchaser, one million (1,000,000) shares
of its Common Stock (the "SHARES") and one warrant (the "WARRANT") in the form
attached hereto as Exhibit A to purchase 250,000 shares of its Common Stock at
an initial exercise price of $25.00 per share (the "WARRANT SHARES") for an
aggregate purchase price of $25.0 million. The aggregate purchase price for the
Shares and the Warrant is referred to in this Agreement as the "Purchase Price."
1.2. Delivery of Funds and Certificates. At closing of the purchase
and sale of the Shares and the Warrant, the Company will deliver to the
Purchaser a duly executed stock certificate, registered in the Purchaser's name
and representing the Shares and a duly executed Warrant in the Purchaser's name
in the form attached hereto as Exhibit A, against payment in United States
dollars of the Purchase Price therefor by delivery by wire transfer of
immediately available funds to such bank account as the Company shall designate
in the amount of the Purchase Price.
II. PURCHASER'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. Investment Intention. The Purchaser represents and warrants that
it is purchasing the Shares, the Warrant and the Warrant Shares solely for its
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution of any thereof. The Purchaser agrees that it
will not, directly or indirectly, offer, transfer, sell,
pledge, hypothecate or otherwise dispose of any of the Shares, the Warrant or
the Warrant Shares (or solicit any offers to buy, purchase, or otherwise acquire
or take a pledge of any of the Shares, the Warrant or the Warrant Shares),
except in compliance with the Securities Act of 1933, as amended (the "ACT"),
and the rules and regulations thereunder, and state securities laws.
2.2. Legends. Each certificate representing the Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
SOLELY FOR ITS OWN ACCOUNT FOR THE PURPOSE OF INVESTMENT AND NOT WITH A VIEW TO
OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION OF ANY THEREOF. THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR AN EXEMPTION THEREFROM."
2.3. Transfer Obligations. If any of the Shares, the Warrant or the
Warrant Shares are offered, sold, transferred, pledged, hypothecated or
otherwise disposed of in accordance with an exemption from the registration
requirements of the Act, the Purchaser shall deliver to the Company (and to the
transfer agent with respect to the Shares if so requested by the Company) prior
to the time of such offer, sale, transfer, pledge or other disposition such
documentation (including, without limitation, opinions of counsel) as the
Company may request in connection therewith.
2.4. Ability to Bear Risk. The Purchaser represents and warrants that
(a) its financial situation is such that it can afford to bear the economic risk
of holding the unregistered Shares, the Warrant and the Warrant Shares for an
indefinite period and (b) it can afford to suffer the complete loss of its
investment in the Shares, the Warrant and the Warrant Shares.
2.5. Access to Information; Evaluation of Risks. The Purchaser
represents and warrants that (a) it is an accredited investor, as the term is
defined in Regulation D under the Act, and that it understands and has taken
cognizance of all the risk factors related to the purchase of the Shares, the
Warrant and the Warrant Shares, (b) it has received and carefully reviewed the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the
"ANNUAL REPORT"), the Company's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1998 and June 30, 1998 (the "QUARTERLY REPORTS") and the
Company's press releases dated August 19, 1998, September 14, 1998, September
24, 1998 and October 20, 1998 (the "PRESS RELEASES") and has been granted the
opportunity to ask questions of, and receive answers from, representatives of
the Company concerning the terms and conditions of the purchase of the Shares,
the Warrant and the Warrant Shares and to obtain any additional information
which it deems necessary to make an informed investment decision with respect to
the purchase of the Shares, the Warrant and the Warrant Shares and to verify the
accuracy of the information contained in the Annual Report, the Quarterly
Reports and the Press Releases and (c) its knowledge and experience in
2
financial and business matter is such that it is capable of evaluating the risks
of the investment in the Shares, the Warrant and the Warrant Shares.
