Exhibit 4.5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is
dated as of April 14, 2000 and is entered into by and between Cellegy
Pharmaceuticals, Inc., a California corporation of 349 Oyster Point Boulevard,
Suite 200 South San Francisco, California 94080, United States of America
("Cellegy" or "Purchaser"), Quay Pharmaceuticals Pty. Ltd., an Australian
corporation ACN 084 808 882 of Level 5, 203-233 New South Head Road, Edgecliff,
New South Wales, Australia ("Quay"), Richcone Pty Ltd ACN 064 469 861 of Level
5, 203-233 New South Head Road, Edgecliff 2027, New South Wales, Australia
("Richcone"), as trustee of the Richcone Unit Trust, being a trust established
by deed dated 5 May 1994 between Richcone and Robert John George Miles
("Richcone Unit Trust"), Cellegy Australia Pty Ltd ACN 092 129 596, an
Australian corporation ("Newco") which is a wholly owned subsidiary of Richcone
Pty Ltd as trustee of the Richcone Unit Trust, and Dr. David Z. Lubowski
("Lubowski").
BACKGROUND
A. In December 1997, Cellegy acquired all of the intellectual property
and certain other assets of Neptune Pharmaceuticals Corporation ("Neptune")
relating to a product candidate named "Anogesic." Pursuant to an Agreement dated
December 29, 1997 between Lubowski and Neptune, Neptune acquired an exclusive
license (with the right to sublicense) to certain products, including the
Product, subject to a reservation of rights by Lubowski to grant a license to a
company owned or controlled by Lubowski to develop and market a nitroglycerin
ointment product in Australia.
B. Quay has an ongoing business distributing in Australia a product,
Rectogesic(TM) (nitroglycerin ointment), for the treatment of anal fissures in
Australia and also intends to market Rectogesic for the treatment of hemorrhoids
in Australia. In addition, Quay has compiled a regulatory package for the
purpose of obtaining approval of Rectogesic in South Africa and for the purpose
of applying for registration of the product for the treatment of anal fissures
and hemorrhoids in South Africa.
C. Newco is a newly formed Australian corporation wholly owned by
Richcone as trustee of the Richcone Unit Trust.
D. Richcone is the proprietor of a patent in relation to Rectogesic in
South Africa and to patent applications in relation to Rectogesic in Australia.
Quay is the registered proprietor of the trademark "Rectogesic" in South Africa
and Australia. Lubowski owns certain other intellectual property rights in
relation to Rectogesic. Before the Closing, the Sellers shall transfer to Newco
the Product and the Acquired Assets (as defined below), the ongoing business
interests related to Rectogesic in Australia, and all remaining rights to the
foregoing in South Africa and the rest of the world. Cellegy has offered to
acquire the entire issued share capital of Newco at the Closing and Richcone has
agreed to sell the same to Cellegy.
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AGREEMENT
THE PARTIES AGREE AS FOLLOWS:
1. Definitions. As used in this Agreement, the following terms shall have the
following meanings.
"Acquired Assets" means (i) all Regulatory Materials, (ii) all
Intellectual Property, and (iii) all inventory as of the Closing Date of Quay
(including but not limited to the inventory in Quay's possession at Closing and
in respect of which Quay will receive an invoice for payment for the inventory
after Closing), which shall constitute all of the inventory of Quay as of the
Closing Date that relate to the Business, and the benefit of any warranties
provided by manufacturers of the inventory to Quay, (iv) the business records
and customer database relating to the Business of Quay as of the Closing Date,
all of which shall have been transferred to Newco as of the Closing Date, and
(v) if not reflected on Exhibit A, any other assets, contracts or instruments to
which any Seller is a party or otherwise bound that relate to the Business or
the Acquired Assets, if Purchaser in its discretion elects to so acquire such
assets after the Closing.
"Accounts Receivable" means all amounts due or accruing to Quay in
connection with the Business as at the Closing Date by or in respect of trade
debtors (each a "Debtor").
"Act": Section 3.11.
"Action": Section 3.8.
"Asset Sellers" means Quay and Lubowski.
"Assumed Obligations" means the contracts, liabilities and obligations
of Sellers relating to the Business which are set forth on Exhibit A hereto.
"Base Reference Price": Section 2.2.
"Business" means the business of Quay relating to the development,
marketing and distribution in Australia of a nitroglycerin ointment product for
the treatment of anal fissures and/or hemorrhoids in Australia, and Quay's
business relating to research and development of, and obtaining regulatory
approval for, a nitroglycerin ointment product for the treatment of anal
fissures and hemorrhoids in South Africa, all of which shall be transferred to
Newco as of the Closing Date.
"Cellegy Shares" means the shares of Cellegy common stock that will be
issued at the Closing to the Sellers pursuant to the provisions of Section 2.2
below.
"Closing": Article 7.
"Closing Date": Article 7.
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"Closing Date Market Price": Section 2.2.
"Consulting Agreement": Section 6.1.
"Dollars" or "$" refers to United States dollars, and the term "AU$"
refers to Australian dollars.
"Encumbrances" means all mortgages, pledges, liens, licenses, rights of
possession, security interests, restrictions, encumbrances, claims, charges,
title retention, conditional sale or other security arrangements, relating to
the Acquired Assets or by which any Acquired Asset is bound or subject.
"End Date" means sixty (60) days from the date of this Agreement.
"Exchange Rate": Section 2.2.
"Excluded Obligations" means all liabilities and obligations of any
Seller other than the Assumed Obligations, and any other assets that Purchaser
designates as Excluded Obligations before the Closing Date.
