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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ARADIGM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 3845 94-3133088
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
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3929 POINT EDEN WAY
HAYWARD, CALIFORNIA 94545
(510) 265-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD P. THOMPSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ARADIGM CORPORATION
3929 POINT EDEN WAY
HAYWARD, CALIFORNIA 94545
(510) 265-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JAMES C. KITCH
JEFFREY S. ZIMMAN
JAMIE E. CHUNG
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94306-2155
(650) 843-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
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Common Stock, no par value
and related rights to
purchase Series A Junior
Participating Preferred
Stock..................... 2,428,338 $11.00 $26,712,268 $7,430
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee under Rule 457(c) of the Securities Act of 1933 based on
the average of the high and low sales prices of the Common Stock as reported
on the Nasdaq National Market on February 5, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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Information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY , 1999
PROSPECTUS
2,428,338 SHARES
ARADIGM CORPORATION
COMMON STOCK
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The selling shareholders identified in this prospectus may sell up to
2,428,338 shares of common stock of Aradigm Corporation, a California
corporation. The selling shareholders may offer and sell their shares of common
stock from time to time:
- on terms to be determined at the time of a sale;
- in transactions on the Nasdaq National Market;
- in privately negotiated transactions; or
- in a combination of these methods of sale.
Please see "Where You Can Find More Information" on page 12 for additional
information about us on file with the United States Securities and Exchange
Commission.
Aradigm's Common Stock is traded on the Nasdaq National Market under the
symbol "ARDM." On February 5, 1999 the closing price for the Common Stock on the
Nasdaq National Market was $10.75 per share.
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WE STRONGLY URGE YOU TO READ AND CONSIDER THIS PROSPECTUS CAREFULLY AND IN
ITS ENTIRETY. INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
February , 1999
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THE COMPANY
We are developing novel pulmonary drug delivery systems designed to enhance
the delivery and effectiveness of a number of existing and development-stage
drugs and reduce the need for injectable drug therapy. Our principal product
development programs are based on our AERx(TM) Pulmonary Drug Delivery System,
which uses proprietary technologies to create aerosols from liquid drug
formulations for delivery systemically via the lung or locally to the lung. We
believe that our systems can potentially be used to deliver a number of existing
drugs for a variety of applications and may also offer a promising means of
delivery for many new drugs being developed by pharmaceutical and biotechnology
companies.
Our company was incorporated in California in January 1991. References in
the prospectus to "Aradigm," "we," "our," "us" and the "Company" refer to
Aradigm Corporation, a California corporation. Our principal executive offices
are located at 3929 Point Eden Way, Hayward, CA 94545, and our telephone number
is (510) 265-9000. We maintain a website at www.aradigm.com. The contents of our
web page are not incorporated herein and are not a part of this prospectus. For
a more detailed discussion of our business, see our Annual Report on Form 10-K
for the year ended December 31, 1997, which is incorporated by reference herein.
Aradigm(TM) and AERx(TM) are trademarks of the Company. Trade names and
trademarks of other companies appearing in this prospectus are the property of
their respective holders.
RISK FACTORS
You should carefully consider the following risk factors and all other
information in this prospectus and incorporated by reference herein before
purchasing our common stock. Investing in our common stock has a high degree of
risk. The risks and uncertainties described below are not the only ones facing
our company. Additional risks and uncertainties that are not yet identified or
that we currently think are immaterial may also materially adversely affect our
business. If any of the following risks actually occur, our business, financial
condition or results of operations would likely suffer and could result in a
complete loss of your investment.
In addition to historical information, this prospectus contains
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that could cause actual results to differ materially
from those in such forward-looking statements.
WE HAVE A LIMITED OPERATING HISTORY
We were incorporated in January 1991 and we have a limited operating
history and have generated only limited revenues to date. Virtually all of our
potential products are in an early stage of research or development. We cannot
assure you that:
- our research and development efforts will be successful;
- any potential products will be proven safe and effective;
- regulatory clearance or approval to sell any potential products will be
obtained; or
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- any of our potential products can be manufactured in commercial
quantities or at an acceptable cost or marketed successfully.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES
We have never been profitable, and through September 30, 1998, we have
incurred a cumulative deficit of approximately $46.9 million. We expect to
continue to incur substantial losses over at least the next several years as we:
- expand our research and development efforts;
- expand our preclinical and clinical testing activities;
- expand our manufacturing efforts; and
- plan and build our clinical and initial commercial production
capabilities.
WE MAY NOT BE ABLE TO DEVELOP PRODUCTS SUCCESSFULLY
Our AERx systems are at an early stage of development and we are currently
testing them using hand-held prototypes. Before we can begin to sell the AERx
systems commercially, we will need to invest in substantial additional
development and conduct preclinical and clinical testing. In order to further
develop our AERx systems, we will need to address engineering and design issues,
including ensuring that the AERx systems can deliver a reproducible amount of
drug into the bloodstream and can be manufactured successfully as hand-held
systems. We cannot assure investors that we will be successful in addressing
these design, engineering and manufacturing issues. Additionally, we may need to
formulate and will need to package drugs for delivery by our AERx systems. We
cannot assure investors that we will be able to do this successfully.
For the AERx systems to be commercially viable, we will need to demonstrate
that drugs delivered by the AERx systems:
- are safe and effective;
- will not be subject to physical or chemical instability over time and
under differing storage conditions; and
- do not suffer from other problems that would affect commercial viability.
While our development efforts are at different stages for different
products, we cannot assure investors that we will successfully develop any
products. We may also abandon some or all of our proposed products. If we cannot
develop potential products in a timely manner, our business will be impaired.
WE MAY NOT BE ABLE TO COMMERCIALIZE PRODUCTS SUCCESSFULLY
Our success in commercializing our products depends on many factors,
including acceptance by health care professionals and patients. Their acceptance
of our products will largely depend on our ability to show them that our
products' ability to compete with alternate delivery systems with respect to:
- safety;
- efficacy;
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- ease of use; and
- price.
We cannot assure investors that our products will be competitive with
respect to these factors or that our partners will be able to successfully
market any of them in a timely manner.
WE DEPEND UPON COLLABORATIVE PARTNERS AND NEED ADDITIONAL COLLABORATIVE PARTNERS
Our commercialization strategy depends on our ability to enter into
agreements with collaborative partners. In particular, our ability to
successfully develop and commercialize the AERx Pain Management System depends
on our corporate partnership with SmithKline Beecham and our ability to
successfully develop and commercialize the AERx Diabetes Management System
depends on our corporate partnership with Novo Nordisk. SmithKline Beecham and
Novo Nordisk have agreed to:
- undertake certain collaborative activities with us;
- design and conduct advanced clinical trials;
- fund research and development activities with us;
- pay us fees upon achievement of certain milestones; and
- purchase product at a defined premium, pay royalties and/or share gross
profits if and when we commercialize a product.
The development and commercialization of these systems will be delayed if
SmithKline Beecham or Novo Nordisk fail to conduct these collaborative
activities in a timely manner or at all. In addition, SmithKline Beecham or Novo
Nordisk could terminate these agreements and we cannot assure investors that we
will receive any development and milestone payments. If we do not receive
development funds or achieve milestones set forth in the agreements, or if
SmithKline Beecham or Novo Nordisk breach or terminate either agreement, our
business will be impaired.
We will also need to enter into agreements with other corporate partners to
conduct the clinical trials, manufacturing, marketing and sales necessary to
commercialize other potential products. In addition, our ability to apply the
AERx system to any proprietary drugs will depend on our ability to establish and
maintain corporate partnerships or other collaborative arrangements with the
holders of proprietary rights to such drugs. We cannot assure investors that we
will be able to establish such additional corporate partnerships or
collaborative arrangements on favorable terms or at all, or that our existing or
future corporate partnerships or collaborative arrangements will be successful.
Nor can we assure investors that existing or future corporate partners or
collaborators will not pursue alternative technologies or develop alternative
products either on their own or in collaboration with others, including our
competitors. We could have disputes with our existing or future corporate
partners or collaborators. Any such disagreements could lead to delays in the
research, development or commercialization of any potential products or could
result in time-consuming and expensive litigation or arbitration. If any of our
corporate partners or collaborators do not develop or commercialize any product
to which it has obtained rights from us, our business could be impaired.