2.6. Federal Securities Laws Matters. The Purchaser represents that it
is familiar with Release No. 5226 issued by the Securities and Exchange
Commission (the "COMMISSION") under the Act, it has consulted with its counsel
with regard thereto, and it is fully aware of the position of the Commission
limiting the resale to the public of any of the Shares, the Warrant, the Warrant
Shares or any part thereof.
III. COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser as of the Closing
Date 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 power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and as proposed to be
conducted. The Company is qualified as a foreign corporation to do business in
each jurisdiction in the United States in which the ownership of its property or
the conduct of its business requires such qualification, except where any
statutory fines or penalties or any corporate disability imposed for the failure
to qualify would not materially or adversely affect the Company, its assets,
financial condition or operations. The Company has no subsidiaries.
3.2. Corporate Power; Authorization. The Company has all requisite
corporate power to, and has taken all requisite corporate action to, execute and
deliver this Agreement and the Warrant, to sell and issue the Shares and the
Warrant and to carry out and perform all of its obligations under this Agreement
and the Warrant. Each of this Agreement and the Warrant constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally and (iii) as to those provisions of each agreement relating
to indemnity, as may be limited by applicable laws. The execution and delivery
of this Agreement and the Warrant does not, and the performance of this
Agreement and the Warrant and the compliance with the provisions hereof and
thereof and the issuance, sale and delivery of the Shares and the Warrant by the
Company will not materially conflict with, or result in a material breach or
violation of the terms, conditions or provisions of, or constitute a material
default under, or result in the creation or imposition of any material lien
pursuant to the terms of, the Certificate of Incorporation or Bylaws of the
Company or (a) any material governmental statute, law, rule applicable to the
Company or (b) material order, writ, judgment, injunction, decree, determination
or award which has been entered against the Company and of which the Company is
aware, the violation of which would materially and adversely affect the Company,
its assets, financial condition or operations.
3
3.3. Issuance and Delivery of the Shares. The Shares, when issued and
paid for in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable. The issuance and delivery of the Shares is
not subject to preemptive, co-sale, right of first refusal or any other similar
rights of the stockholders of the Company or any liens or encumbrances;
provided, however, that the Shares may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time a transfer is proposed.
3.4. Full Disclosure. The Company has furnished to the Purchaser the
following documents filed with the Commission (collectively, the "SEC
DOCUMENTS") and the Company warrants that the information contained in such
documents, as of their respective dates, did not contain any untrue statement of
a material fact, and did not omit to state any material fact necessary to make
any statement, in light of the circumstances under which such statement was
made, not misleading:
(a) The Quarterly Reports.
(b) The Annual Report.
3.5. Litigation. Except as set forth in the SEC Documents, there is no
pending or, to the Company's knowledge, threatened action, suit or other
proceeding before any court, governmental body or authority, or arbitrator to
which the Company is a party or to which its property or assets are subject.
3.6. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Federal, state, or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement and the Warrant except for (a) compliance with
the securities and blue sky laws in the states and other jurisdictions in which
shares of Common Stock are offered and/or sold, and (b) the filing of a
registration statement and all amendments thereto with the SEC as contemplated
by Section IV of this Agreement.
3.7. No Material Adverse Change. Since June 30, 1998, there have not
been any changes in the assets, liabilities, financial condition or operations
of the Company from that reflected in the SEC Documents except changes in the
ordinary course of business or which have not been, either individually or in
the aggregate, materially adverse.
4
IV. REGISTRATION RIGHTS
4.1. On or prior to March 9, 1999, the Company shall prepare and cause
to be filed with the Commission pursuant to Rule 415 under the Act a shelf
registration statement on the appropriate form relating to resales of the Shares
by the Purchaser (the "REGISTRATION STATEMENT"). The Purchaser agrees to fully
cooperate with the Company in connection with the preparation and filing of the
Registration Statement, including, without limitation, by providing the Company
with such information about the Purchaser for inclusion in the Registration
Statement as may be required by the Act, and the Company's obligations under
this Article III shall be contingent upon the Purchaser complying with its
obligations set forth in this sentence.