"Further Agreement": Section 2.6.
"Indemnitee": Section 11.7.
"Indemnitor": Section 11.7.
"Intellectual Property" means all patents, patent applications,
registered and unregistered copyrights, registered and unregistered trademarks,
trade names, service marks or service names, licenses or license agreements,
clinical and pre-clinical data and information, regulatory applications and all
other materials relating to Australian, South African, or other regulatory
matters, know-how, contracts, agreements or other instruments, relating to the
Product or any Regulatory Materials and any of the foregoing that any Seller may
acquire after the Closing Date that relates to the Product, whether or not
listed on Exhibit A attached hereto.
"Knowledge of the Sellers or the Warrantors" means the knowledge of
Lubowski, Sheli Lubowski, and/or Michael Kloster, after reasonable inquiry;
provided, however, that Purchaser acknowledges that with respect to matters
relating to the patents and patent application included in the Product, it means
the actual knowledge of Lubowski, Sheli Lubowski and Michael Kloster, it being
expressly acknowledged by Cellegy that such knowledge or recollection of events
may be imperfect and for the avoidance of doubt shall not mean the actual
knowledge any of them would have if they had made all reasonable inquiries
concerning the patents and patent application.
"Loss" means any liability, injury, damage, expense, cost, fine or
penalty (including without limitation costs of investigation, prosecution,
defense or settlement), including attorney's fees, costs and expenses related
thereto.
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"Marketed Product": Section 2.3.
"Maximum Reference Price": Section 2.2.
"Minimum Reference Price": Section 2.2.
"Net Sales" means revenues of Purchaser or, after the Closing, Newco,
from direct sales of Marketed Products to independent third parties, less:
(a) transportation charges or allowances actually paid or
granted;
(b) trade, quantity, cash or other , brokers or agents
commissions, if any, allowed and paid by Purchaser or Newco to independent
parties in arms-length transactions;
(c) credits or allowances made or given by Cellegy or Newco on
account of rejects, returns, bad debts or retroactive price reductions for any
amount not collected; and
(d) any tax or governmental charge directly on sale or
transportation (including, but not limited to, duties and importation fees), use
or delivery of Products paid by Cellegy or Newco and not recovered from the
purchaser of Products.
Sales between Cellegy and Newco shall not be included in Net Sales.
"Product" means Australian Patent Application No. 708694 (74545/94),
pending divisional Australian application NO. 88330/98, and Republic of South
Africa Patent No. 95/0511, and including all of Richcone's rights, all of which
shall have been transferred to Newco before the Closing Date, relating (but not
limited) to the nitroglycerin product currently named "Rectogesic," for the
treatment of anal fissures, hemorrhoids, and all other conditions, including but
not limited to prescription and non-prescription products but excluding (for the
avoidance of doubt) the rights of Richcone insofar as it is a plaintiff to the
litigation proceedings previously disclosed by Sellers to Cellegy, any related
or corresponding foreign patent or patent applications, and all other patents,
patent applications (and any reissue, extension, division, improvement,
continuation or continuation-in-part of any of the foregoing) of Richcone
relating to the foregoing patent or patent application.
"Purchaser" means Cellegy.
"Regulatory Materials" means all applications, correspondence, all
other written materials, and any intellectual property rights of Sellers and any
equity owners of Sellers, relating to Rectogesic or related products or product
candidates or any other Acquired Asset, relating to Australia, South Africa, or
any other country, all of which shall have been transferred to Newco before the
Closing Date.
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"Securities": Section 3.11.
"Sellers" means Richcone, Quay and Lubowski.
"Shares" means the ordinary shares in the issued share capital of
Newco, constituting all of the outstanding equity securities of Newco as of the
Closing Date, all of which will be held by Richcone as trustee of the Richcone
Unit Trust..
"Territory" means worldwide, including without limitation Australia and
South Africa.
"Transaction" means the transactions contemplated by this Agreement.
"U.S. Dollar Purchase Price": Section 2.2.
"Warrantors" means Sellers, individually and collectively.
"Warrants": Section 2.4.
"Warrant Shares" means the shares issuable upon exercise of the
Warrant.
2. Purchase of the Shares.
2.1 Purchase of the Shares. At the Closing, (i) Richcone shall sell and
transfer the Shares to Purchaser, and Purchaser shall purchase the Shares from
Richcone. Before the Closing, Sellers shall have transferred to Newco the
Product and all Acquired Assets, and Newco shall have assumed the Assumed
Obligations. At any time after the Closing, Purchaser may in its discretion, but
need not, require Sellers to transfer to Newco any asset, liability or
obligation that was required to be identified on Exhibit A as an Acquired Asset
or Assumed Obligation but was not so listed.