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WE HAVE LIMITED MANUFACTURING EXPERIENCE
We have only limited manufacturing experience. We have validated only a
single pilot-scale facility for manufacturing disposable packets for our various
AERx systems. We anticipate spending significant amounts to attempt to provide
for the high-volume manufacturing required for multiple AERx products, and some
of this spending will occur before our products are approved. We cannot assure
investors that:
- we will be able to manufacture sufficient quantities of our products to
support any future clinical trials;
- the design requirements of the AERx system will make it feasible for us
to develop it beyond the current prototype;
- manufacturing and quality control problems will not arise as we attempt
to scale-up; or
- any scale-up can be achieved in a timely manner or at a commercially
reasonable cost.
Failure to address these issues could delay or prevent late-stage clinical
testing and commercialization of our products.
Our manufacturing facilities and our contract manufacturers' facilities
will be subject to periodic regulatory inspections by the Food and Drug
Administration (FDA) and other federal and state regulatory agencies. These
facilities must comply with the good manufacturing practice (GMP) requirements
of the FDA. We cannot assure investors that we will satisfy such regulatory
requirements, and any failure to satisfy GMP and other requirements could impair
our business.
We intend to use contract manufacturers to produce key components,
assemblies and subassemblies in the clinical and commercial manufacturing of our
AERx devices. We cannot assure investors that we will be able to enter into or
maintain satisfactory contract manufacturing arrangements. Certain components of
our products may be available, at least initially, only from single sources. We
cannot assure investors that we could find alternate suppliers for any of these
components. A delay of or interruption in production resulting from any supply
problem could have a material adverse effect on our business.
WE WILL NEED ADDITIONAL CAPITAL AND OUR ABILITY TO FIND ADDITIONAL
FUNDING IS UNCERTAIN
Our operations to date have consumed substantial and increasing amounts of
cash. We expect the negative cash flow from operations to continue in the
foreseeable future. We will need to commit substantial funds to develop our
technology and proposed products. We will have to continue to conduct costly and
time-consuming research and preclinical and clinical testing to develop, refine
and commercialize our technology and proposed products. Our future capital
requirements will depend on many factors, including:
- progress in researching and developing our technology and drug delivery
systems;
- our ability to establish and maintain favorable collaborative
arrangements with others;
- progress with preclinical studies and clinical trials;
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- time and costs to obtain regulatory approvals;
- costs of development and the rate we expand our production technologies;
- costs of preparing, filing, prosecuting, maintaining and enforcing patent
claims; and
- our need to acquire licenses or other rights to technology.
Since inception, we have financed our operations primarily through equity
financings, financings of equipment acquisitions, contract research revenue and
interest earned on investments.
We anticipate that we will be able to maintain our current and planned
operations through the next two years with our existing resources, anticipated
payments from our existing corporate partners and projected interest income.
Depending upon the timing and nature of additional development collaborations,
we may need to raise additional funds to fund operations beyond that period. Our
cash requirements may change because of our research and development efforts,
including capital expenditures and funding preclinical and clinical trials and
manufacturing capacity. We may seek additional funding through collaborations or
through public or private equity financings. We cannot assure investors that
additional financing will be available on acceptable terms or at all. If we
raise additional funds by issuing equity securities, substantial dilution to
shareholders may result. If adequate funds are not available, we may be required
to delay, reduce the scope of, or eliminate one or more of our research or
development programs or obtain funds through arrangements with collaborative
partners or others. Such arrangements might require us to relinquish rights to
certain of our technologies, product candidates or products that we would not
otherwise relinquish.
WE DEPEND UPON PROPRIETARY TECHNOLOGY; THE STATUS OF PATENTS AND PROPRIETARY
TECHNOLOGY IS UNCERTAIN
The field of aerosolized drug delivery is crowded and a substantial number
of patents have been issued. Competitors and institutions may have applied for
and may obtain additional patents and proprietary rights relating to competing
products or processes.
Patents or other publications may hinder us from obtaining patent
protection or draw into question the validity of patents already issued to us.
In addition, patents issued to others might allow competitors to prevent us from
making our products or carrying out processes necessary to use our products. We
may not be able to obtain a license under any such patent and may be prevented
from making products or carrying out processes which are important or essential
to our business. We cannot assure investors that any of our patents would be
upheld as valid if challenged in litigation. There also can be no assurance that
any of our patent applications will issue or, if issued, will later be found
valid if challenged. Furthermore, we cannot assure investors that any issued
patents or patent applications will provide us with sufficient market
exclusivity to profitably compete against our competitors. In the United States,
patent applications are secret until they are issued. As a result, we cannot
know what patents others may have applied for. We may take actions now that
create infringement issues if and when a pending application covering similar
technology is subsequently issued. Furthermore, patents already issued to us or
our pending applications may become subject to dispute, and any disputes could
be resolved against us. Whether or not we are successful, any dispute could
involve the expenditure of substantial financial and human resources.
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We require our officers, employees, consultants and advisors to execute
proprietary information and invention assignment agreements when they began
their relationships with us. We cannot assure investors, however, that these
agreements will provide meaningful protection for our inventions, trade secrets
or other proprietary information in the event of unauthorized use or disclosure
of such information. Violations of such agreements are difficult to police.
OUR BUSINESS IS REGULATED BY THE GOVERNMENT; RESULTS OF PRECLINICAL
AND CLINICAL TESTING ARE UNCERTAIN
All medical devices and new drugs, including our products under
development, are subject to extensive and rigorous regulation by the federal
government, principally the FDA, and by state and local governments. Such
regulations govern the development, testing, manufacture, labeling, storage,
premarket clearance or approval, advertising, promotion, sale and distribution
of such products. Medical devices or drug products that are marketed abroad are
also subject to regulation by foreign governments.
The process for obtaining FDA premarket clearances or approvals for medical
devices and drug products is generally lengthy, expensive and uncertain.
Securing FDA marketing clearances and approvals often requires applicants to
submit extensive clinical data and supporting information to the FDA. Even if
granted, the FDA can withdraw product clearances and approvals for failure to
comply with regulatory requirements or upon the occurrence of unforeseen
problems following initial marketing.
We cannot assure investors that we will be able to obtain necessary
regulatory clearances or approvals on a timely basis, if at all, for any of our
potential products. Our business would suffer if:
- receipt of clearances or approvals is delayed;
- we fail to receive such clearances or approvals; or
- we fail to comply with existing or future regulatory requirements.
Even if granted, regulatory clearances or approvals may include significant
limitations on the uses for which products may be marketed. Certain changes to
marketed medical devices and new drugs are subject to additional FDA review and
clearance or approval.
We cannot assure investors that any required clearances or approvals, once
obtained, will not be withdrawn or that we will remain in compliance with other
regulatory requirements. If we (or manufacturers of our components) fail to
comply with applicable FDA and other regulatory requirements, we (and they) are
subject to sanctions, including:
- warning letters;
- fines;
- product recalls or seizures;
- injunctions;
- refusals to permit products to be imported into or exported out of the
United States;
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- FDA refusal to grant premarket clearance or premarket approval of medical
devices and drugs;
- FDA refusal to allow us to enter into government supply contracts;
- withdrawals of previously approved marketing applications; and
- criminal prosecutions.
Before we can file for regulatory approval for the commercial sale of our
potential AERx products, the FDA will require extensive preclinical and clinical
testing to demonstrate their safety and efficacy. To date, we have tested
prototype patient-operated versions of our AERx Systems with morphine and
insulin on a limited number of individuals in Phase I and Phase II clinical
trials in the United States and with insulin on a limited number of individuals
in Phase I and Phase II trials in Australia. If we do not or cannot complete
these trials or progress to more advanced clinical trials, we may not be able to
commercialize our AERx products.
Completing clinical trials in a timely manner depends on, among other
factors, the enrollment of patients. Our ability to recruit patients depends on
a number of factors, including the size of the patient population, the proximity
of patients to clinical sites, the eligibility criteria for the study and the
existence of competitive clinical trials. Delays in planned patient enrollment
in our current or future clinical trials may result in increased costs, program
delays or both.
We are also developing applications of our AERx system for the delivery of
other compounds. These applications are in an early stage of development and we
do not yet know the degree of testing and development that will be needed to
obtain necessary marketing approvals from the FDA and other regulatory agencies.
