As filed with the Securities and Exchange Commission on September 19, 1997
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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CELLEGY PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
California 82-0429727
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
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1065 E. Hillsdale Blvd., Suite 418
Foster City, California 94404
(650) 524-1600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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K. Michael Forrest
President and Chief Executive Officer
Cellegy Pharmaceuticals, Inc.
1065 E. Hillsdale Blvd., Suite 418
Foster City, California 94404
(650) 524-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
C. Kevin Kelso, Esq.
Melissa Sayer, Esq.
Fenwick & West LLP
Two Palo Alto Square, Suite 700
Palo Alto, California 94306
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Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
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. [ ]
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<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Registered Offering Price per Aggregate Offering Amount of Registration
to be Registered Share Price Fee
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<S> <C> <C> <C> <C>
Common Stock 1,974,887 $5.94(1) 11,730,829(1) 3,555(1)
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Common Stock issuable upon
exercise of warrants 25,000 $5.94(2) 148,500(2) 45(2)
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Total $3,600(1)(2)
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<FN>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c) under the Securities Act, based
on the last sales price of the Common Stock on the Nasdaq SmallCap Market
on September 15, 1997.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(h) under the Securities Act, based
on the last sales price of the Common Stock on the Nasdaq SmallCap Market
on September 15, 1997.
</FN>
</TABLE>
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 which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 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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<PAGE>
This Prospectus and the information contained herein are subject to completion
or amendment. These securities may not be sold, nor may offers to buy be
accepted, prior to the time the prospectus is delivered in final form. Under no
circumstances shall this Preliminary Prospectus constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such jurisdiction.
Subject to Completion dated September 19, 1997
PROSPECTUS
1,999,887 Shares of Common Stock
CELLEGY PHARMACEUTICALS, INC.
This prospectus (this "Prospectus") covers the registration for
possible resale of shares (the "Shares") of Common Stock, no par value (the
"Common Stock"), of Cellegy Pharmaceuticals, Inc. ("Cellegy" or the "Company")
and certain warrants (the "Warrants") to purchase Common Stock, held or
acquirable by certain persons ("Shareholders") named in this Prospectus. (The
Shares and Warrants are referred to hereafter collectively as the "Securities".)
This Prospectus covers 1,547,827 shares of Common Stock held by certain
Shareholders that were acquired in a private placement transaction (the "Private
Placement") completed on July 23, 1997, and described in this Prospectus, see
"Selling Shareholders." Each Shareholder in the Private Placement represented to
the Company, in the subscription agreement relating to the purchase of such
Shares, that it was purchasing such Shares for investment and with no present
intention of distributing or reselling such Securities. However, in recognition
of the fact that each such Shareholder, even though purchasing such Shares for
investment, wishes to be legally permitted to sell the Shares when they deem
appropriate, the Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement of which this Prospectus forms a
part (the "Registration Statement") with respect to the sale of such Shares from
time to time. See "Plan of Distribution." To the Company's knowledge, as of the
date of this Prospectus, no Shareholder has entered into any agreement,
arrangement or understanding with any particular broker, market maker or other
person with respect to sale of any of the Shares offered hereby.
In addition, 427,060 of the Shares covered by this Prospectus were
acquired by certain Shareholders in purchase transactions from other
shareholders prior to the completion of the Private Placement in July 1997. The
Shares covered herein also include 25,000 shares of Common Stock that are
issuable upon exercise of Warrants to purchase Common Stock held by a certain
Shareholder. While the Company will receive proceeds from the exercise of the
Warrants, it will not receive any of the proceeds from the resale of the Shares.
See "Selling Shareholders" for information with respect to Shares held or
acquirable by the Shareholders.
The Shares covered by this Prospectus represent approximately 26.3% of
the Company's currently outstanding Common Stock (assuming exercise of the
Warrant). The Shares are being offered on a continuous basis pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"). The
Company will pay the expenses of registration estimated at $38,600. No
underwriting discounts, commissions or expenses are payable or applicable in
connection with the sale of the Securities. The Common Stock of Cellegy is
quoted on the Nasdaq SmallCap Market under the symbol "CLGY". The Shares offered
hereby may be sold from time to time at then prevailing market prices, at prices
relating to prevailing market prices or at negotiated prices. On September 15,
1997 the closing price of the Common Stock on the Nasdaq SmallCap Market was
$5.94 per share. This Prospectus may be used by the Shareholders or by any
broker-dealer who may participate in sales of the Common Stock covered hereby.
In addition, any Shares offered hereby which qualify for sale pursuant to Rule
144 under the Securities Act or any other exemption may be sold under Rule 144
or an other exemption rather than pursuant to this Prospectus.
See "RISK FACTORS" commencing on page 7 for a discussion of certain factors that
should be considered in connection with an investment in the Common Stock
offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is September 19, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a World Wide Web site (located at
http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company. The Company's Common Stock is listed on
the Nasdaq SmallCap Market and reports, proxy statements and other information
concerning the Company may be inspected at the offices of the Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006-1500.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the Shares offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits filed therewith or incorporated
therein by reference. Regarding statements contained in this Prospectus as to
the contents of any contract or any other document referred to herein, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or incorporated therein by
reference, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected, without
charge, at the offices of the Commission in Washington, D.C. and copies of all
or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon the payment of the fees prescribed by
the Commission.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Shareholder. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 1996.
(b) The Company's quarterly report on Form 10-QSB for the three months
ended March 31, 1997.
(c) The Company's quarterly report on Form 10-QSB for the three months
ended June 30, 1997.
(d) The Company's Proxy Statement for the Annual Meeting of Shareholders
filed with the Commission on April 21, 1997.
(e) All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act following the fiscal year ended
December 31, 1996 and prior to the termination of the offering
contemplated hereby.
(f) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed with the Commission
on August 1, 1995.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including the
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests should be directed to Mr. A. Richard
Juelis, Chief Financial Officer, 1065 E. Hillsdale Blvd., Suite 418, Foster
City, CA 94404; telephone number (650) 524-1600.
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "estimates," "expects"
and words of similar import, constitute "forward looking statements." Such words
and expressions are intended to identify such forward looking statements, but
are not intended to constitute the exclusive means of identifying such
statements. Such forward looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward looking statements. These risks, uncertainties and other factors
include, but are not limited to, those discussed below under the heading "Risk
Factors." Given these uncertainties, prospective investors are cautioned not to
place undue reliance on such forward looking statements. The Company disclaims
any obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward looking statements contained herein to
reflect any events or developments. Investors should also review forward looking
statements contained in the Company's most recent Annual Report on Form 10-KSB
and subsequent quarterly reports on Form 10-QSB.
THE COMPANY
The Company was founded in 1989 and is engaged in the development of
prescription drugs and cosmeceutical products based upon its patented
transdermal and topical drug delivery technologies. The Company's first
prescription dermatologic drug, GlylorinTM, has been licensed to Glaxo Wellcome
and is nearing completion of Phase III clinical trials, the last testing phase
required by the Food and Drug Administration before marketing approval of a drug
in the United States may be sought. In addition to Glylorin, Cellegy is
simultaneously testing and developing several prescription drugs including a
transdermal testosterone gel and a line of anti-wrinkling products that belong
to a class of marketed compounds which the Company believes will not require a
prescription.
The principal executive offices of the Company are located at 1065 E.
Hillsdale Blvd., Suite 418, Foster City, CA 94404 and its telephone number is
(650) 524-1600. In this Prospectus, the term "Cellegy" or "Company" refers to
Cellegy Pharmaceuticals, Inc., a California corporation, unless the context
otherwise requires.
Technology
Cellegy's proprietary transdermal and topical drug delivery
technologies have been found in preclinical evaluations to permit the delivery
of larger or more lipophilic drugs into the systemic circulation and the local
tissue. These technologies consist of PERMEATE and IRM, which the Company
believes will permit the non-irritating transdermal and local delivery of drugs
and other biopharmaceuticals that are the focus of discovery efforts by many of
the world's leading pharmaceutical and biotechnology companies.
If clinical and commercial development efforts are successful, the
technology would permit the delivery of certain drugs that are currently
administered by intramuscular or intravenous injection for the treatment of many
diseases, and would also allow topical application of drugs whose local
administration heretofore has been hampered by irritation, allergy, and
inability to achieve a therapeutic dose. Transdermal delivery can also improve
patient compliance where frequent, painful dosing regiments are required or
where the physical/psychological status of the patient is impaired.
PERMEATE is a patented technology which employs the use of bioactive
permeation enhancers to permit controlled passage of larger molecule drugs
through the skin. This technology potentially enables transdermal delivery of
such drugs without the need for systems which are energy dependent, such as
iontophoresis, electroporation, ultrasound or laser, to drive drugs through the
skin barrier. Cellegy's delivery technology is intended to be used in a variety
of topical dosage forms such as gels, creams, and sprays, and is not limited to
the more traditional occlusive patches.
IRM (Inflammatory Response Modulation) technology employs the use of
proprietary substances intended to prevent or reduce inflammation and allergic
reactions caused by contact with irritating or allergenic substances, including
drugs, certain excipients in skin care products, occupational substances and
natural allergens.
Product Development
Cellegy's product development efforts are focused in three areas: (i)
development of transdermal delivery systems for new drugs discovered by
pharmaceutical and biotechnology companies; (ii) utilization of the Company's
technologies to
<PAGE>
improve currently marketed pharmaceutical products, providing them with greater
competitive advantages, market expansion possibilities and longer patent life;
and (iii) development of improved and effective non-prescription cosmeceutical
products which address the skin care needs of the increasing aging and
middle-aged populations.
The Company's most advanced pharmaceutical product is Glylorin. Based
on clinical studies to date, Glylorin may inhibit the abnormal signs, as well as
other symptoms, of ichthyosis, a lifelong, debilitating skin condition which in
all of its forms afflicts an estimated one million persons in the United States,
and for which there is currently no satisfactory treatment. After conducting
product development efforts through early Phase III clinical trials, Cellegy
licensed Glylorin to Glaxo Wellcome Inc. in November 1996. See "--Corporate and
Research Alliances." Glaxo Wellcome is one of the world's largest pharmaceutical
companies and a leader in the field of dermatology. The product is nearing
completion of Phase III trials in the United States. Glylorin has been awarded
Orphan Drug status and Cellegy has received an Orphan Drug grant of $400,000
from the Food and Drug Administration to supplement certain clinical development
costs.