2.2 Purchase Price. (a) The purchase price for the Shares shall consist
of an aggregate of a number of shares of Cellegy Common Stock equal to
AU$1,577,248, expressed in U.S. dollars and converted based on an exchange rate
of the cross rate quoted in the Wall Street Journal (the "Exchange Rate") on the
date of this Agreement (the "US Dollar Purchase Price"). The number of shares of
Cellegy Common Stock to be issued at the Closing will be determined as follows:
the closing price of Cellegy Common Stock as quoted on the Nasdaq Stock Market
on the date of this Agreement will be the "Base Reference Price," the U.S.
dollar amount which is $2.00 above the Base Reference Price will be the "Maximum
Reference Price," and the U.S. dollar amount which is $2.00 below the Base
Reference Price will be the "Minimum Reference Price." If the closing price of
the Common Stock for the day immediately preceding the Closing Date (determined
either pursuant to this Agreement or the Further Agreement, if any) the "Closing
Date Market Price") is between the Maximum Reference Price and the Minimum
Reference Price (including equal to the Maximum Reference Price or Minimum
Reference Price), then the number of shares to be issued shall equal the U.S.
dollar equivalent of AU$1,577,248 (calculated as described above) divided by the
Closing Date Market Price. If the Closing Date Market Price is higher than the
Maximum Reference Price, then the number of
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shares to be issued shall equal the U.S. dollar equivalent of AU$1,577,248
divided by the Maximum Reference Price. If the Closing Date Market Price is
lower than the Minimum Reference Price, then the number of shares to be issued
shall equal the U.S. dollar equivalent of AU$1,577,248 (calculated as described
above) divided by the Minimum Reference Price. The total purchase price shall be
allocated between the Sellers as follows: (i) Richcone: the sum of AU$1,577,247;
and (ii) Quay: the sum of AU$1.00 (or one share of Cellegy Common Stock). The
purchase price shall also include a payment, by direction, at the Closing, of
AU$500,000, in cash or by check, to Lubowski.
(b) Cellegy shall also purchase all of the inventory of Quay
relating to the Business as of the Closing Date. Such inventory is described in
Exhibit A. The purchase price for such inventory shall be equal to the cost to
Quay of such inventory (as disclosed in writing by Quay to Cellegy before the
date of this Agreement) as of the Closing Date. The purchase price shall be paid
by delivery by Purchaser of a number of shares of Cellegy Common Stock, with the
number of shares determined based on the same methodology as is set forth in
paragraph (a) above with respect to the purchase price for the Shares.
2.3 Additional Contingent Payments. (a) After the Closing, Cellegy
shall be responsible for costs and expenses relating to preparation and
submission of any regulatory packages relating to obtaining regulatory approval
for the Product in South Africa (including without limitation for fissures and
hemorrhoids). However, the first $10,000 of any amounts otherwise payable by
Cellegy to Richcone pursuant to the provisions of subparagraph (b) below
regarding marketing or sale of a Marketed Product for treatment of anal
fissures, hemorrhoids and/or other conditions shall be offset in respect of
expenses incurred by Cellegy in connection with such regulatory package.
(b) Cellegy agrees to pay to Richcone for the life of the South African
patent which is included in the Product, an amount, in Australian dollars,
equivalent to (i) 25% of any pre-marketing payments relating to South Africa
received by Cellegy from any distributor or licensee, if any, of Rectogesic in
South Africa or any other nitroglycerin product marketed in South Africa under a
different name for the treatment of anal fissures, hemorrhoids or any other
conditions, which incorporates the South African patent which is included in the
Product, including but not limited to prescription and non-prescription products
("Marketed Products"), and (ii) 25% of all royalty payments relating to South
Africa received by Cellegy from any distributor or licensee, if any, of Marketed
Products in South Africa. If Cellegy or any associate of Cellegy (as that term
is defined in the Corporations Law of Australia) (but not including any
independent third party) instead markets the Marketed Product in South Africa
directly rather than through licensees or distributors, then Cellegy shall pay
to Richcone during the period specified above an amount equal to two percent
(2%) of Net Sales of Marketed Products in South Africa. The payments will be
made solely to Richcone quarterly in arrears. Regardless of whether Cellegy
markets the Marketed Products in South Africa directly or indirectly through a
distributor or licensee, Cellegy must: (i) notify Richcone of the number of
Marketed Products sold during the quarter and the Net Sales of each Marketed
Product in South Africa sold during the quarter; (ii) maintain or cause to be
maintained for the life of the South African patent which is included in the
Product, in a manner reasonably approved by Richcone, separate and accurate
records and accounts of the sale of the Marketed Products in South Africa and
other information
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that is relevant to the calculation of such Net Sales; (iii) permit or cause to
be permitted an accountant or auditor of Richcone from time to time and during
ordinary business hours to inspect and verify all or any records required to be
maintained by Cellegy under this section; and (iv) give and cause to be given
all assistance reasonably necessary to such accountant or auditor to carry out
such an inspection and verification and permit him or her to take copies of any
such records, subject to customary agreements by such accountant or auditor to
maintain the confidentiality of Cellegy confidential or proprietary information.
2.4 Warrants. In addition, at the Closing Cellegy shall issue to the
Richcone a warrant (the "Warrant") to purchase shares of Common Stock,
substantially in the form provided to Richcone as of the date of this Agreement.
The term of the Warrants will be two years from the Closing Date. The total
number of shares of Common Stock issuable upon exercise of the Warrants shall be
the U.S. Dollar Purchase Price divided by the Base Reference Price. The exercise
price per share shall be equal to 120% of the Base Reference Price. The exercise
price shall be payable in cash or by check, in U.S. dollars. Richcone
acknowledges that shares issuable upon exercise of the Warrant shall constitute
"restricted securities" as defined in Rule 144 promulgated under the Securities
Act of 1933, as amended.
2.5 Excluded Obligations. Sellers shall not transfer to Newco any of
the Excluded Obligations, and Warrantors covenant that neither Newco nor Cellegy
shall incur any obligations with respect to such Excluded Obligations. Without
limiting the foregoing, neither Cellegy nor Newco shall assume or become
obligated to pay any liabilities, debts or obligations of Sellers except for the
Assumed Obligations. In addition, Quay shall be responsible for any amounts
owing to its employees that accrue before the closing and for any amounts owing
to employees who do not receive an offer or who do not accept an offer of
employment with Cellegy or Newco.