We cannot assure investors that these applications will prove to be viable or
that any necessary regulatory approvals will be obtained in a timely manner, if
at all. Although we believe the data regarding our potential products is
encouraging, the results of initial preclinical and clinical testing do not
necessarily predict the results that we will get from subsequent or more
extensive preclinical and clinical testing. Furthermore, we cannot assure
investors that clinical trials of these products will demonstrate that these
products are safe and effective to the extent necessary to obtain regulatory
approvals. Many companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier trials. If we cannot adequately demonstrate that
any therapeutic product we are developing is safe and effective, regulatory
approval of that product would be delayed or prevented, which would impair our
business.
In addition, the FDA may require us to provide clinical data to demonstrate
that the chronic administration of drugs delivered via the lung for systemic
effect is safe. We cannot assure investors that we will be able to present such
data in a timely manner, or at all.
Manufacturers of medical devices and drugs also are required to comply with
the applicable GMP requirements, which relate to product testing, quality
assurance and maintaining records and documentation. We cannot assure investors
that we will be able to comply with the applicable GMP and other FDA regulatory
requirements for manufacturing as we expand our manufacturing operations, which
would impair our business.
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In addition, to market our products in foreign jurisdictions, we and our
partners must obtain required regulatory approvals and clearances from foreign
regulatory agencies and comply with extensive regulations regarding safety and
quality. We cannot assure investors that we will obtain regulatory approvals in
such countries or that we will not be required to incur significant costs in
obtaining or maintaining our foreign regulatory approvals. If approvals to
market our products are delayed, if we fail to receive these approvals, or if we
lose previously received approvals, our business would be impaired.
Because our AERx Pain Management System clinical studies involve morphine,
we are registered with the Drug Enforcement Agency (DEA) and our facilities are
subject to inspection and DEA export, import, security and production quota
requirements. We cannot assure investors that we will not be required to incur
significant costs to comply with DEA regulations in the future or that such
regulations will not otherwise harm our business.
WE ARE IN A HIGHLY COMPETITIVE MARKET AND OUR COMPETITORS MAY DEVELOP
ALTERNATIVE THERAPIES
The medical device, pharmaceutical and biotechnology industries are highly
competitive and rapidly evolving. Our success depends on our ability to
successfully develop products and technologies for pulmonary drug delivery. If a
competing company were to develop or acquire rights to a better pulmonary
delivery device, our business would be harmed.
We compete with pharmaceutical, biotechnology and drug delivery companies
and other entities engaged in the development of alternative drug delivery
systems or new drug research and testing, as well as with entities producing and
developing injectable drugs. There are a number of companies currently seeking
to develop new products and non-invasive alternatives to injectable drug
delivery, including oral, intranasal and transdermal delivery systems and
colonic absorption systems. A competitor of the Company has recently received
approval for fentanyl, a narcotic analgesic, to treat rapid-onset pain in
certain types of patients. Other companies are currently developing and
commercializing enhanced injectable drug delivery systems and pulmonary drug
delivery systems. Many of our competitors have greater research and development
capabilities, experience, manufacturing, marketing, sales, financial and
managerial resources than we do, and they represent significant competition for
our business. Our competitors' financial, marketing and other resources could be
further enhanced if they are acquired by large pharmaceutical companies or if
they enter into partnering arrangements.
Our competitors may succeed in developing competing technologies, obtaining
FDA approval for products more rapidly than us and in gaining greater market
acceptance of their products than our products. We cannot assure investors that
developments by others will not render some or all of our proposed products or
technologies uncompetitive or obsolete.
WE DEPEND ON KEY PERSONNEL
We depend on a small number of key management and technical personnel.
Losing any of these key employees could harm our business and operations. Our
success also depends on our ability to attract and retain additional highly
qualified marketing, management, manufacturing, engineering and research and
development personnel. We
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face intense competition in our recruiting activities, and we may not be able to
attract or retain qualified personnel.
WE MAY BE EXPOSED TO PRODUCT LIABILITY
Researching, developing and commercializing medical devices and therapeutic
products entails significant product liability risks. The use of our products in
clinical trials and the commercial sale of such products may expose us to
liability claims. These claims might be made directly by consumers or by
pharmaceutical companies or others selling such products.
Companies often address the exposure of such risk by obtaining product
liability insurance. Although we currently have product liability insurance, we
cannot assure investors that we can maintain such insurance or obtain additional
insurance on acceptable terms, in amounts sufficient to protect our business, or
at all. A successful claim brought against us in excess of our insurance
coverage would have a material adverse effect on our business.
THIRD-PARTY REIMBURSEMENT FOR OUR PRODUCTS IS UNCERTAIN
In both domestic and foreign markets, sales of our potential products, if
any, depend in part on the availability of reimbursement from third-party payors
such as government health administration authorities, private health insurers
and other organizations. Third-party payors are increasingly challenging the
price and cost-effectiveness of medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products. We cannot assure investors that any of our products will be
reimbursable by third-party payors. In addition, we cannot assure investors that
our products will be considered cost-effective or that adequate third-party
reimbursement will be available to enable us to maintain price levels sufficient
to realize a profit. Legislation and regulations affecting the pricing of
pharmaceuticals may change before our products are approved for marketing and
any such changes could further limit reimbursement.
WE USE HAZARDOUS MATERIALS
Our operations involve the controlled use of hazardous materials, chemicals
and various radioactive compounds. Although we believe that our safety
procedures for handling and disposing of such materials comply with the state
and federal regulations standards, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, we could be held liable for any damages that result and such
liability could exceed the resources of our business.
OUR STOCK PRICE MAY BE VOLATILE
The market prices for securities of many companies in the pharmaceutical
development industry, including ours, have historically been highly volatile,
and the market from time to time has experienced significant price and volume
fluctuations unrelated to the operating performance of particular companies.
Prices for our common stock may be influenced by many factors, including:
- investor perception of us;
- analyst recommendations;
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- fluctuations in our operating results;
- market conditions relating to the pharmaceutical industry;
- announcements of technological innovations or new commercial products by
us or our competitors;
- publicity regarding actual or potential developments relating to products
under development by us or our competitors;
- developments or disputes concerning patent or proprietary rights;
- delays in the development or approval of our product candidates;
- regulatory developments in both the United States and foreign countries;
- public concern as to the safety of drug technologies;
- period-to-period fluctuations in financial results;
- future sales of substantial amounts of common stock by existing
shareholders; or
- economic and other external factors.
In the past, class action securities litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. Any such litigation instigated against us could result in
substantial costs and a diversion of management's attention and resources.
YEAR 2000 ISSUE
As the year 2000 approaches, a "Year 2000" issue has arisen because many
existing application software programs, operating systems and manufacturing
equipment containing computer-related components (Systems) were designed to use
only the last two digits to represent a year (e.g., the year 1998 is represented
by "98" on the system or in the program). As a result, the year 1999 (i.e.,
"99") could be the maximum date value Systems will be able to process
accurately. If not corrected, the Year 2000 problem could cause system failures
or miscalculations resulting in inaccuracies in computer output or disruptions
of operations, including inaccurate processing of financial, personnel and other
information as well as the inability to process transactions or engage in
similar normal business activities.
We are currently developing a strategy to address the potential exposures
related to the impact of the Year 2000 problem on our Systems. We have appointed
a project manager to lead our assessment of the Year 2000 problem. We have begun
an initial inventory of our key internal financial, informational and
operational systems, including manufacturing control systems, to identify those
areas that may be affected by the Year 2000 problem. We intend to complete this
inventory by the end of the first quarter of fiscal 1999. We are in the final
stages of developing plans for implementing and testing any necessary
modifications to these key Systems to ensure Year 2000 compliance. We currently
estimate that any required remediation programs will be completed by the third
quarter of fiscal 1999.
In addition to the risks associated with our own Systems, we have
relationships with, and are to varying degrees dependent upon, a large number of
third parties that provide us
11
<PAGE> 13
with information, goods and services. If significant numbers of these third
parties experience failures in their own Systems due to the Year 2000 problem,
it could affect our ability to process transactions or engage in similar normal
business activities. We have not yet determined the impact on our operations, if
any, if key third parties fail to take necessary actions. We have initiated
formal communications with significant third parties to assess their Year 2000
compliance and determine the extent to which we may be vulnerable to those third
parties' failure to remedy their own Year 2000 issues.
We do not yet know the total cost associated with becoming Year 2000
compliant. To date, we have not incurred, and we do not anticipate that we will
incur, significant operating expenses that would be material to our business.