Another pharmaceutical product under development is transdermal
testosterone gel. Based on studies to date, the Company believes its proprietary
gel formulation may be capable of providing therapeutic levels of testosterone
through a once-a-day topical application to a small area of the body.
Furthermore, Cellegy's testosterone gel is expected to have no risk of local
irritation, which often accompanies use of traditional drug delivery
technologies, such as patches and iontophoresis. Cellegy is also utilizing its
drug delivery technologies to develop other products intended to address unmet
needs in prescription pharmaceutical markets.
The Company is developing a line of cosmeceutical products utilizing
Cellegy's IRM technology which, based on studies conducted to date, appear to
help protect the skin against physical, environmental or chemical insults and
has the potential to reverse inflammation, irritation and allergic reactions
caused by many active substances which are applied to the skin.
The Company's lead cosmeceuticals include products under development
designed to mitigate photoaging and reverse signs of skin wrinkling and dryness.
Based on testing to date, these products are expected to produce greater
improvements to the skin's appearance with less irritation and other adverse
reactions than many current products. This product line may also address the
skin barrier abnormalities unique to various ages, sexes and races. Cellegy
commenced clinical testing of these products during the second quarter of 1997,
and expects to complete clinical trials during 1998.
Other targeted non-prescription cosmeceutical products include the
alternative therapies for corticosteroid responsive diseases, inflammatory
diseases, problem skin, and skin barrier repair following laser or chemical
peeling therapy. If successfully developed, these products will be marketed
primarily to professional groups including dermatologists, plastic/cosmetic
surgeons and medical aestheticians. The Company is seeking partners with
franchises in and access to these target markets and professional groups.
Corporate and Research Alliances
In November 1996, Cellegy licensed its Glylorin treatment for
ichthyosis to Glaxo Wellcome Inc. Under the terms of the agreement Cellegy will
receive upfront and milestone payments from Glaxo Wellcome, assuming successful
completion of the various milestones, as well as a royalty on net sales
following regulatory approval. In addition, Glaxo Wellcome will assume
responsibility and the associated costs for future development and worldwide
commercialization of Glylorin for ichthyosis and other severe dry skin
conditions.
Cellegy has entered into license agreements for patented skin barrier
repair and drug delivery technologies and methods discovered at the University
of California at San Francisco School of Medicine.
Cellegy is currently pursuing additional corporate alliances with major
pharmaceutical companies and may, where appropriate, explore acquisitions to
secure marketing distribution channels and/or to augment the Company's core
technologies.
<PAGE>
RISK FACTORS
Investors should consider carefully the following factors, in addition
to the other information contained in this Prospectus, before purchasing the
shares of Common Stock offered hereby.
Early Stage of Product Development. Cellegy has not yet completed the
development of any products or sought regulatory approval for the marketing of
products and, accordingly, has not begun to market or generate revenues from the
commercialization of products. Development of products will require significant
additional research and development, including process development, extensive
clinical testing and market research. All of the Company's product development
efforts are based upon technologies and therapeutic approaches that have not
been widely tested or used. The Company is not discovering new chemical
entities, rather, it is using known commercially available compounds in
conjunction with novel therapeutic formulations and strategies. Moreover, the
Company's beliefs regarding the therapeutic and commercial potential for its
potential products, including without limitation its drug delivery and
cosmeceutical products, are based on preliminary assays or studies, and later
studies may not support the Company's current beliefs. In addition, results of
the Company's tests and studies have not been published in medical journals or
reviewed by independent third parties (other than the third parties that in some
instances conducted the studies on behalf of the Company) due to patenting
strategies, and as a result have not been subjected to the same degree of
scrutiny as results that have been published or subjected to review by
independent parties. To the Company's knowledge, no company has yet completed
human clinical trials for the regulatory approval process, or undertaken
successfully commercial manufacture, of products that are based on the Company's
proprietary technologies, and it is extremely difficult to predict whether or
when the Company's products will meet with regulatory approval, can be
manufactured successfully, or will be accepted in the marketplace.
As a result, the Company's potential products are subject to the risks
of failure inherent in the development of products based on new technologies.
These risks include the possibilities that the Company's therapeutic approaches
will not be successful; that the results from future clinical trials may not
correlate with any safety or effectiveness results from prior clinical studies
conducted by the Company or others; that some or all of the Company's potential
products will not be successfully developed or will not be found to be safe and
effective by the United States Food and Drug Administration, or otherwise will
fail to meet applicable regulatory standards or receive necessary regulatory
clearances; that the products, if safe and effective, will be difficult to
manufacture in commercial quantities at reasonable costs or will be uneconomical
to market; that proprietary rights of third parties will preclude the Company
from commercializing such products; or that third parties will market superior
or equivalent products. In addition, the failure of the Company's most advanced
clinical compound, Glylorin, to successfully complete its current Phase III and
future clinical testing, including toxicology studies, could have a material
adverse effect on the Company. There can be no assurance the Company's research
and development activities will result in any commercially viable products.
The timetable for the completion of the various milestone events that
must occur in order for the Company's products to be approved and marketed is
very uncertain. Pharmaceutical research and development is frequently
characterized by scientific and regulatory delays and disappointments. Although
the Company may set target dates for the completion of various milestone events,
the uncertainties and risks in the Company's product development and testing
efforts mean that decisions on whether to invest in the Company should not
assume that the targets will be met.
The evaluation of animal and human clinical test results involves
making judgments about data and other information that often are not conclusive.
Later testing may show those judgments to have been erroneous. For example, the
Company's beliefs regarding the potential comparative therapeutic benefits of
its products compared to currently marketed products may be erroneous, or the
FDA may not agree with the Company's conclusions regarding such matters.
Furthermore, due to the independent and blind nature of certain human clinical
testing, there will be extended periods during the testing process when the
Company will have only limited, or no, access to information about the status or
results of the tests. Other pharmaceutical companies have believed that their
products performed satisfactorily in early tests, only to find their performance
in later tests, including Phase III clinical trials, to be inadequate or
unsatisfactory, or that FDA Advisory Committees have declined to recommend
approval of the drugs, or that the FDA itself refused approval, with the result
that such companies' stock prices have fallen precipitously.
Competition and Technological Change. The pharmaceutical industry is
subject to rapid and significant technological change. Competitors of the
Company in the United States and abroad are numerous and include, among others,
major pharmaceutical, chemical, consumer, and biotechnology companies,
specialized firms, universities and other research institutions. There can be no
assurance that the Company's competitors will not succeed in developing
technologies and products that are more effective than any which are being
developed by the Company or that would render the Company's
<PAGE>
technology and potential products obsolete and noncompetitive. Many of these
competitors have substantially greater financial and technical resources and
production and marketing capabilities than the Company. In addition, many of the
Company's competitors have significantly greater experience than the Company in
preclinical testing and human clinical trials of pharmaceutical products and in
obtaining FDA and other regulatory approvals of products for use in health care.
There can be no assurance that the Company's products under development will be
able to compete successfully with existing products or products under
development by other companies, universities and other institutions or that they
will obtain regulatory approval in the United States or elsewhere.
Accumulated Deficit; Anticipated Gains or Losses. The Company had an
accumulated deficit of $16.7 million at June 30, 1997. The Company expects to
incur net losses for at least the next few years, the amount of which is highly
uncertain. There can be no assurance that the Company will ever be able to
generate product revenues or achieve or sustain profitability. The Company will
be required to conduct significant research, development, testing and regulatory
compliance activities that, together with projected general and administrative
expenses, are expected to result in significant operating losses for at least
the next few years. The Company's ability to achieve profitability depends upon
its ability to successfully complete, either alone or with others, development
of its potential products, successfully conduct clinical trials, obtain required
regulatory approvals, find appropriate third party manufacturers and market its
products or enter into license agreements on acceptable terms. In the event the
Company enters into any future license agreements, such license agreements may
adversely affect the Company's profit margins on its products.
Future Capital Needs; Uncertainty of Additional Funding. The Company's
operations to date have consumed substantial amounts of cash. The Company has no
current source of ongoing revenues or capital beyond existing cash. In order to
complete the research and development and other activities necessary to
commercialize its products, additional financing will be required. The Company's
capital requirements depend on numerous factors, including without limitation
the progress of its research and development programs, the progress of
preclinical and clinical testing, the time and costs involved in obtaining
regulatory approvals, the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights, competing
technological and market developments, changes in the Company's existing
research relationships, the ability of the Company to establish collaborative
arrangements, the development of commercialization activities and arrangements,
and the purchase of capital equipment.
In April 1996, the Company completed a private placement of 750 shares
of Series A Preferred Stock resulting in net proceeds of approximately $6.8
million. In July 1997, the Company raised additional $3.8 million in a private
placement which are the subject of the shares registered herein. The Company
believes that its existing resources will satisfy its anticipated cash
requirements through at least December 31, 1998, based upon the Company's
current plan. However, the Company will require substantial additional capital
to fund its operations, continue research and development programs and
preclinical and clinical testing of its potential products and conduct its
business. The Company may seek any required additional funding through equity
offerings, private financings and collaborative or other arrangements with third
parties. There can be no assurance that additional funds will be available on
acceptable terms. If additional funds are raised by issuing equity securities,
further substantial dilution to existing shareholders may result. If adequate
funds are not available, the Company may be required to delay, scale back or
eliminate one or more of its research and development programs, or to obtain
funds through entering into arrangements with third parties that may require the
Company to relinquish rights to certain of its technologies or potential
products that the Company would not otherwise relinquish.
Limits on Secondary Trading; Liquidity of Trading Market. Under the
blue sky laws of most states, public sales of Common Stock and the publicly
traded class of warrants issued in the Company's initial public offering (the
"IPO Warrants") by persons other than the Company in "non-issuer transactions"
must either be qualified under applicable blue sky laws, or exempt from such
qualification requirements. Blue sky authorities in California or other states
may impose other restrictions on the secondary trading of Common Stock or IPO
Warrants in those states. Certain additional restrictions may exist in
California with respect to secondary trading of certain shares of Common Stock
issued or issuable to certain investors, although these restrictions do not
apply to any of the shares sold to the public in the Company's initial public
offering. Moreover, in many states, secondary trading of the Common Stock or IPO
Warrants is permitted only by virtue of an exemption so long as information
about the Company is published in a recognized manual published by Standard &
Poor's Corporation. As a result of these or other restrictions that might be
imposed, shareholders may be restricted or prohibited from selling Common Stock
or IPO Warrants in particular states as a result of applicable blue sky laws.