2.6 Further Agreement; Due Diligence. The parties may enter into a more
comprehensive agreement (the "Further Agreement") incorporating the material
terms and conditions described in this Agreement. Unless and until the Further
Agreement becomes effective, however, the parties agree to be bound by all of
the terms and conditions of this Agreement. The parties hereby agree to
negotiate in good faith, as soon as possible but in any event before the End
Date, a more comprehensive Further Agreement on terms consistent in all material
respects with the terms set forth in this Agreement. If the parties have not
executed the Further Agreement by the End Date (or, if it occurs earlier, the
Closing), then the terms and conditions set out in this Agreement will
constitute the Further Agreement (subject to any amendments agreed to by the
parties), and the Closing Date will be the End Date.
2.7 No Obligations to Third Parties. The execution and delivery of this
Agreement shall not be deemed to confer any rights upon any person or entity
other than the parties hereto, or to make any person or entity a third party
beneficiary of this Agreement, or to obligate the parties hereto to any person
or entity other than the parties to this Agreement.
3. Representations and Warranties of Warrantors. Each Warrantor jointly and
severally represents and warrants to Cellegy and, after the Closing Date, Newco,
that each of the following is a true and complete statement:
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3.1 Organization.
(a) Newco is a corporation duly incorporated under the laws of
New South Wales and is qualified or licensed to do business in all jurisdictions
where Seller is required to be so qualified or licensed. All right, title and
interest in and into the Product will have been transferred from Richcone to
Newco pursuant to valid and enforceable instruments of transfer, and all
necessary or appropriate regulatory filings have been made to lawfully effect
such transfer. All right, title and interest in and into the Acquired Assets
will have been transferred by Quay and Lubowski to Newco on or before the
Closing Date. As of the Closing, other than title to the Product and the
Acquired Assets, Newco will not have engaged in any business, has no significant
assets, has no liabilities, has no employees, and has not entered into any other
agreements or instruments with any third parties.
(b) Quay is a corporation duly incorporated under the laws of
New South Wales and is qualified or licensed to do business in all jurisdictions
where Quay is required to be so qualified or licensed.
(c) Richcone is a corporation duly incorporated under the laws
of New South Wales and is the trustee of the Richcone Unit Trust.
3.2 Authorization; Enforceability. Before the Closing Date Sellers will
have taken all corporate, shareholder and unitholder action necessary to
authorize consummation of the Transaction and the performance of their
respective obligations under this Agreement. This Agreement when executed by
Sellers, will be (assuming due authorization, execution and delivery of same by
Cellegy) the valid and binding obligation of each Seller, enforceable against
each Seller (under applicable Australian law) in accordance with its terms,
subject only to the effect of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (b) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
3.3 No Conflict. The execution of this Agreement, the transfer to
Purchaser of the Shares and the performance of Sellers' other obligations
hereunder will not (A) cause a violation of Sellers' articles of incorporation
or bylaws or other charter instruments, (B) cause a breach under, or allow any
party to terminate, or require the consent of any third party under, any
agreement to which any Seller is a party or by which the business or property of
any Seller is bound, or (C) cause any violation of Australian law or of a
judgment or order of any Australian court or Australian governmental body.
3.4 Title; Intellectual Property. Cellegy acknowledges and agrees that
before the date of the Agreement Sellers have made, and between the date of this
Agreement and Closing Date Sellers may make, several oral and written
disclosures to Cellegy regarding the patent and patent application included in
the Product and related intellectual property matters concerning the Product and
such patent and patent applications. All of the representations and warranties
in this Section are qualified in their entirety by such disclosures, the content
of which Cellegy acknowledges having received. To the Knowledge of the
Warrantors, (A) the Asset Sellers
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collectively hold good and merchantable title to all Acquired Assets, free and
clear of any Encumbrances; (B) prior to the transfer of the Product to Newco
Richcone held good and merchantable title to the Product free and clear of any
Encumbrances; and (C) the Asset Sellers have not transferred, encumbered or
created any third party interests in their respective titles to the Acquired
Assets except for transfer of the Acquired Assets to Newco as contemplated by
this Agreement. To the Knowledge of the Warrantors, the Sellers collectively own
all intellectual property rights to each item included in the Product and the
Acquired Assets without infringement of any third party intellectual property
interest, and no other party has any right or interest whatsoever in any of the
Product and the Acquired Assets, including without limitation any license,
option, right of first refusal or right to acquire, or development, manufacture,
marketing or distribution rights, relating to the Product or any of the Acquired
Assets. To the Knowledge of the Warrantors, as of the Closing Date, no other
person or entity other than Newco has any right or interest whatsoever in the
Product, including without limitation any license, option, right of first
refusal or right to acquire, or development, manufacture, marketing or
distribution rights relating to the Product. To the Knowledge of Warrantors,
neither the Product nor any item included in the Acquired Assets infringes upon
or violates any patent, copyright, trademark, trade secret or other intellectual
property rights of any other person or entity. To the Knowledge of Warrantors,
each of the patents included in the Product is valid and enforceable and will be
valid and enforceable by Newco after the Closing Date. There are no other assets
of any Seller that relate to the Product other than such as are included in the
Acquired Assets, and to the Knowledge of the Warrantors, no director, officer or
employee of any Seller has any substantial intellectual property related to the
Product that is not included in the Intellectual Property being transferred to
Purchaser hereunder.