4.2. The Company shall use its reasonable best efforts to cause such
Registration Statement to be declared effective by the Commission as promptly as
practicable following the filing thereof.
4.3. The Company shall use its reasonable best efforts to keep the
Registration Statement continuously effective under the Act until the two year
anniversary of the date of this Agreement or until the end of such shorter
period as will terminate on the earlier of (a) the date when all the Shares
covered by the Registration Statement have been sold pursuant thereto other than
to an affiliate of the Purchaser and (b) the date on which the Purchaser and its
affiliates no longer own any of the Shares. Notwithstanding the foregoing, the
Company shall not be required to keep the Registration Statement effective in
the event that (i) an event occurs and is continuing as a result of which the
Registration Statement, any related prospectus or any document incorporated
therein by reference as then amended or supplemented would, in the Company's
good faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
(ii)(A) the Company determines in its good faith judgment that the disclosure of
such event at such time would have an adverse effect on the business, operations
or prospects of the Company or (B) the disclosure otherwise relates to a
material business transaction which has not yet been publicly disclosed; which
period shall not exceed an aggregate of 60 days in any twelve-month period. The
Purchaser agrees to give the Company at least one Business Day notice of its
intent to resell its Shares under the Registration Statement so that the Company
can confirm that no event mentioned in the preceding sentence has occurred and
that the Registration Statement is available for such use. The term "BUSINESS
DAY" as used herein means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
V. INDEMNITY
5.1. The Company agrees to indemnify and hold harmless the Purchaser,
its directors, officers and each person, if any, who controls the Purchaser
(within the meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")), from and against any and
all losses, claims, damages, liabilities, judgments,
5
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or prospectus
(or any amendment or supplement thereto) provided by the Company to the
Purchaser or any prospective purchaser of registered Shares, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by (i) an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to the Purchaser furnished in
writing to the Company by or on behalf of the Purchaser or (ii) an untrue
statement or omission or alleged untrue statement or omission that is corrected
in any subsequent Registration Statement, preliminary prospectus or prospectus
(or any amendment or supplement thereto) that was delivered to the Purchaser by
the Company.
5.2. The Purchaser agrees to indemnify and hold harmless the Company
and its directors and officers, and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, to the same extent as the foregoing indemnity from the Company set
forth in Section 5.1 above, but only with reference to information relating to
the Purchaser furnished in writing to the Company by or on behalf of the
Purchaser expressly for use in any Registration Statement except insofar as such
losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that was corrected
in writing by the Purchaser and delivered to the Company for use in the
Registration Statement at issue prior to the date of such Registration
Statement.
5.3. In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 5.1 or 5.2 (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 5.1 and 5.2, the Purchaser shall not be required to assume the
defense of such action pursuant to this Section 5.3, but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the
Purchaser). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party or (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party. In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more
6
than one separate firm of attorneys (in addition to any local counsel) for all
indemnified parties and all such fees and expenses shall be reimbursed as they
are incurred. Such firm shall be designated in writing by the Purchaser, in the
case of the parties indemnified pursuant to Section 5.1, and by the Company, in
the case of parties indemnified pursuant to Section 5.2. The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
VI. MISCELLANEOUS
6.1. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, to the parties to this Agreement at
the following address or to such other address as either party to this Agreement
shall specify by notice to the other:
if to the Company:
Algos Pharmaceutical Corporation
1333 Campus Parkway
Neptune, New Jersey 07753
Attention: President and Chief Executive Officer
with a copy to:
Algos Pharmaceutical Corporation
1333 Campus Parkway
Neptune, New Jersey 07753
Attention: General Counsel
and
7
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Raymond Y. Lin
if to the Purchaser:
Biotech Target S.A.