These restrictions may have the effect of reducing the liquidity of the Common
Stock or IPO Warrants and could adversely affect the market price of the Common
Stock or IPO Warrants.
<PAGE>
The Common Stock and the IPO Warrants are listed on the Nasdaq SmallCap
Market. If the Company should be unable to maintain the standards for continued
quotation on the Nasdaq SmallCap Market, the Common Stock and the IPO Warrants
could be subject to removal from the Nasdaq SmallCap Market. Trading, if any, in
the Common Stock and the IPO Warrants would then be conducted in the
over-the-counter market on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap Market listing requirements or
in what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, the Company's securities. In addition, depending on several
factors including the future market price of the Common Stock, the Company's
securities could become subject to the so-called "penny stock" rules that impose
additional sales practice and market making requirements on broker-dealers who
sell and/or make a market in such securities, which could affect the ability or
willingness of broker-dealers to sell and/or make a market in the Company's
securities and the ability of purchasers of the Company's securities to sell
their securities in the secondary market.
The National Securities Market's Improvement Act of 1996 ("NSMIA"),
among other things, prohibits states from preventing secondary trading of
securities such as the Common Stock and IPO Warrants in transactions that are
exempt from federal registration requirements under Section 4(1) of the
Securities Act of 1933, as amended. Section 4(1) of the Securities Act exempts
from federal registration requirements transactions by persons other than an
issuer, underwriter or dealer, as those terms are defined in a Securities Act.
The preemptive effect of NSMIA on regulation of secondary trading in California
and other states has not been definitively addressed by the courts or applicable
administrative agencies however, and thus some uncertainty may exist concerning
the restrictions that states may impose upon secondary trading of the Common
Stock and IPO Warrants.
Government Regulation and Product Approvals. The research, testing,
manufacture, labeling, distribution, marketing and advertising of products such
as the Company's products and its ongoing research and development activities
are subject to extensive regulation by governmental regulatory authorities in
the United States and other countries. The rigorous preclinical and clinical
testing requirements and regulatory approval process of the FDA in the United
States and of certain foreign regulatory authorities can take five to ten years
or more and require the expenditure of substantial resources. There can be no
assurance that the Company will be able to obtain the necessary approvals for
clinical testing or for the marketing of products. Moreover, additional
government regulations may be established that could prevent or delay regulatory
approval of the Company's products. Delays in obtaining regulatory approvals
could have a material adverse effect on the Company. Even if regulatory approval
of a product is granted, such approval may include significant limitations on
the indicated uses of the product or the manner in which or conditions under
which the product may be marketed. For example, even if the Company seeks FDA
approval of a cosmeceutical product for non-prescription consumer sales, the FDA
could instead require that the product be distributed by means of a prescription
before considering approval for distribution as a non-prescription product.
Prescription only approval, which the Company believes is common where a company
seeks approval for a product involving a new compound or a compound previously
approved for other uses, could delay for several years, or indefinitely,
distribution through the consumer (non-prescription) channel of the Company's
consumer products which are subject to premarket review and approval by the FDA.
Moreover, failure to comply with regulatory requirements could subject the
Company to regulatory or judicial enforcement actions, including, but not
limited to, product recalls or seizures, injunctions, civil penalties, criminal
prosecution, refusals to approve new products and withdrawal of existing
approvals, as well as potentially enhanced product liability exposure. Sales of
the Company's products outside the United States will be subject to regulatory
requirements governing clinical trials and marketing approval. These
requirements vary widely from country to country and could delay introduction of
the Company's products in those countries.
Patents and Proprietary Technology. The Company's success depends, in
part, on its ability to obtain patent protection for its products and methods,
both in the United States and in other countries. Several of the Company's
products are based on existing compounds with a history of use in humans but
which are being developed by the Company for new therapeutic use for skin
diseases unrelated to the systemic diseases for which the compounds were
previously approved. The Company cannot obtain composition patent claims on all
formulations that include these compounds, and will instead need to rely on
patent claims, if any, directed to use of the compound to treat certain
conditions. The Company will not be able to prevent a competitor from using that
formulation or compound for a different purpose. No assurance can be given that
any additional patents will be issued to the Company, that the protection of any
patents that may be issued in the future will be significant, or that current or
future patents will be held valid if subsequently challenged. There is a
substantial backlog of patent applications at the United States Patent and
Trademark Office ("USPTO").
The patent position of companies engaged in businesses such as the
Company's business generally is uncertain and involves complex legal and factual
questions. Further, issued patents can later be held invalid by the patent
office issuing the patent or by a court. There can be no assurance that any
patent applications relating to the Company's products or methods
<PAGE>
will issue as patents, or, if issued, that the patents will not be challenged,
invalidated, or circumvented or that the rights granted thereunder will provide
a competitive advantage to the Company. In addition, other entities may
currently have, or may obtain in the future, legally blocking proprietary
rights, including patent rights, in one or more products or methods under
development or consideration by the Company. These rights may prevent the
Company from commercializing technology, or may require the Company to obtain a
license from the entity to practice the technology. There can be no assurance
that the Company will be able to obtain any such licenses that may be required
on commercially reasonable terms, if at all, or that the patents underlying any
such licenses will be valid or enforceable. Moreover, the laws of certain
foreign countries do not protect intellectual property rights relating to U.S.
patents as extensively as those rights are protected in the United States. As
with other companies in the pharmaceutical industry, the Company is subject to
the risk that persons located in such countries will engage in development,
marketing or sales activities of products that would infringe the Company's
patent rights if such activities were in the United States.
The agreements with UCSF pursuant to which the Company has exclusive
license rights to certain barrier repair and drug delivery technology contain
certain development and performance milestones which the Company must satisfy in
order to retain such rights. Certain milestone dates have passed with the
development or performance milestone not being satisfied. The Company is
currently in discussions with the University concerning negotiations of new
milestones and milestone dates, but no agreement has yet been reached. While the
Company currently believes it will be able to negotiate satisfactory extensions,
a loss of rights to the drug delivery technology could have a material adverse
effect on the Company.
Limited Staff; Third Party Relationship. In view of the early stage of
the Company and its research and development programs, the Company has
restricted hiring to research and development scientists and a small
administrative staff and has made limited or no investment in marketing, product
sales and regulatory compliance resources. The Company has certain key
collaborations relating to the research, development and commercialization of
its potential products. Therefore, the Company may be dependent upon the
subsequent success of these outside parties in performing their
responsibilities. In addition, the Company may enter into additional
arrangements with corporate and academic collaborators and others to research,
develop or commercialize potential products. There can be no assurance that the
Company will be able to establish any such arrangements or that they will be
successful. Failure to enter into any such arrangements that in the future might
be necessary could have a material adverse effect on the Company's business.
Risk of Product Liability; Limited Product Liability Insurance;
Environmental Matters. The testing, marketing and sale of human health care
products entails an inherent risk of allegations of product liability, and there
can be no assurance that substantial product liability claims will not be
asserted against the Company. The Company has obtained limited amounts of
insurance relating to its clinical trials. There can be no assurance that the
Company will be able to obtain or maintain insurance on acceptable terms for its
clinical and commercial activities or that any insurance obtained will provide
adequate protection against potential liabilities. Moreover, the Company is
subject to federal, state and local laws and regulations governing the use,
generation, manufacture, storage, handling and disposal of certain materials and
wastes. The Company's research and development processes involve the limited,
controlled use of hazardous and radioactive materials. The Company believes its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by such laws and regulations, but the risk of accidental
contamination or injury to the Company's employees or others from these
materials cannot be eliminated. In the event of such an accident, the Company
could be held liable for any damages that result, and any such liability could
exceed the resources of the Company. Although the Company believes it is in
compliance in all material respects with applicable environmental laws and
regulations and currently does not expect to make material capital expenditures
for environmental control facilities in the near-term, there can be no assurance
that the Company will not be required to incur significant costs to comply with
environmental laws and regulations in the future, or that the operations,
business or assets of the Company may not be materially adversely affected by
current or future environmental laws or regulations.
Dependence Upon Key Employees and Consultants. The success of the
Company is dependent upon the efforts of its senior management team, including
Dr. Carl R. Thornfeldt, Chairman of the Board of Directors and Medical Director
of the Company, and K. Michael Forrest, Chief Executive Officer of the Company.
A change in the association of these individuals or other officers and directors
of the Company could adversely affect the Company if suitable replacement
personnel could not be employed. The success of the Company also depends upon
its ability to continue to attract and retain qualified scientific and technical
personnel. There is intense competition for qualified personnel in the areas of
the Company's activities, and there can be no assurance that the Company will be
able to continue to attract and retain the qualified personnel necessary for the
development or expansion of its business.
<PAGE>
Anti-Takeover Provisions. Certain provisions of the Company's Amended
and Restated Articles of Incorporation, as well as the California General
Corporation Law, could discourage a third party from attempting to acquire, or
make it more difficult for a third party to acquire, control of the Company
without approval of the Company's Board of Directors. Such provisions could also
limit the price that certain investors might be willing to pay in the future for
shares of the Common Stock. Certain of such provisions allow the Board of
Directors to authorize the issuance of preferred stock with rights superior to
those of the Common Stock. The Company is also subject to the provisions of
Section 1203 of the California General Corporation Law which requires that a
fairness opinion be provided to the Company's shareholders in connection with
their consideration of any proposed "interested party" reorganization
transaction.
Volatility of Stock Price. The stock market has from time to time
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies. In addition, the market price
of the Common Stock and the IPO Warrants, like the stock prices of many
publicly-traded pharmaceutical, chemical, consumer, and biotechnology companies,
may prove to be highly volatile. Announcements of technological innovations or
new commercial products by the Company or its competitors, developments or
disputes concerning patent or proprietary rights, publicity regarding actual or
potential medical results relating to products under development by the Company
or its competitors, regulatory developments in both the United States and
foreign countries, public concern as to the safety of pharmaceutical products,
sales of a large number of shares of Common Stock in the market, and economic
and other external factors, as well as period-to-period fluctuations in
financial results, among other factors, may have a significant impact on the
market price of the Common Stock and the IPO Warrants.
<PAGE>
SELLING SHAREHOLDERS
The Shareholders consist of (i) the investors who purchased Shares in the
Private Placement (the "Investors"), some of whom also purchased Shares in
purchase transactions from other shareholders completed in July 1997 and (ii)
Charles S. Aker, who holds warrants to purchase Common Stock (the "Other
Shareholder").