3.5 Acquired Assets; Assumed Obligations.
(a) Exhibit A lists (i) all of the assets (including all
Intellectual Property, Regulatory Materials, agreements and instruments) that
are required to be included within the definition of "Acquired Assets", (ii) all
of the liabilities and obligations that are required to be included within the
definition of "Assumed Obligations", and (iii) all of the liabilities and
obligations that are required to be included within the definition of "Excluded
Obligations." Sellers have delivered to Purchaser a true and correct copy of
each agreement relating to the Acquired Assets.
(b) Sellers have validly transferred to Newco all of Sellers'
interest in any item included within the definition of Acquired Assets, Assumed
Obligations, Product, Regulatory Materials or Intellectual Property. Richcone
has made all filings with all regulatory authorities that are necessary to
effect the transfer of the Product from Richcone to Newco and to vest in Newco
full title to the patent and patent applications included in the Product.
3.6 Financial Information. Sellers have previously delivered to
Purchaser the balance sheet and statement of income of Quay as of and for the
period ended March 31, 2000. Such financial statements fairly present the
financial condition of the Acquired Assets (insofar as they are the property of
Quay) and the Business as of such date.
3.7 Taxes. At or as soon after the Closing as practicable, Newco will
have paid all stamp duty owing in respect of the acquisition of the Product and
the Acquired Assets. There are
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no federal, state or local tax liens against the Product or any of the Acquired
Assets transferred to Newco. At the Closing, there will be no federal, state or
local tax liens against, or any unsatisfied liabilities for taxes of any kind
imposed on or levied with respect to, any of the Acquired Assets or the Product
other than liens for any such taxes which have not yet become due and payable.
Sellers have paid or will pay, when due, any federal, state or local taxes
accrued before the Closing Date with respect to the Product, the Acquired Assets
or Sellers' business which, if unpaid, may result in a liability of Purchaser or
a lien against Newco or any assets of Newco.
3.8 Litigation. To the Knowledge of the Warrantors, and except as
previously disclosed orally or in writing to Cellegy, there is no litigation,
arbitration, claim, proceeding or governmental investigation (each an "Action")
pending against any Seller or any Seller's properties, business, directors,
officers or employees in connection with the Product or the Acquired Assets, nor
to the Knowledge of the Warrantors is there any factual or legal basis for any
Action.
3.9 Brokers Fees. Neither Purchaser nor Newco shall incur any liability
to any third party with respect to any brokerage or finder's fee payable by any
Warrantor in connection with the Transaction or the Agreement.
3.10 Undisclosed Liabilities. To the Knowledge of the Warrantors, there
are no liabilities, obligations, or claims (whether contingent or otherwise)
relating to the Product or the Acquired Assets that have not been previously
identified orally or in writing to Cellegy before the date of this Agreement.
3.11 Securites Law Matters. Each Seller represents, warrants and
acknowledges as follows:
(a) Purchase Entirely for Own Account. The Cellegy Shares to
be received by such Seller, the Warrants, and the shares of Common Stock
issuable upon exercise of the Warrants (collectively, the "Securities") are
being acquired for investment for Seller's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof.
Seller has no present intention of selling, granting any participation in, or
otherwise distributing the same other than to an affiliate (as defined in Rule
501(b) of the Act) of Richcone in compliance with applicable U.S. securities
laws. Seller does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any Securities.
(b) Disclosure of Information. Seller believes it has received
all the information it considers necessary or appropriate for deciding whether
to acquire the Securities. Seller further represents that it has had an
opportunity to ask questions and receive answers from Cellegy regarding the
terms and conditions of the offering of the Securities and the business,
properties, prospects and financial condition of Cellegy. Sellers, individually
and collectively, have disclosed all information relevant and material to the
sale of the Product and/or Acquired Assets and have not omitted to disclose any
information which might materially affect the operation of the Product and/or
assets after the Closing, including without limitation the intellectual property
being transferred. Without limiting the foregoing, neither this Agreement,
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nor written materials delivered by Sellers to Cellegy relating to the Product or
Acquired Assets or the matters contemplated by this Agreement, taken together,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not
misleading.
(c) Investment Experience. Seller acknowledges that it is able
to fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Securities. Seller also
represents it has not been organized for the purpose of acquiring the
Securities.
(d) Restricted Securities. Seller understands that the
Securities it is acquiring are characterized as "restricted securities" under
the United States federal securities laws inasmuch as the Securities are being
acquired in a transaction not involving a public offering and that under such
laws and applicable regulations the Securities may be resold in the United
States without registration under the Act only in certain limited circumstances.
In this connection, Seller represents that it is familiar with Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act"), as
presently in effect, and understands the resale limitations imposed thereby and
by the Act. Seller understands that the holding period under Rule 144 with
respect to shares acquired upon exercise of the Warrants will commence on the
date that the shares are purchased and fully paid for.
(e) Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Seller further agrees not to make
any disposition of all or any portion of the Securities unless:
(i) 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; or
(ii) (A) Seller shall have notified Cellegy of the
proposed disposition and shall have furnished Cellegy with a detailed statement
of the circumstances surrounding the proposed disposition, and (B) if reasonably
requested by Cellegy, Seller shall have furnished Cellegy with an opinion of
counsel, reasonably satisfactory to Cellegy that such disposition will not
require registration of such shares under the Act. It is agreed that Cellegy
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(f) Legends. Seller understands and agrees that the legends
set forth below or similar legends will be placed on any certificate(s)
evidencing the Securities, together with any other legends that may be required
by applicable securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE
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TRANSFERRED, PLEDGED, RESOLD, OR OTHERWISE DISPOSED OF EXCEPT
AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
ISSUER OF THE 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."