Swiss Bank Tower
Panama 1
Republic of Panama
with a copy to:
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078
Attention: Thomas J. Egan, Jr.
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof.
6.2. Fees. The Company agrees to pay to the Purchaser, upon receipt of
written invoice(s), all reasonable fees and expenses of legal counsel incurred
in connection with the execution and delivery of this Agreement and the Warrant
and the consummation of the transactions contemplated hereby and thereby;
provided, however, that in no event shall the Company be obligated to pay any
such fees and expenses in excess of $25,000.
6.3. Binding Effect; Benefits. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
6.4. Waiver. Either party hereto may by written notice to the other
(a) extend the time for the performance of any of the obligations or other
actions of the other under this Agreement; (b) waive compliance with any of the
conditions or covenants of the other contained in this Agreement; and (c) waive
or modify performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained herein. The waiver by any party
8
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure by
either party to exercise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time or
times hereunder.
6.5. Amendment. This Agreement may be amended, modified or
supplemented only by a written instrument executed by each of the parties
hereto.
6.6. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by either party hereto without the prior written consent of the other
party.
6.7. Applicable Law; Consent to Jurisdiction. (a) This Agreement shall
be construed and enforced in accordance with, and be governed by, the internal
laws of the State of New York, without regard to its choice of law rules, and
the parties consent to the exclusive jurisdiction of the federal and state
courts located in the city of New York to resolve any dispute relating to this
Agreement.
(b) To the extent not prohibited by applicable law which cannot be waived,
each of the parties hereto hereby waives, and covenants that he or it will not
assert (whether as plaintiff, defendant, or otherwise), any right to trial by
jury in any forum in respect of any issue, claim, demand, cause of action,
action, suit or proceeding arising out of or based upon this Agreement or the
subject matter hereof, in each case whether now existing or hereafter arising
and whether in contract or tort or otherwise. Any of the parties hereto may file
an original counterpart or a copy of this Section 6.7 with any court as written
evidence of the consent of each of the parties hereto to the waiver of his or
its right to trial by jury.
(c) Each of the parties hereto by execution hereof (i) hereby irrevocably
submits to the jurisdiction of the federal and state courts located in the City
of New York, State of New York, for the purpose of any action, suit or
proceeding arising out of or based upon this Agreement or the subject matter
hereof and (ii) hereby waives to the extent not prohibited by applicable law,
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such action, suit or proceeding, any claim that he or it is not subject
personally to the jurisdiction of the above-named courts, that he or it is
immune from extraterritorial injunctive relief or other injunctive relief, that
this or its property is exempt or immune from attachment or execution, that any
such action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
above-named courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that
9
service of process by registered or certified mail, return receipt requested, at
the address specified in or pursuant to Section 6.1 hereof is reasonably
calculated to give actual notice and waives and agrees not to assert by way of
motion, as a defense or otherwise, in any such action, suit or proceeding any
claim that service of process made in accordance with Section 6.1 hereof does
not constitute good and sufficient service of process. The provisions of this
Section 6.7 shall not restrict the ability of any party to enforce in any court
any judgment obtained in a federal or state court located in the City of New
York, State of New York.
6.8. Survivability. The representations and warranties contained in
this Agreement shall survive the closing of the transactions contemplated
hereunder.
6.9. Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
6.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
[signature page follows]
10
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the day and year first above written.
BIOTECH TARGET S.A.
By: /s/ A. Hove
-------------------------------
Name: A. Hove
--------------------------
Title: Signatory Authority
-------------------------
BIOTECH TARGET S.A.
By: /s/ A. Bremer
-------------------------------
Name: A. Bremer
--------------------------
Title: Signatory Authority
-------------------------
ALGOS PHARMACEUTICAL CORPORATION
By: /s/ W. Bradford Middlekauff
-------------------------------
Name: W. Bradford Middlekauff
--------------------------
Title: Vice President, Business
Development and General
Counsel
EXHIBIT A
WARRANT