The Registration Statement of which this Prospectus is a part is being
filed, and the Shares offered hereby that were purchased in the Private
Placement, are included herein, pursuant to registration rights included in the
common stock purchase agreement associated with the Private Placement dated as
of July 23, 1997 by and among the Company and the Investors (the "Placement
Agreement"), and pursuant to registration rights granted to Mr. Aker in
connection with his acquisition of the warrant described below (together, the
"Registration Rights").
The Shareholders identified in the table below as "Investors" acquired
1,547,827 shares of Common Stock in the Private Placement pursuant to Securities
Subscription Agreements dated as of July 23, 1997 (the "Subscription
Agreements"). The Investors include K. Michael Forrest, who has been the
Company's President and Chief Executive Officer and a director since December
1996. Each Shareholder in the Private Placement represented to the Company in
the Subscription Agreement that it was purchasing such Shares for investment and
with no present intention of distributing or reselling such securities. However,
in recognition of the fact that each such Shareholder, even though purchasing
such Shares for investment, wishes to be legally permitted to sell the Shares
when it deems appropriate, the Company has filed the Registration Statement with
the Commission with respect to the sale of such Shares from time to time. To the
Company's knowledge, as of the date of this Prospectus, no Shareholder has
entered into any agreement, arrangement or understanding with any particular
broker, market maker or other person with respect to sale of any of the Shares
offered hereby.
In addition, 427,060 shares were acquired by certain Shareholders in
purchase transactions from other shareholders prior to the completion of the
Private Placement in July 1997. Also in July 1997, common stock purchase
warrants were issued to Charles S. Aker, an investor relations advisor to the
Company, to acquire a total of 25,000 shares at an exercise price of $4.00 per
share, subject to certain terms and conditions relating to his performance as an
advisor to the Company.
<TABLE>
The following table and accompanying footnotes identify each
Shareholder based upon information provided to the Company, set forth as of
September 15, 1997, with respect to the Shares beneficially held by or
acquirable within 60 days of the date of the information in the table by, each
Shareholder and the shares of Common Stock beneficially owned by the
Shareholders which are not covered by this Prospectus. Except as described
above, based on information supplied to the Company, no Shareholder has had any
position, office or other material relationship with the Company within the past
three years.
<CAPTION>
Shares Beneficially Owned Number of Shares Beneficially
Prior to Offering Shares Being Owned After Offering
Name Number Percent Offered Number Percent
- ---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Investors
Four Partners 1,053,500 13.9 1,053,500 0 *
K. Michael Forrest 425,827 5.6 347,827 78,000 1.0
Biotechnology Value Fund, L.P. 313,560 4.1 313,560 0 *
Biotechnology Value Fund, Ltd 160,000 2.1 160,000 0 *
Gary William Ross Trust 50,000 * 50,000 0 *
Curran Partners, L.P. 25,000 * 25,000 0 *
John Curran 25,000 * 25,000 0 *
Other Shareholder
Charles S. Aker 25,000 * 25,000 0 *
<FN>
* Less than 1%.
</FN>
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The Registration Statement of which this Prospectus forms a part has
been filed pursuant to the Registration Rights. To the Company's knowledge, as
of the date hereof, no Shareholder has entered into any agreement, arrangement
or understanding with any particular broker or market maker with respect to the
Shares offered hereby, nor does the Company know the identity of any of the
brokers or market makers that any Shareholder may utilize in connection with the
sale of any Shares. The Shares covered hereby may be offered and sold from time
to time by the Shareholders. The Shareholders will act independently of the
Company in making decisions concerning sales or other disposition of any Shares,
and will act independently of the Company in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made on the Nasdaq
SmallCap Market or otherwise, at prices and on terms then prevailing or at
prices related to the then market price, or in negotiated transactions. In
addition, any Shares offered hereby which qualify for sale pursuant to Rule 144
under the Securities Act of 1933 or any other exemption may be sold under Rule
144 or an other exemption rather than pursuant to this Prospectus.
The Shares may be sold by one or more of the following methods: (a) a
block trade in which the broker-dealer engaged by the Shareholder will attempt
to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction; (b) through privately negotiated
transactions; (c) purchases by the broker-dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
To the Company's knowledge, the Shareholders have not, as of the date hereof,
entered into any arrangement with a broker-dealer for the sale of shares through
a block trade, special offering, or secondary distribution of a purchase by a
broker-dealer. In effecting sales, broker-dealers engaged by the Shareholders
may arrange for other broker-dealers to participate. Broker-dealers will receive
commissions or discounts from the Shareholders in amounts to be negotiated.
In offering their Shares, the Shareholders and any broker-dealers who
execute sales for the Shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any profits
realized by the Shareholders and the compensation of such broker-dealer may be
deemed to be underwriting discounts and commissions.
The Shareholders have advised the Company that, during such time as
they may be engaged in a distribution of the shares of Common Stock included
herein, they will comply with the applicable provisions under Regulation M under
the Securities Exchange Act of 1934, as amended ("Regulation M") and, in
connection therewith, each of the Shareholders has agreed not to engage in any
stabilization activity in connection with any securities of the Company, to
furnish copies of this Prospectus to each broker-dealer through which the shares
of Common Stock included herein may be offered, and not to bid for or purchase
any securities of the Company or attempt to induce any person to purchase any
securities of the Company except as permitted under Regulation M. Each of the
Shareholders has also agreed to inform the Company and broker-dealers through
whom sales may be made hereunder when the distribution of the shares is
completed.
Rule 102 and 103 under Regulation M prohibit participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 104 under Regulation M governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
This offering will terminate as to each Shareholder on the earlier of
(a) the date on which such Shareholder's shares may be resold without volume
restrictions under the Securities Act; or (b) the date on which all Shares
offered hereby have been sold by the Shareholders. There can be no assurance
that any of the Shareholders will sell any or all of the shares of Common Stock
offered hereby.
Pursuant to the registration rights granted in the Placement Agreement,
the Investors have agreed to sell Shares constituting "Registrable Securities"
pursuant to this Prospectus only during a "Permitted Window." As defined in the
Purchase Agreement, the term "Registrable Securities" includes, among other
shares, (i) all of the Shares purchased in the Private Placement, and (ii) any
other shares of Common Stock owned, at the time the Registration Statement is
filed, by an Investor that reasonably may be deemed to be an "affiliate" (as
defined in Rule 144) of the Company.
A "Permitted Window" is a period of 30 consecutive calendar days
commencing upon delivery to the Investor of the Company's written notification
to the Investor in response to a Notice of Resale that the Prospectus contained
in the Registration Statement is available for resale. In order to cause a
Permitted Window to commence, an Investor must first give
<PAGE>
written notice to the Company of its present intention to sell part or all of
the Registrable Securities pursuant to such registration (a "Notice of Resale").
Upon receipt of such Notice of Resale, the Company will give written notice to
the Investors as soon as practicable, but in no event not more than three
business days after such receipt, that (A) the Permitted Window will commence on
the date such notice is received by the Investor, (B) it is necessary for the
Company to supplement the Prospectus or make an appropriate filing with the
Commission so as to cause the Prospectus to become current (unless the Company
exercises its deferral rights as provided in the Placement Agreement), or (C)
the Company is required under the Securities Act to amend the Registration
Statement in order to cause the Prospectus to be current (unless the Company
exercises its deferral rights as provided in the Placement Agreement). If the
Company determines that a supplement to the Prospectus, the filing of a report
pursuant to the Exchange Act or an amendment to the Registration Statement is
necessary, it will take such actions as soon as reasonably practicable (subject
to certain exceptions), and the Company will notify the Investor of the filing
of such supplement, report or amendment, and, in the case of an amendment, the
effectiveness thereof, and the Permitted Window will then commence. Under
certain circumstances once in any twelve month period, the Company is permitted
to postpone the commencement of a Permitted Window for up to 60 days after
receipt of a Notice of Resale. The Company may also defer the commencement of
the Permitted Window for up to 180 days if so requested by an underwriter in
connection with an underwritten offering of the Company's securities so long as
any selling shareholders in such underwritten offering are subject to a lock-up
agreement of the same duration. The Company is also permitted in certain
circumstances and upon notice to the Investors to suspend a Permitted Window
after it has opened for up to 60 days (and fewer days in certain circumstances).
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto
Square, Suite 700, Palo Alto, California 94306.
EXPERTS
The financial statements of Cellegy Pharmaceuticals, Inc. appearing in
Cellegy Pharmaceuticals, Inc.'s Annual Report (Form 10-KSB) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time subsequent
to the date hereof or that there has been no change in the affairs of the
Company since such date.
---------------------
TABLE OF CONTENTS
Page
----
Available Information 3
Incorporation of Certain Documents by
Reference 4
Forward Looking Statements 5
The Company 5
Risk Factors 7
Selling Shareholders 12
Plan of Distribution 13
Legal Matters 14
Experts 14
1,999,887 Shares of
Common Stock
September 19, 1997
---------------------
PROSPECTUS
---------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses to be paid in
connection with the sale of the shares of Common Stock being registered hereby,
all of which will be paid by the Registrant. All amounts are estimates except
for the Securities and Exchange Commission registration fee.
Securities and Exchange Commission registration fee $ 3,600
Nasdaq SmallCap Market filing fee 7,500
Accounting fees and expenses 3,500
Legal fees and expenses 20,000
Printing and miscellaneous 4,000
------------
Total $ 38,600
------------
ITEM 15. Indemnification of Directors and Officers.
The Registrant's Amended and Restated Articles of Incorporation (the
"Restated Articles") include a provision that eliminates the personal liability
of its directors to the Registrant and its shareholders for monetary damages for
breach of the directors' fiduciary duties to the maximum extent permitted under
California law. This limitation has no effect on a director's liability (i) for
acts or omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interests of the Registrant or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Registrant or its shareholders in circumstances in which the director was aware,
or should have been aware, in the ordinary course of performing a director's
duties, of a risk of a serious injury to the Registrant or its shareholders, (v)
for acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Registrant or its
shareholders, (vi) under Section 310 of the California Corporations Code (the
"California Code") (concerning contracts or transactions between the Registrant
and a director) or (vii) under Section 316 of the California Code (concerning
directors' liability for improper dividends, loans and guarantees). The
provision does not extend to acts or omissions of a director in his capacity as
an officer. Further, the provision has no effect on claims arising under federal
or state securities laws and will not affect the availability of injunctions and
other equitable remedies available to the Registrant's shareholders for any
violation of a director's fiduciary duty to the Registrant or its shareholders.