(g) Refusal to Transfer. Seller acknowledges and agrees that
Cellegy will not be required (i) to transfer on its books any Securities that
have been sold or otherwise transferred in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such Securities, or to accord the
right to vote or pay dividends to, any other transferee to whom such Securities
have been so transferred.
3.12 Regulatory Filings. To the Knowledge of the Warrantors, Seller has
made all filings with governmental agencies and obtained all assignments
necessary to claim and protect its rights in all intellectual property included
in the Product and the Acquired Assets; provided, however, that Purchaser
acknowledges that neither regulatory approval of the Product in South Africa,
nor registration of the Product for the treatment of anal fissures and
hemorrhoids in South Africa, has been obtained, and that Sellers do not intend
to undertake any significant additional efforts before the Closing with respect
to obtaining such approvals.
3.13 Liability Insurance. Quay has maintained all insurance policies
required at law for it to carry on the Business. All premiums for product
liability insurance policy relating to the Product and research, development and
trials related thereto have been paid by Quay for all periods up to, and for
certain periods beyond, the Closing Date. Quay shall take such actions and pay
such premiums as are required to maintain coverage under such product liability
policies (or other comparable policies) after the Closing Date, with respect to
pre-Closing research, development and trials and Products manufactured or sold
before the Closing Date (including inventory to be acquired by Cellegy pursuant
to this Agreement).
4. Representations and Warranties of Cellegy. Cellegy represents and warrants to
each of the Sellers that each of the following is a true and complete statement:
4.1 Organization. Cellegy is a corporation duly organized under the
laws of the State of California.
4.2 Authorization. Before the Closing Date Cellegy will have taken all
corporate action necessary to authorize its consummation of the Transaction and
the performance of its obligations under this Agreement.
4.3 No Conflict. The execution of this Agreement and the performance of
Cellegy's obligations hereunder will not (A) cause a violation of Cellegy's
articles of incorporation or bylaws, (B) cause a breach under, or allow any
party to terminate, or require the consent of any third party under, any
agreement to which Cellegy is a party or by which the business or property of
Cellegy is bound (other than such consents, if any, as Cellegy will obtain
before the Closing),
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or (C) cause any violation of law or of a judgment or order of any court or
governmental body. This Agreement when executed by Cellegy will be (assuming due
authorization, execution and delivery of the same by the Sellers), the valid and
binding obligation of Cellegy, enforceable against Cellegy (under applicable
U.S. law) in accordance with its terms, subject only to the effect of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and (b) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
4.4 No Tax Representations. Cellegy expressly does not make any
representation or warranty concerning the tax consequences of the transactions
contemplated by this Agreement to Sellers or their shareholders or unitholders,
as the case may be.
5. Covenants.
5.1 Due Diligence. Between the date of this Agreement and the Closing,
Sellers and Newco shall allow Purchaser and its representatives to fully
investigate Newco's and Sellers' (insofar as it relates to the transactions
contemplated by this Agreement) business, technology and financial condition,
subject to prior approval of Seller, as to the times at which, and the persons
from whom, inquiries are made in the course of such investigations and as to
whether Purchaser and its representatives may have access to or to copies of any
documentation held by third parties relating to the Product and/or the Acquired
Assets and which are not in the public domain. Sellers will afford Purchaser or
its representative reasonable access to Sellers' and Newco's properties, offices
and files, upon reasonable prior notice and in a manner so as not to disrupt
Sellers' business, whether before or after the Closing, for purposes of
conducting due diligence relating to the Product and Acquired Assets. Purchaser
shall give Seller prior notice of any proposed communication with any third
party that Purchaser or any representative of Purchaser proposes to make as part
of its investigation, and shall not contact such third party without Seller's
prior consent.
5.2 No Other Negotiations. Seller agrees that from the date of this
Agreement until the earlier to occur of the Closing or the termination of this
Agreement pursuant to its terms, Sellers will not, and will use best efforts not
to allow any officer or director of Seller or any other person on behalf of
Seller to, negotiate or accept any offer from any party concerning the possible
disposition of all or any substantial portion of Sellers' assets, equity or
business or any shares or units in the Sellers, as the case may be. Sellers will
promptly notify Cellegy of any such inquiries or proposals.
5.3 Existing Litigation. Before the Closing, Sellers shall take all
necessary actions to remove from the Product or Acquired Assets any connection
with any ongoing litigation relating thereto (including without limitation
litigation against Sellers' former attorneys) insofar as such a connection may
affect their title to the Product or Acquired Assets, and Sellers agree to bear
all costs, fees and expenses, and to indemnify Newco and Cellegy and their
employees, officers and agents against any loss, liability, expense and cost
(including costs of investigation, prosecution and settlement and attorneys'
fees and expenses) relating to any such litigation.
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5.4 Cooperation. Cellegy and Sellers will cooperate and use their good
faith efforts to satisfy the conditions to closing described below and, upon
satisfaction of such conditions, to consummate the transactions contemplated
hereby.