While we plan to complete modifications of our business-critical Systems prior
to the Year 2000, if we (or our third-party providers) do not complete such
modifications in a timely manner, the Year 2000 problem could impair our
business. We cannot predict the extent of any such impact. We cannot assure
investors that we or any third party will not encounter any unforeseen problems
with respect to any Systems, and these unforeseen problems could impair our
business. We currently have no contingency plans to deal with any major Year
2000 non-compliance, though we will develop such plans over the coming quarters.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which include
statements based on our current expectations, assumptions, estimates and
projections about our company and our industry, including statements about the
timing and results of clinical trials, regulatory approval, the establishment of
corporate partnering arrangements, the anticipated commercial introduction of
our products and the timing of our cash requirements. Words such as "believes,"
"anticipates," "expects," "intends," "plans" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying these statements. Actual results could differ materially from
those projected in any forward-looking statements for the reasons detailed in
"Risk Factors" or elsewhere in this Prospectus. We assume no obligation to
update any forward-looking statement.
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement. We also file annual, quarterly and special reports,
proxy statements and other information with the SEC.
You may inspect and copy these materials at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the SEC's regional offices at 7 World Trade Center, Suite 1300, New York,
New York, 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. You may also obtain copies of these materials from the SEC at prescribed
rates by writing to the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC
12
<PAGE> 14
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's website at www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ARDM." You may inspect reports and other information concerning us at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997, filed on March 24, 1998, an amendment thereto filed on April 2,
1998 and an amendment thereto filed on June 22, 1998, including all
material incorporated by reference therein;
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1998, filed on May 15, 1998 and an amendment thereto filed on July 6,
1998, including all material incorporated by reference therein;
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998, filed on August 14, 1998, including all material incorporated by
reference therein;
4. Our Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1998, filed on November 13, 1998, including all material
incorporated by reference therein;
5. Our Current Report on Form 8-K, filed on September 2, 1998, including
all material incorporated by reference therein; and
6. The description of the common stock contained in our Registration
Statement on Form 8-A.
7. The Proxy Statement for our 1998 Annual Meeting of Shareholders.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at:
Aradigm Corporation
Investor Relations Department
3929 Point Eden Way
Hayward, California 94545
Telephone: (510) 265-9000
13
<PAGE> 15
You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of common stock by
any selling shareholder in this offering.
14
<PAGE> 16
SELLING SHAREHOLDERS
In January 1999, we agreed to sell 2,428,338 shares of Common Stock of the
Company upon meeting certain closing conditions, including the effectiveness of
this registration statement to certain purchasers pursuant to a Common Stock
Purchase Agreement dated January 27, 1999 by and among us and the Purchasers
named therein. In connection with this sale, we agreed to file a registration
statement with the SEC covering the shares issued to each selling shareholder
and agreed to indemnify each selling shareholder against claims made against
them arising out of, among other things, statements made in this registration
statement. We have agreed to cause this registration statement to remain
effective until (a) all the common stock has been re-sold (b) all the common
stock may be re-sold in a three-month period under Rule 144 or (c) two years
after the closing of the transactions contemplated in the Common Stock Purchase
Agreement, whichever is earlier.
The following table provides certain information with respect to shares of
common stock held and to be offered under this prospectus from time to time by
each selling shareholder. Because the selling shareholders may sell all or part
of their common stock pursuant to this prospectus, and this offering is not
being underwritten on a firm commitment basis, only an estimate can be given as
to the number and percentage of shares of common stock that will be held by each
selling shareholder upon termination of this offering. See "Plan of
Distribution."
We are unaware of any material relationship between any of the selling
shareholders and us in the past three years other than as a result of the
ownership of the shares of common stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING NUMBER OF OFFERING(2)
---------------------- SHARES BEING --------------------
SELLING SHAREHOLDER NUMBER PERCENT(1) OFFERED NUMBER PERCENT(1)
------------------- --------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
The Kaufmann Fund, Inc................ 1,044,167 * 666,667 377,500 *
Invesco Global Health Services Fund... 380,952 * 380,952 0 *
Biotechnology Investments Limited..... 350,000 * 350,000 0 *
H & Q Healthcare Investors............ 225,000 * 225,000 0 *
Bank Invest........................... 200,000 * 200,000 0 *
State of Oregon PERS/ZCG.............. 390,000 * 160,000 230,000 *
H & Q Life Sciences Investors......... 125,000 * 125,000 0 *
Pharma w/Health FCP................... 85,000 * 85,000 0 *
Public Employee Retirement System of
Idaho............................... 150,000 * 50,000 100,000 *
Delta Opportunity Fund, Ltd........... 47,619 * 47,619 0 *
The Magee/Bernhard LLC................ 25,000 * 25,000 0 *
NFIB Employee Pension Trust........... 25,000 * 25,000 0 *
The A&JS Family LLC................... 15,000 * 15,000 0 *
Wells Family LLC...................... 15,000 * 15,000 0 *
Morgan Trust Co. of the Bahamas Ltd.
as trustee u/a/d 11/30/93........... 15,000 * 15,000 0 *
Roanoke College....................... 15,000 * 15,000 0 *
Amherst College....................... 10,000 * 10,000 0 *
Merlin BioMed LP...................... 8,000 * 8,000 0 *
Merlin BioMed International........... 7,000 * 7,000 0 *
Alza Corporation Retirement Plan...... 12,000 * 2,000 10,000 *
Wolfson Investment Partners LP........ 1,100 * 1,100 0 *
TOTAL........................ 2,428,338
</TABLE>
- -------------------------
* Less than one percent.
(1) Percentage of ownership is based on 12,171,116 shares of common stock
outstanding on February 2, 1999.
(2) Assumes the sale of all shares offered hereby.
15
<PAGE> 17
PLAN OF DISTRIBUTION
We are registering the shares of common stock offered by the selling
shareholders pursuant to contractual registration rights contained in the Common
Stock Purchase Agreement. The selling shareholders may sell their shares on the
Nasdaq National Market, in private transactions or in a combination of such
methods of sale. The selling shareholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated or at fixed prices. For their shares, the selling
shareholders will receive the purchase price of the shares sold less any agents'
commissions or underwriters' discounts and other related expenses. If the
selling shareholders sell shares to or through brokers or dealers, they may pay
the brokers or dealers compensation in the form of discounts, concessions or
commissions. We will not receive any proceeds from the sale of shares by the
selling shareholders.
The selling shareholders and any persons who participate in the sale of the
shares may be deemed to be "underwriters" as defined in the Securities Act, and
any discounts, commissions or concessions received by them and any provided
pursuant to the sales of shares by them might be deemed underwriting discounts
and commissions under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the common stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
We have agreed in the Common Stock Purchase Agreement to register the
shares of our common stock received by the selling shareholders pursuant to the
Common Stock Purchase Agreement under applicable federal and state securities
laws under certain circumstances and at certain times. Pursuant to the Common
Stock Purchase Agreement, we have filed a registration statement related to the
shares offered hereby and have agreed to keep such registration statement
effective until (a) all the common stock has been re-sold (b) all the common
stock may be re-sold in a three-month period under Rule 144 or (c) two years
after the closing of the transactions contemplated in the Common Stock Purchase
Agreement, whichever is earlier.
We are not paying any underwriting commissions or discounts in this
offering. We will, however, pay for the expenses incurred in this offering. We
estimate these expenses to be approximately $25,000. We have agreed to indemnify
the selling shareholders and certain other persons against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for the
Company by Cooley Godward LLP, Palo Alto, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 1997, as set forth in their report, which is incorporated in this
prospectus by reference. Our financial statements are incorporated by reference
in reliance on their report, given on their authority as experts in accounting
and auditing.
16
<PAGE> 18
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE AUTHORIZED NO ONE TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS THAT ARE NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD RELY ONLY
ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SHARES IN ANY
JURISDICTION WHERE IT IS UNLAWFUL. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THE DOCUMENT.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company........................... 2
Risk Factors.......................... 2
Forward-Looking Statements............ 12
Where You Can Find More Information... 12
Use of Proceeds....................... 14
Selling Shareholders.................. 15
Plan of Distribution.................. 16
Legal Matters......................... 16
Experts............................... 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,428,338 SHARES
COMMON STOCK
ARADIGM
CORPORATION
-------------------------
PROSPECTUS
-------------------------
FEBRUARY , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by Aradigm Corporation
in connection with the sale of the shares of common stock being registered. All
of the amounts shown are estimates except for the registration fee. None of
these expenses will be paid by the selling shareholders.