The Restated Articles also include an authorization for the Registrant
to indemnify its agents (as defined in Section 317 of the California Code),
through bylaws provisions, by agreement or otherwise, to the fullest extent
permitted by law. Pursuant to this latter provision, the Registrant's Bylaws
provide for indemnification of the Registrant's directors, officers and
employees. Indemnification may only be authorized by a majority of Registrant's
directors or shareholders or by order of a court, unless the agent has been
successful on the merits. In addition, the Registrant's policy is to enter into
indemnification agreements with each of its officers and directors. These
indemnification agreements provide that directors and officers will be
indemnified and held harmless to the fullest extent permitted by law. These
agreements, together with the Restated Articles, may require the Registrant,
among other things, to indemnify such directors, officers and employees against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities resulting from willful misconduct
of a culpable nature), to advance expenses to them as they are incurred,
provided that they undertake to repay the amount advanced if it is ultimately
determined by a court that they are not entitled to indemnification, and to
obtain directors' and officers' insurance if available on reasonable terms.
<PAGE>
Section 317 of the California Code makes provisions for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act.
The Underwriting Agreement referred to below sets forth certain
provisions with respect to the indemnification of the Registrant and certain
directors, officers, and controlling persons against certain losses and
liabilities, including certain liabilities under the Securities Act.
The Amended and Restated Registration Rights Agreement dated April 10,
1992, entered into by and among the Registrant and various investors, and the
Amended and Restated Registration Rights Agreement dated February 10, 1995,
entered into by and among the Registrant and various investors provide for cross
indemnification of certain holders of Registrant's securities, and of Registrant
and its officers and directors for certain liabilities existing under the
Securities Act and otherwise.
The Registrant also maintains a director and officer liability policy.
<PAGE>
ITEM 16. Exhibits.
The following exhibits are filed herewith or incorporated by reference herein:
Exhibit
Number Exhibit Title
- ------ -------------
4.1 Amended and Restated Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit 3.2 to the Company's Registration
Statement on Form SB-2 (Registration No. 33-93288 LA) declared
effective on August 11, 1995 (the "SB-2")).
4.2 Bylaws of the Company. (Incorporated by reference to Exhibit 3.3 to the
SB-2).
4.3 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the SB-2).
4.4 Common Stock Purchase Agreement dated as of July 23, 1997 by and among
the Company and the Investors.
5.1 Opinion of Fenwick & West LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See signature page).
<PAGE>
ITEM 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, 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 Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the 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, the 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
Securities Act and will be governed by the final adjudication of such issue.
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 (the
"Securities Act"); (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 in the
Registration Statement; and (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; provided, however, that (i) and (ii) do not apply
if the information required to be included in a post-effective amendment
thereby is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial bona fide
offering thereof.
(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.
(4) That, for purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
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.
<PAGE>
SIGNATURES
In accordance with 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 authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Foster City, State of California, on September 19,
1997.
CELLEGY PHARMACEUTICALS, INC.
By: /s/ K. MICHAEL FORREST
------------------------------------
K. Michael Forrest
President and Chief Executive
Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints K. Michael Forrest and A. Richard Juelis,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-3, and to file the same with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all of said attorneys-in-fact and agents, or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<CAPTION>
Name Title Date
Principal Executive Officer:
<S> <C> <C>
/s/ K. MICHAEL FORREST President, Chief Executive Officer and September 19, 1997
- ------------------------------------ Director
K. Michael Forrest
Principal Financial Officer
and Principal Accounting Officer:
/s/ A. RICHARD JUELIS Vice President, Finance, Chief Financial September 19, 1997
- ------------------------------------ Officer and Secretary
A. Richard Juelis
Directors:
/s/ CARL R. THORNFELDT, M.D. Chairman of the Board of Directors September 19, 1997
- ------------------------------------
Carl R. Thornfeldt, M.D.
/s/ JACK L. BOWMAN Director September 19, 1997
- ------------------------------------
Jack L. Bowman
/s/ DENIS R. BURGER, PH.D. Director September 19, 1997
- ------------------------------------
Denis R. Burger, Ph.D.
/s/ PETER M. ELIAS, M.D. Director September 19, 1997
- ------------------------------------
Peter M. Elias, M.D.
/s/ TOBI B. KLAR, M.D. Director September 19, 1997
- ------------------------------------
Tobi B. Klar, M.D.
/s/ ALAN A. STEIGROD Director September 19, 1997
- ------------------------------------
Alan A. Steigrod
/s/ LARRY J. WELLS Director September 19, 1997
- ------------------------------------
Larry J. Wells
</TABLE>
EXHIBIT 4.4
CELLEGY PHARMACEUTICALS, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of July 23, 1997 by and among Cellegy Pharmaceuticals, Inc., a
California corporation (the "Company"), and the parties listed on the Schedule
of Investors separately delivered to the Investors (the "Schedule of Investors")
(each hereinafter individually referred to as an "Investor" and collectively
referred to as the "Investors").
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. As of the Closing (as defined below) the Company
will have authorized the issuance, pursuant to the terms and conditions of this
Agreement, of up to 1,547,827 shares of the Company's Common Stock, no par value
(the "Common Stock").
1.2 Agreement to Purchase and Sell. The Company agrees to sell to each
Investor at the Closing, and each Investor agrees, severally and not jointly, to
purchase from the Company at the Closing, the number of shares of Common Stock
for the aggregate price set forth beside such Investor's name on the Schedule of
Investors, at the price per share for such Investor set forth on the Schedule of
Investors. The shares of Common Stock purchased and sold pursuant to this
Agreement will be collectively hereinafter referred to as the "Purchased
Shares."
2. CLOSING.
2.1 The Closing. The purchase and sale of the Purchased Shares will
take place at the offices of Fenwick & West LLP, Two Palo Alto Square, Suite
800, Palo Alto, California, at 11 a.m. Pacific Time, on July 23, 1997 or at such
other time and place as the Company and Investors who have agreed to purchase a
majority of the Purchased Shares listed on the Schedule of Investors mutually
agree upon (which time and place are referred to in this Agreement as the
"Closing"). At the Closing, the Company will deliver to each Investor a
certificate representing the number of Purchased Shares that such Investor has
agreed to purchase hereunder as shown on the Schedule of Investors against
delivery to the Company by such Investor of the full purchase price of such
Purchased Shares, paid by (i) a check payable to the Company's order, (ii) wire
transfer of funds to the Company or (iii) any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Investor that, except as set forth in the Disclosure
Schedule and Schedule of Exceptions (the "Disclosure Schedule") separately
delivered by the Company to the Investors (which Disclosure Schedule shall be
deemed to be representations and warranties to the Investors by the Company
under this Section and to qualify each of the representations and warranties set
forth herein), the statements in the following paragraphs of this Section 3 are
all true and correct:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and has all requisite corporate power and authority
to conduct its business as currently conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction where failure to be so
qualified could reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations, assets or prospects of the
Company (the "Business") (such effect referred to as a "Material Adverse
Effect").
3.2 Capitalization. Immediately before the Closing the capitalization of
the Company will consist of the following:
<PAGE>
(a) Preferred Stock. A total of 5,000,000 authorized shares of
Preferred Stock, no par value per share (the "Preferred Stock"), 1,100 of which
have been designated as Series A Preferred Stock (the "Series A Preferred"). The
Series A Preferred has the rights, preferences and privileges stated in the
Certificate of Designation filed with the California Secretary of State on April
15, 1996. A total of 25 shares of Series A Preferred are issued and outstanding,
and no other shares of Preferred Stock are outstanding.
(b) Common Stock. A total of 20,000,000 authorized shares of Common
Stock, of which approximately 5,879,115 shares were issued and outstanding as of
June 30, 1997 (subject to increase only by employee stock option exercises after
June 30, 1997 or by conversion of outstanding shares of Series A Preferred into
shares of Common Stock).
(c) Options, Warrants, Reserved Shares. Except for: (i) the
conversion privileges of the Series A Preferred, (ii) the approximately
1,049,047 shares of Common Stock issuable upon exercise of options outstanding
as of June 30, 1997, (iii) approximately additional 74,000 shares of Common
Stock reserved for issuance under the Company's 1995 Directors Stock Option
Plan, (iv) approximately additional 391,830 shares of Common Stock reserved for
issuance under the Company's 1995 Equity Incentive Plan and (v) warrants to
purchase an aggregate of 1,497,911 shares of Common Stock, there are not
outstanding any options, warrants, rights or agreements for the purchase or
acquisition from the Company of any shares of its capital stock or any
securities convertible into or ultimately exchangeable or exercisable for any
shares of the Company's capital stock.
3.3 Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, partnership, trust, joint
venture, association, or other entity.
3.4 Due Authorization; No Violation. All corporate action on the part of
the Company and its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Agreement, and the authorization, issuance,
reservation for issuance and delivery of all of the Purchased Shares being sold
under this Agreement, has been taken or will be taken prior to the Closing, and
this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies. Neither the execution,
delivery or performance by the Company of this Agreement nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in a breach of any provision of the Restated Articles of Incorporation of
the Company (the "Restated Articles") or the Company's Bylaws, (ii) cause a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any material agreement,
instrument or obligation to which the Company is a party, which default could
reasonably be expected to have a Material Adverse Effect or (iii) violate any
law, statute, rule or regulation or judgment, order, writ, injunction or decree
of any governmental authority, in each case applicable to the Company or its
properties or assets and which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
3.5 Valid Issuance of Stock. The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable and are not subject to preemptive rights of any shareholder of the
Company.
3.6 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for qualifications or filings under the Securities Act of
1933, as amended (the "Act") and the applicable rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act, and all other applicable securities laws as may be
required in connection with the transactions contemplated by this Agreement. All
such qualifications will be effective on the Closing, and all such filings be
made within the time prescribed by law.