5.5 Conduct of Business. Between the date of this Agreement and the
Closing:
(i) Quay shall use its best efforts to operate its business
(insofar as it relates to the Product or Acquired Assets) in the ordinary course
thereof and consistently with its past practices (however, it is expressly
acknowledged that the Sellers shall be under no obligation to obtain regulatory
approval of Rectogesic in South Africa nor registration of the product for the
treatment of anal fissures and hemorrhoids in South Africa) and Richcone will
ensure that Newco does not enter into any transaction or agreement or take any
action out of the ordinary course or enter into any transaction or make any
commitment involving an expense or capital expenditure by Seller relating to the
Acquired Assets, in excess of $5,000, without Cellegy's prior written consent;
(ii) each Seller shall use all reasonable efforts to protect
the Product and Acquired Assets, cooperate with Cellegy concerning protection of
intellectual property rights relating to the Product and Acquired Assets (but
the foregoing shall not obligate Sellers to undertake any expenditure of funds
for the protection of such assets and rights outside of the ordinary course of
business) and take such actions as Cellegy may reasonably request (at Cellegy's
expense) relating to protection of such assets, and except as contemplated by
this Agreement effect no transfer, sale, assignment, lease, license or
encumbrance of any of its Acquired Assets;
(iii) each Seller shall engage in no transactions materially
inconsistent with its representations and warranties of the Warrantors in this
Agreement;
(iv) each Seller shall provide Cellegy with all information
and supporting documents concerning the Product, Acquired Assets and the
Business that Cellegy reasonably requests in connection with its due diligence
conducted in accordance with Section 5.1 above;
(v) each Seller shall use its best efforts to obtain, before
the Closing, the written consent of all third parties necessary for Sellers to
consummate the Transaction and to transfer and assign the Product and Acquired
Assets to Newco and Cellegy;
(vi) each Seller shall notify Cellegy promptly upon receipt of
any communication or legal process which commences or threatens litigation
against any Seller in connection with the Business, the Product or any of the
Acquired Assets;
(vii) each Seller shall provide Cellegy, whether before or
after the Closing, with any further documents which Cellegy reasonably requests
relating to the Product, Acquired Assets or the Business or to carry into effect
the Transaction, subject to Section 5.1; and
(ix) each Seller shall upon the Closing, cease use of the
Intellectual Property without Cellegy's prior written consent.
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5.6 Taxes. Sellers agree to pay any sales, use or other taxes (other
than capital gain or income taxes imposed on the individual Seller
shareholders), other than any taxes arising under United States tax laws, as a
result of the Transaction. Cellegy agrees to be responsible for any sales, use
or other taxes arising under United States tax laws arising from consummation of
the Transaction. Cellegy agrees to be responsible for any stamp duty taxes
arising out of the Transaction.
5.7 Cellegy Covenants. Cellegy agrees that from the date of this
Agreement until the Closing, subject to its rights described herein not to
consummate the Transaction, it will (i) use its best efforts to conduct its
business in such a manner so as to not be in material breach of the
representations and warranties made to Sellers herein, (ii) use its best efforts
to obtain before the Closing the written consent of all third parties necessary
for Cellegy to consummate the Transaction, and (iii) notify Sellers promptly
upon receipt of any communication or legal process which commences or threatens
litigation relating to the Product, Acquired Assets or the transactions
contemplated hereby.
6. Additional Agreements.
6.1 Consulting Agreement; Transition.
(a) The Sellers agree to use their best efforts to ensure that
Sheli Lubowski will, if Cellegy requests, before the Closing enter into a
consulting agreement (the "Consulting Agreement") to provide their services to
Cellegy and Newco during a six-month transition period so as to assist Cellegy
and Newco in running the Business, including but not limited to assisting
Cellegy and Newco in obtaining regulatory approval for and commercializing the
Product and Acquired Assets, at a commercially reasonable fee (but in no event
more than AU$8,333/per month) and on the basis that Cellegy or Newco may
terminate the transition period, and payments to such persons, upon 30 days
written notice and on such other terms and conditions as they and Cellegy may
agree.
(b) Lubowski further agrees to provide his services to Cellegy
in relation to the prosecution of Cellegy's worldwide patent applications with
respect to other products similar to the Product, for a period of two (2) years
after the end of the term of the consulting period under the Consulting
Agreement, on the basis that:
(A) the services will be provided in return for a
nominal fee only and Lubowski must bear all reasonable expenses incurred in
relation to the provision of the services and will be indemnified by Cellegy in
respect of expenses incurred exceeding the sum of AU$500 (provided that Lubowski
complies with Cellegy's policies, disclosed to Lubowski, concerning the
requirement for prior approval by Cellegy of certain expenses); and
(B) Lubowski will be entitled to provide the services
at such times as he determines, acting reasonably, having regard to his other
employment commitments.
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6.2 Non-Competition. For a period consisting of the longer of (i) the
life of the South African and Australian patents which are included in the
Product or (ii) ten (10) years from the Closing Date, Sellers agree that they
will not engage in any business, whether as an employee, officer, consultant
shareholder, lender or otherwise, or otherwise utilize their expertise to
register, seek regulatory approval for, market, distribute or sell Rectogesic,
any product included within the Product, any Acquired Asset, or any comparable
product for the treatment of anorectal disorders, in any market of the
Territory.
6.3 Restrictions on Transfers of Shares. Without the prior written
consent of Cellegy, Sellers will not for a period of (i) six (6) months in the
case of the Cellegy Shares and (ii) one year in the case of the Warrant Shares
(or such shorter period as the parties may mutually agree in the Further
Agreement) after the Closing Date, (1) offer, pledge, sell, contract to sell,
sell any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any of the Cellegy Shares or any Warrant
Shares (other than to an affiliate (as defined in Rule 501(b) of the Act) of
Richcone) in compliance with applicable U.S. securities laws who agrees in
writing to be bound by the same restrictions, or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of such securities (other than to an
affiliate (as defined in Rule 501(b) of the Act) of Richcone) in compliance with
applicable U.S. securities laws who agrees in writing to be bound by the same
restrictions.