<TABLE>
<S> <C>
Securities Act Registration Fee............................. $ 7,430
Legal fees and expenses..................................... 10,000
Accounting fees and expenses................................ 2,500
Printing and engraving expenses............................. 2,500
Miscellaneous............................................... 2,570
-------
Total............................................. $25,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's amended and Restated Articles of Incorporation and Bylaws
include provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by California law and (ii) permit the Company to indemnify its
directors and officers, employees and other agents to the fullest extent
permitted by the California Corporations Code (the "Corporations Code").
Pursuant to Section 317 of the Corporations Code, a corporation generally has
the power to indemnify its present and former directors, officers, employees and
agents against any expenses incurred by them in connection with any suit to
which they are, or are threatened to be made, a party by reason of their serving
in such positions so long as hey acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of a
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Company believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate liability for breach of the
director's duty of loyalty to the Company or its shareholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for any transaction from which the director derived an
improper personal benefit or for any willful or negligent payment of any
unlawful dividend.
The Company has entered into agreements with its directors and executive
officers that require the Company to indemnify such persons against expenses,
judgments, fines, settlements and other amounts that such person becomes legally
obligated to pay (including expenses of a derivative action) in connection with
any proceeding, whether actual or threatened, to which any such person may be
made a party by reason of the fact that such person is or was a director or
officer of the Company or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Company. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
II-1
<PAGE> 20
ITEM 16. EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
3.1(1) Amended and Restated Articles of Incorporation of the
Company.
3.2(1) Bylaws of the Company.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Common Stock Purchase Agreement between the Company and the
Purchasers of Common Stock listed on Exhibit A thereto,
dated January 27, 1999.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP (included in its opinion filed
as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- -------------------------
(1) Incorporated by reference to the indicated exhibit in the Company's
Registration Statement (No. 333-4236), as amended.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 21
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by registrant of expenses incurred or
paid by a director, officer or controlling person of registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hayward, State of California, on this 9th day of
February, 1999.
ARADIGM CORPORATION
By: /s/ RICHARD P. THOMPSON
--------------------------------------
Richard P. Thompson
President, Chief Executive Officer and
Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints jointly and severally, Richard P.
Thompson and Mark A. Olbert, and each one of them, his or her attorneys-in-fact,
each with the power of substitution, for him or her in any way and all
capacities, to sign any and all amendments (including post-effective amendments
and registration statements filed pursuant to Rule 462) to this Registration
Statement on Form S-3 and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 9th day of February, 1999.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ RICHARD P. THOMPSON President, Chief February 9, 1999
- ------------------------------------------------ Executive Officer
Richard P. Thompson and Director
(Principal Executive
Officer)
/s/ MARK A. OLBERT Vice President, February 9, 1999
- ------------------------------------------------ Finance and
Mark A. Olbert Administration and
Chief Financial
Officer (Principal
Financial and
Accounting Officer)
/s/ REID M. RUBSAMEN, M.D. Vice President, February 9, 1999
- ------------------------------------------------ Medical Affairs,
Reid M. Rubsamen, M.D. Secretary and Director
</TABLE>
II-4
<PAGE> 23
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ BURTON J. MCMURTRY, PH.D. Director February 9, 1999
- ------------------------------------------------
Burton J. McMurtry, Ph.D.
/s/ GORDON W. RUSSELL Director February 9, 1999
- ------------------------------------------------
Gordon W. Russell
/s/ FRED E. SILVERSTEIN, M.D. Director February 9, 1999
- ------------------------------------------------
Fred E. Silverstein, M.D.
/s/ VIRGIL D. THOMPSON Director February 9, 1999
- ------------------------------------------------
Virgil D. Thompson
</TABLE>
II-5
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
3.1(1 ) Amended and Restated Articles of Incorporation of the
Company.
3.2(1 ) Bylaws of the Company.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Common Stock Purchase Agreement between the Company and the
Purchasers of Common Stock listed on Exhibit A thereto,
dated January 27, 1999.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP (included in its opinion filed
as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- -------------------------
(1) Incorporated by reference to the indicated exhibit in the Company's
Registration Statement (No. 333-4236), as amended.
<PAGE> 1
Exhibit 4.2
------------------------------------------
ARADIGM CORPORATION
COMMON STOCK PURCHASE AGREEMENT
January 27, 1999
------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1 Authorization and Sale of Common Stock........................ 1
1.1 Authorization ................................................ 1
1.2 Sale of Common ............................................... 1
Section 2 Closing Date; Delivery ....................................... 1
2.1 Closing Date ................................................. 1
2.2 Delivery ..................................................... 1
Section 3 Representations and Warranties of the Company ................ 2
3.1 Organization and Standing .................................... 2
3.2 Corporate Power; Authorization ............................... 2
3.3 Issuance and Delivery of the Shares .......................... 2
3.4 SEC Documents; Financial Statements .......................... 2
3.5 Governmental Consents ........................................ 3
3.6 No Material Adverse Change ................................... 3
3.7 Authorized Capital Stock ..................................... 3
3.8 Litigation ................................................... 3
Section 4 Representations; Warranties and Covenants of the Purchasers .. 3
4.1 Authorization ................................................ 4
4.2 Investment Experience ........................................ 4
4.3 Investment Intent ............................................ 4
4.4 Registration or Exemption Requirements ....................... 4
4.5 Restriction on Short Sales ................................... 4
4.6 No Legal, Tax or Investment Advice ........................... 5
Section 5 Conditions to Closing Obligations of Purchasers .............. 5
5.1 Registration Statement ....................................... 5
Section 6 Conditions to Closing Obligations of Company ................. 5
6.1 Representations and Warranties ............................... 5
6.2 Covenants .................................................... 5
6.3 Blue Sky ..................................................... 5
Section 7 Covenants of the Company ..................................... 6
7.1 Definitions .................................................. 6
7.2 Registration Procedures and Expenses ......................... 6
7.3 Indemnification .............................................. 7
7.4 Prospectus Delivery .......................................... 9
7.5 Termination of Obligations ................................... 9
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.6 Reporting Requirements ....................................... 9
Section 8 Restrictions on Transferability of Shares:
Compliance with Securities Act ............................... 10
8.1 Restrictions on Transferability .............................. 10
8.2 Instruction Sheet ............................................ 10
8.3 Transfer of Shares After Registration ........................ 10
8.4 Purchaser Information ........................................ 10
Section 9 Miscellaneous ................................................ 10
9.1 Waivers and Amendments ....................................... 10
9.2 Broker's Fee ................................................. 11
9.3 Governing Law ................................................ 11
9.4 Survival ..................................................... 11
9.5 Successors and Assigns ....................................... 11
9.6 Entire Agreement ............................................. 11
9.7 Notices, etc. ................................................ 11
9.8 Severability of this Agreement ............................... 11
9.9 Counterparts ................................................. 12
9.10 Further Assurances ........................................... 12
9.11 Termination .................................................. 12
9.12 Expenses ..................................................... 12
9.13 Currency ..................................................... 12
</TABLE>
Exhibit A -- Schedule of Purchasers
Exhibit B -- Form of Purchaser's Questionnaire
Exhibit C -- Instruction Sheet
Exhibit D -- Form of Purchaser's Certificate of Subsequent Sale
-ii-
<PAGE> 4
ARADIGM CORPORATION
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
January 27, 1999, by and among Aradigm Corporation, a California corporation
(the "Company") with its principal office at 26219 Eden Landing Road, Hayward,
California 94545, and the persons listed on the Schedule of Investors attached
hereto as Exhibit A (the "Purchasers").
Section 1
Authorization and Sale of Common Stock
1.1 Authorization. The Company has authorized the sale and issuance of
up to 2,428,338 shares of its Common Stock pursuant to this Agreement (the
"Shares").
1.2 Sale of Common. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company the number of Shares set
forth opposite each Purchaser's name on Exhibit A for $10.50 per share.
Section 2
Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the officers of Brobeck, Phleger &
Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California at
the time the Registration Statement (as defined below) registering the resale of
the Shares by the Purchasers is declared effective by the Securities and
Exchange Commission (the "SEC") or at such other time and place upon which the
Company and the Purchasers purchasing the majority of the Shares shall agree.
The date of the Closing is hereinafter referred to as the "Closing Date".