<PAGE>
3.7 Absence of Changes. After the respective dates as of which information
is given in the Company's Proxy Statement for the annual meeting of shareholders
held on June 5, 1997, the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996 and the Company's Quarterly Reports on Form 10-QSB for
the quarter ended March 31, 1997, respectively (such documents, together with
the Disclosure Schedule, referred to collectively as the "Disclosure
Documents"), there has not been (i) any material adverse change in the Business,
(ii) any transaction that is material to the Company, (iii) any obligation,
direct or contingent, that is material to the Company, incurred by the Company,
(iv) any change in the outstanding indebtedness of the Company that is material
to the Company, (v) any dividend declared, paid or made on the capital stock of
the Company or (vi) any loss or damage (whether or not insured) to the property
of the Company which has been sustained which could reasonably be expected to
have a Material Adverse Effect.
3.8 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation ("Action") pending (or, to the Company's knowledge, currently
threatened) against the Company, its activities, properties or assets, which (i)
might prevent the consummation of the transactions contemplated hereby or (ii)
if adversely resolved against the Company could reasonably be expected to have a
Material Adverse Effect.
3.9 Nasdaq Listing. The Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and is listed on the Nasdaq SmallCap Market. To its knowledge, the Company has
not received any notification that the Commission or the National Association of
Securities Dealers, Inc. is contemplating the termination of such registration
or listing. Before the Shelf Registration Statement is declared effective by the
Commission, the Purchased Shares will have been approved for quotation on the
Nasdaq SmallCap Market, subject to notice of issuance.
3.10 Exchange Act Filings. The Company has filed in a timely manner all
reports and other information required to be filed ("Filings") with the
Commission pursuant to the Exchange Act during preceding the twelve calendar
months. On their respective dates of filing, the Filings complied as to form in
all material respects with the requirements of the Exchange Act, and the
published rules and regulations of the Commission promulgated thereunder. To the
Company's knowledge, on their respective dates of filing, the Filings did not
include any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and all financial statements contained in the
Filings fairly present the financial position of the Company on the dates of
such statements and the results of operations for the periods covered thereby in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved and prior periods, except as otherwise indicated
in the notes to such financial statements.
3.11 Disclosure. To the Company's knowledge, the representations and
warranties made by the Company in this Agreement (including the Disclosure
Schedule) when read together do not contain any untrue statement of a material
fact and do not omit to state a material fact necessary to make the statements
herein as a whole not misleading.
3.12 Governmental Permits, Etc. The Company possesses all licenses,
franchises, governmental approvals, permits or other governmental authorizations
(collectively, "Authorizations") relating to the operation of the Business,
except for those Authorizations the failure of which to possess would not,
separately or in the aggregate, have a Material Adverse Effect. To the Company's
knowledge, the Company is in compliance with the terms of all Authorizations and
all laws, ordinances, regulations and decrees which to the Company's knowledge
are applicable to the Business, except for such non-compliance which does not,
separately or in the aggregate, have a Material Adverse Effect.
3.13 Business Relationships. In November 1996, the Company entered into a
license agreement (the "Glaxo Agreement") with Glaxo Dermatology ("Glaxo"), a
division of Glaxo Wellcome, Inc., granting Glaxo worldwide rights to Glylorin, a
lipid compound of the Company. The Company does not have any knowledge that
leads the Company to believe that Glaxo intends to terminate the Glaxo Agreement
or its relationship with the Company, and the Company has not received any
notices or other communications from Glaxo to that effect.
<PAGE>
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each
Investor hereby represents and warrants to, and agrees with, the Company, that:
4.1 Authorization. All corporate action on the part of the Investor and its
officers, directors and stockholders necessary for the authorization, execution
and delivery of, and the performance of all obligations of the Investor under,
this Agreement has been taken or will be taken prior to the Closing, and this
Agreement constitutes a valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies.
4.2 Purchase for Own Account. The Purchased Shares to be purchased by such
Investor hereunder will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the public resale or
distribution thereof within the meaning of the Act, and such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. If not an individual, such Investor also represents that
such Investor has not been formed for the specific purpose of acquiring
Purchased Shares.
4.3 Disclosure of Information. The Investor has received a copy of the
Disclosure Documents and has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Purchased Shares to be purchased by the Investor
under this Agreement. Investor further has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Purchased Shares and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to
the Investor or to which the Investor had access. The foregoing, however, does
not in any way limit or modify the representations and warranties made by the
Company in Section 3.
4.4 Investment Experience. Such Investor understands that the purchase
of the Purchased Shares involves substantial risk. Such Investor: (i) has
experience as an investor in securities of companies in the development stage
and acknowledges that such Investor is able to fend for itself, can bear the
economic risk of such Investor's investment in the Purchased Shares and has such
knowledge and experience in financial or business matters that such Investor is
capable of evaluating the merits and risks of this investment in the Purchased
Shares and protecting its own interests in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.
4.5 Accredited Investor Status. Unless otherwise expressly indicated on
the Schedule of Investors to this Agreement, such Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Act.
4.6 Restricted Securities. Such Investor understands that the Purchased
Shares are characterized as "restricted securities" under the Act inasmuch as
they are being acquired from the Company in a transaction not involving a public
offering and that under the Act and the Rules and Regulations such securities
may be resold without registration under the Act only in certain limited
circumstances. In this connection, such Investor represents that such Investor
is familiar with Rule 144 of the Commission and understands the resale
limitations imposed thereby and by the Act. Such Investor understands that the
Company is under no obligation to register any of the Purchased Shares except as
provided in Section 7 below.
4.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, such Investor further agrees not to make any
disposition of all or any portion of the Purchased Shares unless and until:
<PAGE>
(a) there is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement and the provisions of Section 7 of this
Agreement; or
(b) (i) such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) such Investor
shall have furnished the Company, at the expense of such Investor or its
transferee, with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such securities under the
Act.
Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be required: (i) for
any transfer of any Purchased Shares in compliance with Rule 144 or Rule 144A,
or (ii) for any transfer of Purchased Shares by an Investor that is a
partnership or a corporation to (A) a partner of such partnership or shareholder
of such corporation, or (B) the estate of any such partner or shareholder, or
(iii) for the transfer by gift, will or intestate succession by any Investor to
his or her spouse or lineal descendants or ancestors or any trust for any of the
foregoing; provided, that in each of the foregoing cases the transferee agrees
in writing to be subject to the terms of this Section 4 (other than Section 4.5)
to the same extent as if the transferee were an original Investor hereunder.
4.8 Legends. It is understood that the certificates evidencing the
Purchased Shares will bear the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF, AND MAY HAVE CERTAIN REGISTRATION RIGHTS PURSUANT TO, THE
PROVISIONS OF A PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER, WHICH MAY
RESTRICT THE TRANSFER OF SUCH SHARES IN CERTAIN CIRCUMSTANCES. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
(c) After consultation with counsel for the Investor, any legend
that counsel to the Company reasonably deems appropriate under the laws of the
State of California.
The legends set forth in (a) and (b) above shall be removed by the Company
from any certificate evidencing Purchased Shares upon delivery to the Company of
an opinion of counsel to the Investor, reasonably satisfactory to the Company,
that the legended security can be freely transferred in a public sale without a
registration statement being in effect under the Act and in compliance with
exemption requirements under applicable state securities laws and that such
transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Company issued the Purchased Shares.
4.9 Resale Restrictions. Each Investor agrees that it will not, to the
extent requested by the Company or an underwriter or placement agent of
securities of the Company, directly or indirectly offer, sell, contract or grant
an option to sell, pledge, encumber, or otherwise dispose of or otherwise
transfer (a "Disposition") any Purchased Shares (other than to donees,
shareholders or partners of the Investor who agree to
<PAGE>
be similarly bound) for up to 180 days after the effective date of a
registration statement of the Company filed under the Act; provided, however,
that (i) such agreement shall be applicable only to the first such registration
statement of the Company filed after the date of this Agreement that covers
securities to be sold on its behalf to the public in an underwritten offering
but not to any Registrable Securities (as hereinafter defined) that are included
in and sold pursuant to such registration statement; and (ii) all executive
officers and directors of the Company then holding Common Stock enter into
similar agreements.
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING.
5.1 Closing. The obligations of each Investor under Section 2 of this
Agreement to purchase the Purchased Shares at the Closing are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions, and the Company shall use all reasonable efforts to cause such
conditions to be satisfied on or before the Closing:
5.1.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.1.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.1.3 Compliance Certificate. The Company shall have delivered to
the Investors at the Closing a certificate signed on its behalf by its
President, Chief Executive Officer, or Chief Financial Officer certifying that
the conditions specified in Sections 5.1.1 and 5.1.2 have been fulfilled.
5.1.4 Registration; Securities Exemptions. The offer and sale of the
Purchased Shares to the Investors pursuant to this Agreement shall be exempt
from the registration requirements under the Act and the California Corporate
Securities Law of 1968, as amended, and the rules thereunder (the "Law") and the
registration and/or qualification requirements of all other applicable state
securities laws.
5.1.5 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor and to special counsel to the Investors, and they
shall each have received all such documents as they may reasonably request.
5.1.6 Transfer Agent. The Company shall have made provision to
include the Purchased Shares within the authority of its transfer agent and/or
registrar for its shares.
5.1.7 No Material Change. There shall have been no material adverse
change in the Business from the date of this Agreement.
5.1.8 Opinion of Counsel. The Investors shall have received an
opinion of counsel to the Company substantially in the form of Exhibit B
attached hereto.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
6.1. Closing. The obligations of the Company under this Agreement to
sell the Purchased Shares to the Investors at the Closing are subject to the
fulfillment or waiver on or before the Closing of each of the following
conditions by the Investor, and each Investor shall use all reasonable efforts
to cause such conditions to be satisfied on or before the Closing:
<PAGE>
6.1.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 4 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.1.2 Payment of Purchase Price. The Investor shall have delivered
to the Company the purchase price for the Purchased Shares specified for such
Investor on the Schedule of Investors attached hereto, in accordance with the
provisions of Section 2.
6.1.3 Registration; Securities Exemptions. The offer and sale of the
Purchased Shares to the Investor pursuant to this Agreement shall be exempt from
the registration requirements under the Act and shall be exempt from the
qualification requirements of the Law and the registration and/or qualification
requirements of all other applicable state securities laws.
6.1.4 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the Company
shall have received such documents as it may reasonably request.
7. REGISTRATION RIGHTS.
7.1 Definitions. For purposes of this Agreement:
(a) Form S-3. The term "Form S-3" means such form under the Act as
is in effect on the date hereof or any successor registration form under the Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
(b) Holder. The term "Holders" shall mean holders of Registrable
Securities that have registration rights pursuant to this Agreement.
(c) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement.
(d) Registrable Securities. The term "Registrable Securities" means:
(1) all of the Purchased Shares, (2) any other shares of Common Stock owned, at
the time of filing of the Form S-3 by the Company, by an Investor that
reasonably may be deemed to be an "affiliate" (as defined in Rule 144) of the
Company, and (3) any shares of Common Stock of the Company issued as a dividend
or other distribution with respect to, or in exchange for or in replacement of,
any of the shares of Common Stock that are included in clauses (1) and (2)
above; provided, however, that the term "Registrable Securities" shall exclude
in all events (and such securities shall not constitute "Registrable
Securities") (i) any Registrable Securities sold or transferred by a person in a
transaction in which the registration rights granted under this Agreement are
not assigned in accordance with the provisions of this Agreement, (ii) any
Registrable Securities sold in a public offering pursuant to a registration
statement filed with the Commission or sold pursuant to Rule 144 promulgated
under the Act ("Rule 144") or (iii) as to any Holder, the Registrable Securities
held by such Holder if all of such Registrable Securities can be publicly sold
without volume restriction within a three-month period pursuant to Rule 144.
(e) Prospectus: The term "Prospectus" shall mean the prospectus
included in any Shelf Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Act), as amended or supplemented by any prospectus
supplement (including, without limitation, any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Shelf Registration Statement), and all other
amendments and supplements to the
<PAGE>
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
(f) Shelf Registration Statement. See Section 7.2(a).
7.2 Form S-3 Shelf Registration.
(a) Registration. The Company shall prepare and file with the
Commission within 60 days following the Closing and use all reasonable efforts
to have declared effective as soon as practicable thereafter, a registration
statement on Form S-3 (or, if the Company is not then eligible to use Form S-3,
then another appropriate form) providing for the resale by the Holders of all of
the Registrable Securities (the "Shelf Registration Statement"). The Shelf
Registration Statement may include securities other than those held by Holders.
Cellegy shall use its best efforts to keep the Shelf Registration Statement
continuously effective, pursuant to the Act and the Rules and Regulations
promulgated thereunder, until (i) the date when such Registrable Securities
cease to meet the definition of Registrable Securities pursuant to Section 7.1,
or (ii) the Company's obligations hereunder terminate; provided, however:
(i) that the Holders will sell the Registrable Securities pursuant
to such registration only during a "Permitted Window" (as defined below);
(ii) if the Company furnishes to the Holders a certificate
signed by the President or Chief Executive Officer of the Company stating that,
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for sales to be made
from such Shelf Registration Statement at such time (or, in the case a "Notice
of Resale" (as defined below) has been given, that would be seriously
detrimental to the Company and its shareholders for the Permitted Window to
commence at such time) due to (A) the existence of a material development or
potential material development involving the Company which the Company would be
obligated to disclose in the Prospectus contained in the Shelf Registration
Statement, which disclosure would in the good faith judgment of the Board of
Directors of the Company be premature or otherwise inadvisable at such time or
(B) concurrent public filings with the Commission of other registration
statements, then the Company will have the right to defer the filing (the
"Deferral Right") of the Shelf Registration Statement (or the commencement of
the Permitted Window, as the case may be) for a period of not more than 60 days
after the date it would otherwise be required to file the Shelf Registration
Statement pursuant to this Section 7.2(a) (or after receipt of the Notice of
Resale, as the case may be); provided, however, that the Company will not
utilize the Deferral Right more than once in any twelve month period; and
provided further, however, that the Company may defer the filing of the Shelf
Registration Statement (or the commencement of the Permitted Window as the case
may be) for up to 180 days if so requested by an underwriter in connection with
an underwritten offering of the Company's securities so long as any selling
shareholders in such underwritten offering are subject to a lock-up agreement of
the same duration (other than with respect to the Company securities to be sold
by such selling shareholders in such underwritten offering); and
(iii) that the Company will not be required to effect any such
registration, qualification or compliance under applicable state blue sky laws
in any particular jurisdiction in which the Company would thereby be required to
qualify to do business or to execute a general consent to service of process.
In the event that the Shelf Registration Statement shall cease to be
effective, the Company shall promptly prepare and file a new registration
statement covering the Registrable Securities and shall use its best efforts to
have such registration statement declared effective as soon as possible. Any
such registration statement shall be considered a "Shelf Registration Statement"
hereunder.
(b) Permitted Window. For the purposes of this Agreement, a
"Permitted Window" with respect to a Holder is a period of 30 consecutive
calendar days commencing upon delivery to the Holder of the Company's written
notification to the Holder in response to a Notice of Resale that the Prospectus
contained in the Shelf Registration Statement is available for resale. In order
to cause a Permitted Window to commence, a Holder must first give written notice
to the Company of its present intention to sell part or all of the
<PAGE>
Registrable Securities pursuant to such registration (a "Notice of Resale").
Upon receipt of such Notice of Resale, the Company will give written notice to
the Holders as soon as practicable, but in no event not more than three business
days after such receipt, that (A) the Permitted Window will commence on the date
such notice is received by the Holder, (B) it is necessary for the Company to
supplement the Prospectus or make an appropriate filing under the Exchange Act
so as to cause the Prospectus to become current (unless a certificate of the
President or Chief Executive Officer is delivered as provided in 7.2(a)(ii)
above), or (C) the Company is required under the Act and the Rules and
Regulations thereunder to amend the Shelf Registration Statement in order to
cause the Prospectus to be current (unless a certificate of the President or
Chief Executive Officer is delivered as provided in 7.2(a)(ii) above). If the
Company determines that a supplement to the Prospectus, the filing of a report
pursuant to the Exchange Act or an amendment to the Shelf Registration Statement
required under the Act, as provided above, is necessary, it will take such
actions as soon as reasonably practicable (subject to paragraph (c) below), and
the Company will notify the Holder of the filing of such supplement, report or
amendment, and, in the case of an amendment, the effectiveness thereof, and the
Permitted Window will then commence.
(c) Closing of Permitted Window. During a Permitted Window and in
the event (i) of the happening of any event of the kind described in Section
7.3(c) hereof or (ii) that, in the judgment of the Company's Board of Directors,
it is advisable to suspend use of the Prospectus for a discrete period of time
due to undisclosed pending corporate developments or pending public filings with
the Commission (which need not be described in detail), the Company shall
deliver a certificate in writing to the Holder to the effect of the foregoing
and, upon receipt of such certificate, the Permitted Window shall terminate. The
Permitted Window shall resume upon the Holder's receipt of copies of the
supplemented or amended Prospectus, or at such time as the Holder is advised in
writing by the Company that the Prospectus may be used, and at such time as the
Holder has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus and which
are required to be delivered as part of the Prospectus. In any event, the
Permitted Window shall resume no later than 60 days after it has been terminated
pursuant to this Section. If the Company has previously terminated a Permitted
Window pursuant to this subsection within 90 days of the date that it delivers
another notice pursuant this subsection terminating another Permitted Window,
then the time period set forth in the preceding sentence shall be shortened so
that the Permitted Window shall resume no later than 10 days after it has been
terminated pursuant to such second notice.
(d) Expenses. The registration fees and expenses incurred by the
Company in connection with the Shelf Registration Statement and actions taken by
the Company in connection with each Permitted Window shall be borne by the
Company. Holder shall be responsible for any fees and expenses of its counsel or
other advisers.
7.3 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Furnish to the Holder such number of copies of a Prospectus,
including a preliminary Prospectus, in conformity with the requirements of the
Act, and such other documents as it may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by it that are
included in such registration.
(b) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holder, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(c) Notify the Holder promptly (i) of any request by the Commission
or any other federal or state governmental authority during the period of
effectiveness of a registration statement for amendments or supplements to such
registration statement or related prospectus or for additional information, (ii)
of the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of a registration
statement or the initiation of any proceedings for that purpose and (iii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or
<PAGE>
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(d) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement at the
earliest possible time.
7.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 7.2 that the
Holder shall furnish to the Company such information regarding it, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to timely effect the registration of its
Registrable Securities.
7.5 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) By Cellegy. To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, officers and directors of the Holder,
each entity that may be deemed to be an "underwriter" within the meaning of the
Act in connection with the sale of any Registrable Securities pursuant to the
Shelf Registration Statement and each person, if any, who controls the Holder or
any such underwriter within the meaning of the Act or the Exchange Act (such
persons and entities referred to as "Holder Indemnified Parties"), against any
losses, expenses, damages or liabilities to which they may become subject under
the Act, the Exchange Act or other federal or state law (a "Loss"), insofar as
such Losses (or actions in respect thereof) arise out of any claim, action or
proceeding brought by a third party arising out of or based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material
fact contained in a registration statement filed pursuant to this Section 7;
(ii) the omission or alleged omission to state in a registration
statement filed pursuant to this Section 7 a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company of the Act,
the Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Act, the Exchange Act or any federal or state securities
law in connection with the offering covered by such registration statement;
and the Company will reimburse each Holder Indemnified Party for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such Violation; provided, however, that the
indemnity agreement contained in this subsection shall not apply to amounts paid
in settlement of any such Loss, if such settlement is effected without the
consent of the Company, nor shall the Company be liable in any such case for any
such Loss to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the Holder Indemnified
Party; and provided further, that the Company will not be liable for the legal
fees and expenses of more than one counsel to the Holder Indemnified Parties.