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser a certificate, registered in the Purchaser's name as shown on Exhibit
A, representing the number of Shares to be purchased by the Purchaser. Such
delivery shall be against payment of the purchase price therefor by wire
transfer to an escrow account established by Piper Jaffray Inc. and Perkevich &
Partners, LLC (collectively, the "Placement Agents") in the amount set forth on
Exhibit A.
<PAGE> 5
Section 3
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as of the Closing
Date as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State
of California and is in good standing as a domestic corporation under the laws
of said state.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to sell and issue the Shares and to carry out and
perform all of its obligations under this Agreement. This Agreement 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 or similar laws relating to or affecting the
enforcement of creditors' rights generally and (ii) as limited by equitable
principles generally. The execution and delivery of this Agreement does not,
and the performance of this Agreement and the compliance with the provisions
hereof and the issuance, sale and delivery of the Shares 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 any statute,
law, rule or regulation or any state or federal order, judgment or decree or
any indenture, mortgage, lease or other material agreement or instrument to
which the Company or any of its properties is subject.
3.3 Issuance and Delivery of the Shares. The Shares, when issued 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 or any other similar rights of the stockholders of the Company or
any liens or encumbrances.
3.4 SEC Documents; Financial Statements. Each report or proxy statement
delivered to the Purchasers is a true and complete copy of such documents as
filed by the Company with the Securities and Exchange Commission (the "SEC").
The Company has filed in a timely manner all documents that the Company was
required to file with the SEC under Sections 13, 14(a) and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), during the
twelve (12) months preceding the date of this Agreement. As of their respective
filing dates, all documents filed by the Company with the SEC (the "SEC
Documents") complied in all material respects with the requirements of the
Exchange Act or the Securities Act of 1933, as amended (the "Securities Act"),
as applicable. None of the SEC Documents as of their respective dates contained
any untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents (the
"Financial Statements") comply as to form in all material respects with
applicable
2.
<PAGE> 6
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the consolidated financial position of the Company and any subsidiaries
at the dates thereof and the consolidated results of their operations and
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with,
any federal, state, or local governmental authority on the part of the Company
is required in connection with the consummation of the transactions
contemplated by this Agreement except for (a) compliance with the securities
and blue sky laws in the states in which Shares are offered and/or sold, which
compliance will be effected in accordance with such laws, (b) the filing of
Form S-3 and all amendments thereto with the SEC as contemplated by Section 7.2
of this Agreement and (c) the filing of the Nasdaq National Market Notification
Form with the Nasdaq National Market and Form 10-C with the SEC.
3.6 No Material Adverse Change. Except as otherwise disclosed herein,
since September 30, 1998, there have not been any changes in the assets,
liabilities, financial condition, business prospects or operations of the
Company from that reflected in the Financial Statements except changes in the
ordinary course of business which have not been, either individually or in the
aggregate, materially adverse.
3.7 Authorized Capital Stock. The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Common Stock, no par value, of which, as
of September 30, 1998, 12,150,867 shares were outstanding, and (ii) 5,000,000
shares of Preferred Stock, no par value, none of which shares are currently
outstanding.
3.8 Litigation. Except as disclosed in the SEC Documents, there are no
actions, suits proceedings or investigations pending or, to the best of the
Company's knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood (in the judgment of the
Company) of an adverse decision that (a) could have a material adverse effect
on the Company's properties or assets or the business of the Company as
presently conducted or proposed to be conducted or (b) could impair the ability
of the Company to perform in any material respect its obligations under this
Agreement.
Section 4
Representations, Warranties and Covenants of the Purchasers
Each Purchaser hereby severally represents and warrants to the Company,
effective as of the Closing Date, as follows:
3.
<PAGE> 7
4.1 Authorization. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Shares to be purchased by it and to
carry out and perform all of its obligations under this Agreement; and (ii) this
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or affecting
the enforcement of creditors' rights generally and (b) as limited by equitable
principles generally.
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Shares.
4.3 Investment Intent. Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only, and not with a present view
to, or for, resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed the Purchaser Questionnaire attached
hereto as Exhibit B for use in preparation of the Registration Statement (as
defined below), and the responses provided therein shall be true and correct as
of the Closing Date and will be true and correct as of the effective date of the
Registration Statement. Purchaser has, in connection with its decision to
purchase the number of shares set forth in Exhibit A relied solely upon the SEC
Documents and the representations and warranties of the Company contained
herein. Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act, and the rules and regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available.
4.5 Restriction on Short Sales. Purchaser represents and warrants to
and covenants with the Company that Purchaser has not engaged and will not
engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement, except to the extent that any such
short sale is fully covered by shares of Common Stock of the Company other than
the Shares.
4.
<PAGE> 8
4.6 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
Section 5
Conditions to Closing Obligations of Purchasers
Each Purchaser's obligation to purchase the Shares at the Closing is,
at the option of such Purchaser, subject to the fulfillment or waiver as of the
Closing Date of the following conditions:
5.1 Registration Statement. The Registration Statement (as defined
below) registering the resale of the Shares by the Purchasers shall have been
filed with and declared effective by the SEC. In the event that the
Registration Statement is not declared effective by the SEC within ninety (90)
days from the date of filing, this Agreement, and all obligations of all
parties hereto, shall terminate.
Section 6
Conditions to Closing Obligations of Company
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations made by the
Purchasers in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing
Date shall have been performed or complied with in all material respects.
6.3 Blue Sky. The Company shall have obtained and maintained all
necessary blue sky law permits and qualifications, or secured exemptions
therefrom, required by any state for the offer and sale of the Shares.
5.
<PAGE> 9
Section 7
Covenants of the Company
7.1 Definitions. For the purpose of this Section 7:
(a) the term "Registration Statement" shall mean any registration
statement required to be filed by Section 7.2 below, and shall include any
preliminary prospectus, final prospectus, exhibit or amendment included in or
relating to such registration statement; and
(b) the term "untrue statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and
(c) the term "Registrable Shares" shall mean the shares of Common Stock
issued pursuant to this Agreement.
7.2 Registration Procedures and Expenses. The Company shall:
(a) use its best efforts to file a registration statement with the SEC
within ten (10) business days following the date of this Agreement to register
the Registrable Shares on Form S-3 under the Securities Act (providing for
shelf registration of the Common Stock under SEC Rule 415) or on such other
form which is appropriate to register all of the Registrable Shares for resale
from time to time by the Purchasers;
(b) use its best efforts, subject to receipt of necessary information from
the Purchasers, to cause such Registration Statement to become effective as
promptly after filing as practicable;
(c) prepare and file with the SEC such amendment and supplements to such
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective until termination of
such obligation as provided in Section 7.5 below, subject to the Company's
right to suspend pursuant to Section 7.4;
(d) furnish to each Purchaser (and to each underwriter, if any, of such
Common Stock) such number of copies of prospectuses in conformity with the
requirements of the Securities Act and such other documents as the Purchasers
may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Registrable Shares by the Purchasers;
(e) file such documents as may be required of the Company for normal
securities law clearance for the resale of the Registrable Shares in such
states of the United States as may be reasonably requested by each Purchaser;
provided, however, that the Company shall not be required
6.
<PAGE> 10
in connection with this paragraph (e) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction;
(f) advise each Purchaser promptly:
(i) of any request by the SEC for amendments to the Registration
Statement or amendments to the prospectus or for additional information
relating thereto;
(ii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act or of the
suspension by any state securities commission of the qualification of the
Registrable Shares for offering or sale in any jurisdiction, or the initiation
of any proceeding for any preceding purposes; and
(iii) of the existence of any fact and the happening of any event
that makes any statement of a material fact made in the Registration Statement,
the prospectus and amendment or supplement thereto, or any document
incorporated by reference therein, untrue, or that requires the making of any
additions to or changes in the Registration Statement or the prospectus in
order to make the statements therein not misleading;
(g) in connection with the filing of any document that is to be
incorporated by reference into the Registration Statement or the prospectus
(after the initial filing of the Registration Statement):
(i) use its best efforts to provide copies of such document to the
Purchasers concurrently with such filing; and
(ii) make a Company representative available for discussion of such
document;
(h) use its best efforts to cause all Registrable Shares to be listed on
each securities exchange, if any, on which equity securities by the Company are
then listed; and
(i) bear all expenses in connection with the procedures in paragraphs (a)
through (h) of this Section 7.2 and the registration of the Registrable Shares
on such Registration Statement and the satisfaction of the blue sky laws of
such states.