(b) By the Holder. To the extent permitted by law, each Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, and each person, if any,
who controls the Company within the meaning of the Act (such persons and
entities referred to as "Company Indemnified Parties") against any Losses to
which such Company Indemnified Parties may become subject under the Act, the
Exchange Act or other federal or state law, insofar as such Losses (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by the Holder
expressly for use in connection with such registration; and the Holder will
reimburse any legal or other expenses reasonably incurred by such Company
Indemnified Parties in connection with investigating or defending any such
Violation; provided, however, that the indemnity agreement contained in this
subsection shall not apply
<PAGE>
to amounts paid in settlement of any such Loss if such settlement is effected
without the consent of the Holder; provided further, that the Holder shall not
be liable for the legal fees and expenses of more than one counsel to the
Company Indemnified Parties; and provided further, that the total amounts
payable in indemnity by the Holder under this subsection in respect of any
Violation shall not exceed the net proceeds received by the Holder in the
registered offering out of which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim for
indemnification in respect thereof is to be made against any indemnifying party
under this Section, deliver to the indemnifying party a written notice of the
commencement of such an action and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel elected by the indemnifying party and reasonably acceptable
for the indemnified party materially; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if the indemnified party has been advised
in writing by counsel that representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
conflict of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of liability to the
indemnified party under this Section to the extent such delay caused actual
prejudice to the indemnified party, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and the Holder are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the Commission at
the time the registration statement in question becomes effective or in the
amended prospectus filed with the Commission pursuant to Rule 424(b) of the
Commission (the "Final Prospectus"), such indemnity agreements shall not inure
to the benefit of any person if a copy of the Final Prospectus was furnished in
a timely manner to the indemnified party and was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Act.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the Act in any case in which either (i) a
Holder Indemnified Party makes a claim for indemnification pursuant to this
Section but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section provides for
indemnification in such case, or (ii) contribution under the Act may be required
on the part of the Holder Indemnified Party in circumstances for which
indemnification is provided under this Section then, and in each such case, the
Company and the Holder Indemnified Parties will contribute to the aggregate
Losses to which they may be subject (after contribution from others) in
proportion to their relative fault as determined by a court of competent
jurisdiction; provided however, that in no event, except in instances of fraud
by the Holder in which there is no limitation, (i) shall the Holder be
responsible for more than the portion represented by the percentage that the
public offering price of its Registrable Securities offered by and sold under
the registration statement bears to the public offering price of all securities
offered by and sold under such registration statement and (ii) shall the Holder
be required to contribute any amount in excess of the public offering price of
all such Registrable Securities offered and sold by the Holder pursuant to such
registration statement; and in any event, no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and the Holder under
this Section shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
<PAGE>
7.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, for so
long as the Holder owns any Registrable Securities, the Company agrees to:
(a) Make and keep adequate, current public information available, as
those terms are understood and defined in Rule 144 under the Act, at all times;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as the Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144, a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
7.7 Termination of Cellegy's Obligations. The Company shall have no
obligations to register, or maintain, a registration statement governing
Registrable Securities, (i) if all Registrable Securities have been registered
and sold pursuant to registrations effected pursuant to this Agreement, or (ii)
with respect to any particular Holder, at such time as all Registrable
Securities held by such Holder may be sold within a three month period under
Rule 144, as it may be amended from time to time, including but not limited to
amendments that reduce that period of time that securities must be held before
such securities may be sold pursuant to such rule.
7.8 Piggyback Registrations. (a) The Company shall use its best efforts
to notify all Holders of Registrable Securities in writing at least twenty (20)
days before filing any registration statement under the Act for purposes of
effecting a public offering by the Company of securities of the Company
(excluding registration statements relating to any employee benefit plan or a
corporate reorganization) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall, within ten (10) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any such registration statement
filed by the Company, such Holder shall nevertheless continue to have the right
to include any Registrable Securities in any subsequent registration statement
or registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth herein.
The Holders' rights to include any Registrable Securities in any offering under
this Section are subject in all events to the ability of the managing
underwriter for such offering (or, if there is no underwriter, then the Company)
to exclude some or all of the Registrable Securities requested to be registered
on the basis of a good faith determination that inclusion of such securities
might adversely affect the success of the offering or otherwise adversely affect
the Company. Any such exclusion shall be pro rata among all Holders who have
requested to sell Registrable Securities in such registration.
(b) Underwriting. If a registration statement under which the
Company gives notice under this Section is for an underwritten offering, then
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting and
shall furnish such information and documents as the Company or the managing
underwriter or underwriters may reasonably request. Notwithstanding any other
provision of this Agreement, if the managing underwriter determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude Registrable
Securities from the registration and the underwriting, pro rata among all
Holders who have requested to sell Registrable Securities in such registration.
If
<PAGE>
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration.
(c) Expenses. The Holders shall be responsible for their pro rata
share of registration fees and underwriters' and brokers' discounts and
commissions relating to any Registrable Securities included in such
registration. Other registration expenses (such as legal and accounting fees of
counsel to the Company, printing fees, road show expenses, and the like) shall
be shall be borne by the Company.
(d) Number of Piggyback Registrations. The piggyback registration
rights granted to the Holders under this Section shall apply to the first three
registrations filed by the Company after the Closing.
8. ASSIGNMENT. Notwithstanding anything herein to the contrary, the
registration rights of the Holder under Section 7 hereof may be assigned only to
a party who acquires from the Holder at least 33% of the shares of Common Stock
that constituted the original number of Registrable Securities acquired by the
original Holder of the Registrable Securities or, if less, at least 100,000
shares of Registrable Securities (as such number may be adjusted to reflect
subdivisions, combinations and stock dividends of the Company's Common Stock),
(such party is referred to as a "Assignee"); provided, however, that (w) no
party may be assigned any of the foregoing rights until the Company is given
written notice by the assigning party at the time of such assignment stating the
name and address of the Assignee and identifying the securities of the Company
as to which the rights in question are being assigned; (x) that any such
Assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement; and (y) no such assignment or assignments shall
increase the obligations of the Company hereunder.
9. MISCELLANEOUS.
9.1 Survival of Warranties. The representations, warranties and covenants
of the Company and the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Investors, their counsel or the Company, as the case
may be.
9.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties.
9.3 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed under the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, without reference to principles of
conflict of laws or choice of laws. The parties hereby submit to the exclusive
jurisdiction of the state and federal courts located in San Mateo County,
California, for purposes of any action arising out of or relating to this
Agreement or the transactions contemplated hereby, and agree that service of
process in such action may be made in the manner provided herein for the
delivery of notices.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
<PAGE>
9.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified, by telecopier or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified in the case of the
Company, at 1065 E. Hillsdale Blvd., Foster City, CA 94404, attention:
President, with a copy to C. Kevin Kelso, Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California 94306, or in the case of Investor, at the record
address for such Investor as reflected on the books of the Company, with a copy
to: William Greason, Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, NY
10112, or at such other address as any party may designate by giving ten (10)
days advance written notice to the other party. Notices shall be deemed
delivered upon delivery if personally delivered, one business day after
transmission with confirmation of receipt if sent by telecopier, or three days
after deposit in the mails if mailed.
9.7 No Finder's Fees. Each party represents that it neither is nor will be
obligated for any finder's or broker's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's or broker's fee (and any asserted liability) for which the Investor or
any of its officers, partners, employees, or representatives is responsible. The
Company agrees to indemnify and to hold harmless each Investor from any
liability for any commission or compensation in the nature of a finder's or
broker's fee (and any asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
9.8 Costs, Expenses. Each party's costs in connection with the preparation,
execution delivery and performance of this Agreement (including without
limitation legal fees) shall be borne by that party.
9.9 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and Investors holding a majority of the
Purchased Shares purchased hereunder. Any amendment or waiver effected in
accordance with this Section shall be binding upon each holder of any Purchased
Shares at the time outstanding (even if such Investor or other holder did not
vote with respect to, or voted against, such amendment or waiver), each future
holder of such securities, and the Company. The Investors acknowledge that by
virtue of this provision, holders of a majority of the Purchase Shares may bind
other holders to amendment or waivers that such other holders may have voted to
oppose.
9.10 Severability. If one or more provisions of this Agreement are held to
be invalid, illegal or unenforceable under applicable law, such provision(s)
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
9.11 Entire Agreement. This Agreement, together with any exhibits or
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
9.12 Further Assurances. From and after the date of this Agreement, upon
the request of an Investor or the Company, the Company and the Investors shall
execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
[Remainder of this page intentionally left blank]
<PAGE>
COUNTERPART SIGNATURE PAGE
COMMON STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.
THE COMPANY: INVESTOR:
Cellegy Pharmaceuticals, Inc.,
a California corporation
By:________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
EXHIBIT 5.1
September 19, 1997
Cellegy Pharmaceuticals, Inc.
1065 E. Hillsdale Blvd.
Suite 418
Foster City, CA 94404
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about September 19, 1997 in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 1,999,887 shares of your Common Stock (the "Stock"),
including 1,974,887 shares that are presently issued and outstanding (the
"Outstanding Shares") and 25,000 shares (the "Warrant Shares") that are issuable
upon the exercise of a warrant (the "Warrant") and all of which will be sold by
the selling shareholders named in the Prospectus included within the
Registration Statement (the "Selling Shareholders").
In rendering this opinion, we have examined the following:
(1) the Registration Statement, together with the Exhibits filed as a part
thereof;
(2) your registration statement on Form 8-A filed with the Commission in
connection with the Company's initial public offering in August 1995;
(3) the Prospectus prepared in connection with the Registration Statement;
(4) the minutes of meetings and actions by written consent of the Board of
Directors that are contained in your minute books and that are in our
possession, that relate to issuance of the Stock and the Warrant;
(5) the stock purchase and other agreements, other than those filed as
exhibits to the Registration Statement, pursuant to which the Selling
Shareholders acquired the Stock and the Warrant as described in the
Registration Statement; and
(6) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and other
representations.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies, the legal capacity of all natural persons executing the same, the lack
of any undisclosed terminations, modifications, waivers or amendments to any
documents reviewed by us and the due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from records included in
the documents referred to above. We have made no independent investigation or
other attempt to verify the accuracy of any of such information or to determine
the existence or non-existence of any other factual matters; however, we are not
aware of any facts that would lead us to believe that the opinion expressed
herein is not accurate.
In rendering any opinion that the shares of Stock are, or will when
issued be, "fully paid," we have assumed that such shares were issued in
accordance with the terms of the plans or agreements governing the issuance of
such shares, and that the Company received full consideration for the issuance
of such shares, provided for in the plans and agreements relating to such
shares, and we have relied solely, without independent investigation, upon the
representation of the Company to that effect in the Management Certificate
referred to above.
Based upon the foregoing, it is our opinion that the Outstanding Shares
to be sold by the Selling Shareholders pursuant to the Registration Statement
are, and the Warrant Shares, when issued upon exercise of the Warrant and fully
paid for as provided in the Warrant will be, legally issued, and nonassessable
and, to our knowledge, fully paid.
<PAGE>
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and is intended solely for your use
as an exhibit to the Registration Statement for the purpose of the above sale of
the Stock and is not to be relied upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Fenwick & West LLP
-------------------------
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 Cellegy
Pharmaceuticals, Inc. for the registration of 1,999,887 shares of its common
stock and to the incorporation by reference therein of our report dated February
5, 1997 with respect to the financial statements of Cellegy Pharmaceuticals,
Inc. included in its Annual Report on Form 10-KSB for the year ended December
31, 1996, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Jose, California
September 19, 1997