7.3 Indemnification.
(a) The Company agrees to indemnify and hold harmless Purchaser from and
against any losses, claims, damages or liabilities to which such Purchaser may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make
7.
<PAGE> 11
the statements therein not misleading, in each case on the effective date
thereof, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement and the Company will, as incurred,
reimburse such Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement or omission or alleged untrue statement or
omission made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Purchaser specifically for use in preparation of the Registration Statement or
any breach of this Agreement by Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 5 of the Securities Act or Section 20 of the Exchange
Act, each officer of the Company who signs the Registration Statement and each
director of the Company), from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling
person) may become subject (under the Securities Act or otherwise), insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any breach of this Agreement
by such Purchaser or any untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in each case, on the effective date thereof, if, and to
the extent, such untrue statement was made in reliance upon and in conformity
with written information furnished by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement, and such
Purchaser will reimburse the Company (and each of its officers, directors or
controlling persons) for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying shall have been notified thereof, such
indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
or any affiliate or associate thereof, the indemnified person shall be entitled
to retain its own counsel at the expense of such indemnifying person; provided,
further, that no indemnifying person shall be responsible for the fees and
expense of more than one separate counsel
8.
<PAGE> 12
for all indemnified parties. The indemnifying party shall not settle an action
without the consent of the indemnified party, which shall not be unreasonably
withheld.
(d) If after proper notice of a claim or the commencement of any
action against the indemnified party, the indemnifying party does not choose to
participate, then the indemnified party shall defend itself at its own cost and
expense until there is an adjudication at which point the indemnifying party
shall then reimburse the indemnified party for its costs and expenses.
(e) If the indemnification provided for in this Section 7.3 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities referred to above, then each applicable
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities.
7.4 Prospectus Delivery. The Purchaser hereby covenants with the
Company not to make any sale of the Shares without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied. The
Purchaser acknowledges that there may be times when the Company must suspend
the use of the prospectus forming a part of the Registration Statement until
such time as an amendment to the Registration Statement has been filed by the
Company and declared effective by the SEC, or until such time as the Company
has filed an appropriate report with the SEC pursuant to the Exchange Act. The
Purchaser hereby covenants that it will not sell any Shares pursuant to said
prospectus during the period commencing at the time at which the Company gives
the Purchaser notice of the suspension of the use of said prospectus and ending
at the time the Company gives the Purchaser notice that the Purchaser may
thereafter effect sales pursuant to said prospectus. Such suspension periods
shall in no event exceed 60 days in any 12 month period.
7.5 Termination of Obligations. The obligations of the Company
pursuant to Section 7.2 hereof shall cease and terminate upon the earlier to
occur of (i) such time as all of the Registrable Shares have been resold, or
(ii) such time as all of the Registrable Shares may be resold in a three-month
period pursuant to Rule 144, or (iii) the second anniversary of the Closing
Date.
7.6 Reporting Requirements.
(a) With a view to making available the benefits of certain rules
and regulations of the SEC that may at any time permit the sale of the Shares
to the public without registration or pursuant to a registration statement on
Form S-3, the Company agrees to use its best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934; and
9.
<PAGE> 13
(iii) so long as any of the Purchasers own Registrable
Securities, to furnish to the Purchasers forthwith upon request (1) a written
statement by the Company as to whether it is in compliance with the reporting
requirements of said Rule 144, the Securities Act and Securities Exchange Act
of 1934, or whether it is qualified as a registrant whose securities may be
resold pursuant to SEC Form S-3, and (2) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company.
Section 8
Restrictions on Transferability of Shares:
Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Shares in order to enforce the foregoing
restrictions.
8.2 Instruction Sheet. Each certificate representing Shares shall
bear the Instruction Sheet attached hereto as Exhibit C (in addition to any
legends required under applicable securities laws).
8.3 Transfer of Shares After Registration. Each Purchaser hereby
covenants with the Company not to make any sale of the Shares except either (i)
in accordance with the Registration Statement, in which case Purchaser
covenants to comply with the requirement of delivering a current prospectus, or
(ii) in accordance with Rule 144, in which case Purchaser covenants to comply
with Rule 144. Purchaser further acknowledges and agrees that such Shares are
not transferable on the books of the Company unless the certificate submitted
to the Company's transfer agent evidencing such Shares is accompanied by a
separate certificate executed by an officer of, or other person duly authorized
by, the Purchaser in the form attached hereto as Exhibit D.
8.4 Purchaser Information. Each Purchaser covenants that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution."
Section 9
Miscellaneous
9.1 Waivers and Amendments. With the exception of Section 7 hereof,
the terms of this Agreement may be waived or amended with the written consent
of the Company and each Purchaser. With respect to Section 7.1 and 7.2 hereof,
with the written consent of the Company and the record holders of more than
fifty percent (50%) of the Shares then outstanding and held by
10.
<PAGE> 14
Purchasers, the terms of the Agreement may be waived or amended and any such
amendment or waiver shall be binding upon the Company and all holders of Shares.
9.2 Broker's Fee. Each Purchaser acknowledges that the Company intends to
pay a fee in respect of the sale of the Shares to the Placement Agents. Each of
the parties hereto hereby represents that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Shares to the Purchasers.
9.3 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California without
any regard to conflicts of laws principles.
9.4 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
no Purchaser shall assign this Agreement without the prior written consent of
the Company.
9.6 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
9.7 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by telecopy, overnight delivery service or registered or certified
United States mail, addressed to the Company or the Purchasers, as the case may
be, at their respective addresses set forth at the beginning of this Agreement
or on Exhibit A, or at such other address as the Company or the Purchasers
shall have furnished to the other party in writing. All notices and other
communications shall be effective upon the earlier of actual receipt thereof by
the person to whom notice is directed or (i) in the case of notices and
communications sent by personal delivery or telecopy, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (ii) in the case of
notices and communications sent by overnight delivery service, at noon (local
time) on the second business day following the day such notice or communication
was sent, and (iii) in the case of notices and communications sent by United
States mail, seven days after such notice or communication shall have been
deposited in the United States mail.
9.8 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
11.
<PAGE> 15
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.11 Termination. In the event that the Registration Statement is not
declared effective by the SEC within ninety (90) days from the date the Company
files such Registration Statement with the SEC, this Agreement shall terminate.
9.12 Expenses. The Company and each such Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
9.13 Currency. All references to "dollars" or "$" in this Agreement
shall be deemed to refer to United States dollars.
12.
<PAGE> 16
The forgoing agreement is hereby executed as of the date first above written.
"COMPANY"
ARADIGM CORPORATION,
a Delaware corporation
By: ____________________________________
Title: _________________________________
"PURCHASERS"
Name: __________________________________
By: ____________________________________
Title: _________________________________
[SIGNATURE PAGE TO ARADIGM CORPORATION
COMMON STOCK PURCHASE AGREEMENT]
<PAGE> 17
Exhibit A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Purchaser Commitment Shares
- --------- ---------- ------
<S> <C> <C>
The Kaufmann Fund, Inc. $7,000,003.50 666,667
Invesco Global Health Services, Inc $3,999,996.00 380,952
Biotechnology Investments Limited $3,675,000.00 350,000
H&Q Healthcare Investors $2,362,500.00 225,000
Bank Invest $2,100,000.00 200,000
H&Q Life Sciences Investors $1,680,000.00 125,000
State of Oregon PERS/ZCG $1,312,500.00 160,000
Pharma w/Health FCP $ 892,500.00 85,000
Public Employee Retirement System
of Idaho $ 525,000.00 50,000
Delta Opportunity Fund, Ltd. $ 499,999.50 47,619
The Magee/Bernhard LLC $ 262,500.00 25,000
NFIB Employee Pension Trust $ 262,500.00 25,000
The A&JS Family LLC $ 157,500.00 15,000
A&S Wells Family LLC $ 157,500.00 15,000
Morgan Trust Co. of the Bahamas
Ltd. as Trustee u/a/d 11/30/93 $ 157,500.00 15,000
Roanoke College $ 157,500.00 15,000
Amherst College $ 105,000.00 10,000
Merlin BioMed L.P. $ 84,000.00 8,000
Merlin BioMed International $ 73,500.00 7,000
Alza Corporation Retirement Fund $ 21,000.00 2,000
Wolfson Investment Partners LP $ 11,500.00 1,100
---------
TOTAL 2,428,338
</TABLE>
<PAGE> 18
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on the
signature page. The Agreement must be executed by an individual
authorized to bind the Purchaser.
2. Exhibit B-1 - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire;
3. Exhibit B-2 - Registration Statement Questionnaire:
Provide the information requested by the Registration Statement
Questionnaire.
4. Exhibit B-3 - Purchaser Certificate:
Provide the information requested by the Certificate for Individual
Purchasers or the Certificate for Corporate, Partnership, Trust,
Foundation and Joint Purchasers, as applicable.
5. Return the signed Purchase Agreement to:
Matthew L. Jacobson, Esq.
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
B. Instructions regarding the transfer of funds for the purchase of Shares
will be telecopied to the Purchaser by the Placement Agents at a later
date.
C. Upon the resale of the Shares by the Purchaser after the Registration
Statement covering the Shares is effective, as described in the Purchase
Agreement, the Purchaser:
(i) must deliver a current prospectus, and annual and quarterly
reports of the Company to the buyer (prospectuses, and annual
and quarterly reports may be obtained from the Company at the
Purchaser's request); and
(ii) must send a letter in the form of Exhibit D to the Company so
that the Shares may be properly transferred.
<PAGE> 19
ARADIGM CORPORATION
STOCK CERTIFICATE QUESTIONNAIRE
<TABLE>
<S> <C>
Pursuant to Section 4.3 of the Agreement, please provide us with the
following information.
1. The exact name that the Shares are to be
registered in (this is the name that will appear on
the stock certificate(s)). You may use a nominee
name if appropriate:
--------------------
2. The relationship between the Purchaser of the
Share and the Registered Holder listed in
response to item 1 above:
--------------------
3. The mailing address of the Registered Holder
listed in response to item 1 above:
--------------------
--------------------
--------------------
--------------------
--------------------
4. The Tax Identification Number of the Registered
Holder listed in response to item 1 above:
--------------------
</TABLE>
-2-
<PAGE> 20
ARADIGM CORPORATION
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should appear in
the Registration Statement:
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in this Prospectus included in the
Registration Statement?
------- YES ------- NO
If yes, please indicate the nature of any such relationships below.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 21
ARADIGM CORPORATION
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple) the
Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true and
accurate:
In order for the Company to offer and sell the Shares in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable to you
as an investor in the Company.
__ (1) A natural person whose net worth, either individually or jointly
with such person's spouse exceeds $1,000,000;
__ (2) A natural person who had an income in excess of $200,000, or
joint income with the person's spouse in excess of $300,000, in 1996, 1997 and
1998, and reasonably expects to have individual income reaching the same level
in 1999.
__ (3) An executive officer or director of the Company.
Dated: __________________ ________________________________
Name(s) of Purchaser
________________________________
Signature
________________________________
Signature
<PAGE> 22
ARADIGM CORPORATION
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension plan,
foundation, joint purchasers (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below are
true and accurate.
(a) The investor has been duly formed and is validly existing and has
full power and authority to invest in the Company. The person signing on behalf
of the undersigned has the authority to exercise and deliver the Common Stock
Purchase Agreement on behalf of the Purchaser, and to take other sections with
respect thereto.
(b) Indicate the form of entity of the undersigned:
- Limited Partnership
- General Partnership
- Corporation
- Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the grantor: _______________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________ (Continue on a separate piece of paper, if necessary.)
- Other Type of Trust (indicate type of trust and, for trusts other
than pension trust, name the guarantors and beneficiaries:__________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
_________. (Continue on a separate piece of paper, if necessary.)
- Other form of organization (indicate form of organization (_______)
(c) Indicate the approximate date the undersigned entity was formed: _____
(d) In order for the Company to offer and sell the Shares in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor sums. Please initial each category applicable
to you as an investor in the Company.
<PAGE> 23
____ 1. A bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity;
____ 2. A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
____ 3. An insurance company as defined in Section 2(13) of the
Securities Act;
____ 4. As investment company registered under the Investment Company Act
of 1940 or a business development company as defined in Section 2(a)(48) of
that Act;
____ 5. A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
____ 6. A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000;
____ 7. An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or
registered investment adviser, or if the employee benefit plan has total
assets in excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
____ 8. A private business development company as defined in Section
202(a)(23) of the Investment Advisers Act of 1940;
____ 9. An organization described in Section 501(c)(3) of the Internal
Revenue Code, a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares,
with total assets in excess of $5,000,000;
____ 10. A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Shares, whose purchase is
directed by a sophisticated person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating
the merits and risks of investing in the Company;
-2-
<PAGE> 24
____ 11. An entity in which all of the equity owners qualify under any of
the above subparagraphs. If the undersigned belongs to this investor
category only, list the equity owners of the undersigned, and the investor
category which each such equity owner satisfies:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(Combine on a separate piece of paper, if necessary.)
Dated: _________________________ , 19 ____
__________________________________________
Name of investors
__________________________________________
Signature and title of authorized
officer, partner or trustee
-3-
<PAGE> 25
ARADIGM CORPORATION
IMPORTANT -- DO NOT REMOVE THIS INSTRUCTION SHEET FROM THE ATTACHED SHARE
CERTIFICATE UNLESS AND UNTIL THE SHARES ARE SOLD AS FOLLOWS:
(1) THE SHARES ARE RESOLD PURSUANT TO THE REGISTRATION STATEMENT ON FORM
S-3 (NO. [ ]), AND, IN CONNECTION WITH SUCH RESALE, THE HOLDER HAS
DELIVERED TO THE PURCHASER OF THE SHARES A CURRENT PROSPECTUS AND HAS
PROVIDED TO THE COMPANY OR TO THE TRANSFER AGENT FOR THE COMPANY'S STOCK A
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE; OR
(2) THE SHARES ARE RESOLD IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, PROVIDED THAT,
PRIOR TO SUCH RESALE, THE HOLDER HAS NOTIFIED THE COMPANY OF SUCH
DISPOSITION AND PROVIDED THE COMPANY WITH WRITTEN ASSURANCES, IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH THE REQUIREMENTS
OF SUCH EXEMPTION.
DO NOT REMOVE THIS INSTRUCTION SHEET FROM
THE ATTACHED SHARE CERTIFICATE
EXCEPT IN ACCORDANCE WITH
THE INSTRUCTIONS SET FORTH ABOVE.
<PAGE> 26
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: [INSERT TRANSFER AGENT]
Attention: [________]
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that ___________________________
[Fill in name of Purchaser]
institution was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about _______
[Date]
either (i) in accordance with the registration statement, file number [______]
in which case the Purchaser certifies that the requirement of delivering a
current prospectus has been complied with or will be complied with in
connection with such sale, or (ii) in accordance with Rule 144 under the
Securities Act of 1933 ("Rule 144"), in which case the Purchaser certifies that
it has complied with or will comply with the requirements of Rule 144.
Print or type:
Name of Purchaser: __________________________________________________
Name of Individual
representing
Purchaser (if an
Institution): __________________________________________________
Title of Individual
representing
Purchaser (if an
Institution): __________________________________________________
Signature by:
Purchaser or
Individual
representing
Purchaser: __________________________________________________
<PAGE> 1
EXHIBIT 5.1
OPINION OF COOLEY GODWARD LLP
February 9, 1999
Aradigm Corporation
3929 Point Eden Way
Hayward, CA 94545
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Aradigm Corporation (the "Company") of a Registration
Statement on Form S-3 on or about February 9, 1999 (the "Registration
Statement") with the Securities and Exchange Commission covering the offering of
up to 2,428,338 shares of the Company's Common Stock, no par value (the
"Shares").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Amended and Restated Articles of Incorporation and
Bylaws, as amended, and such other documents, records, certificates, memoranda
and other instruments as we deem necessary as a basis for this opinion. We have
assumed the genuineness and authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies thereof, and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares are validly issued, fully paid, and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Registration Statement and to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/JAMIE E. CHUNG
-----------------------
Jamie E. Chung
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-3 and related Prospectus of Aradigm
Corporation for the registration of 2,428,338 shares of its Common Stock and to
the incorporation by reference therein of our report dated February 6, 1998,
with respect to the financial statements of Aradigm Corporation included in its
Annual Report on Form 10-K for the year ended December 31, 1997 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Palo Alto, California
February 8, 1999