6.4 Efforts to Market the Product. Cellegy confirms that it will seek
to develop, market and sell the Product in Australia and South Africa, through
the use of commercially reasonable efforts in relation to a product of similar
potential as the Product in such markets; provided, however, that the foregoing
shall not obligate Cellegy to devote resources to develop, market or sell the
Product where Cellegy in good faith concludes that it would be commercially
unreasonable to do so in light of Cellegy's overall business, financial
condition, prospects, results of operations, and other business opportunities.
6.5 Accounts Receivable. The Purchaser acknowledges and agrees that the
Accounts Receivable will remain the property of Quay and will not be transferred
from Quay to Newco. The Purchaser shall:
(a) act as agent of Quay during the period of 90 days from the Closing
Date ("Collection Period") and shall use all reasonable endeavors to
collect the Trade Debts for Quay during the Collection Period ;
(b) promptly account to Quay for any amount received by the Purchaser
after the Collection Period or any extension of the Collection Period
in respect of the Trade Debts, less a commission of 12.5% of the Trade
Debts collected by way of a collection fee in favor of the Purchaser
("Commission");
(c) provide a statement in writing to Quay on a monthly basis of all
monies received in respect of each of the Debtors including without
limitation the name of the Debtor, the amounts (in respect of each
Debtor) and all customer references and other details as to allocation
of the moneys and the deduction of the Commission;
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(d) at all reasonable times afford Quay full, free and unrestricted
access to all relevant records pertaining to the Trade Debts; and
(e) pay to the credit of such bank account as shall be nominated in
writing by Quay to the Purchaser on or prior to Closing for the purpose
all amounts received in respect of each of the Debtors (less the
Commission) as soon as practicable after receipt and, in any event, not
later than 4 Business Days after the date of receipt. The Purchaser
acknowledges that such amounts are to be paid free from all claims,
demands, rights of set-off (other than in relation to the Commission),
contribution, counter claim, marshalling or any other right at law or
in equity whatsoever which the Purchaser may have against Quay on any
account.
Any part of the Trade Debts outstanding at the expiration of the
Collection Period are to be collected by Quay. Upon receipt by the Purchaser of
payment of any Trade Debt, the Purchaser is authorized by Quay, during the
Collection Period, to give a full and valid discharge of the amount received.
7. Closing. The closing of the transactions contemplated by this Agreement (and
the Further Agreement, if any) (the "Closing") will occur promptly upon
satisfaction of all closing conditions, but (assuming satisfaction of all
closing conditions) in all events not later than the End Date (or, if a Further
Agreement is entered into, then the date specified in the Further Agreement)
(the date on which the Closing occurs, referred to as the "Closing Date"),
unless one or more regulatory or governmental consents or approvals that is
required to be obtained before the Closing has not been obtained through no
fault of any party, in which case the Closing shall occur as soon as reasonably
possible after such consent or approval has been obtained. At the Closing,
Sellers shall transfer, sell and assign to Purchaser all of the Shares, such
that Cellegy is the sole owner of Newco, and Newco is the sole owner of all of
the Acquired Assets, Intellectual Property and Regulatory Materials, and Cellegy
will deliver the purchase price for the Shares in accordance with Section 2.2.
8. Cellegy's Closing Conditions. Cellegy's obligations under this Agreement are
subject to the satisfaction of each of the following conditions, except as
Cellegy may waive in writing.
8.1 Due Diligence. Cellegy shall have completed such investigation of
the Product, Acquired Assets and the Business as it deems appropriate and shall
in its discretion be satisfied with its due diligence, including with respect to
Richcone's, Newco's and Quay's respective ownership of the Product and the
Acquired Assets.
8.2 No Material Adverse Change. No material adverse change shall have
occurred in Newco's or Sellers' business or in the Acquired Assets since the
date of this Agreement.
8.3 Representations, Warranties and Covenants. The Sellers' and the
Warrantors' representations and warranties made in this Agreement shall remain
true in all material respects as if made on the Closing Date (except for
representations and warranties which are themselves qualified by concepts of
materiality, in which case such representations and warranties shall remain true
and correct in all respects as if made on the Closing Date), and Sellers shall
have
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performed in all material respects all of the terms and obligations of this
Agreement that are required to be performed by Sellers before the Closing.
8.4 Third Party Consents. All third party consents which are required
in order to assign and transfer the Acquired Assets to Newco and to consummate
the Transaction shall have been obtained.
8.5 Compliance Certificate. Cellegy shall have received a certificate
with respect to satisfaction of the conditions set forth in Sections 8.2, 8.3
and 8.4 signed on behalf of Sellers by one or more duly authorized
representatives of Sellers.
8.6 No Litigation. No action, claim or proceeding shall have been
brought or threatened against any party seeking to challenge or prohibit the
transactions contemplated hereby or claims any rights to any of the Acquired
Assets.
8.7 Opinion of Counsel. Cellegy shall have received the favorable
opinion of Corrs Chambers Westgarth, counsel to Sellers, in form and substance
reasonably satisfactory to Cellegy, concerning due incorporation of Newco, valid
transfer of Product and Acquired Assets from Quay, Richcone and Lubowski to
Newco, all required corporate, shareholder and unitholder approvals of this
Agreement and the transactions contemplated hereby, no conflict between this
Agreement and any Australian law or regulation, enforceability of the Agreement
under Australian law, and such other matters as the parties may mutually agree.
Cellegy agrees to reimburse Sellers for up to AU $2,000 of the legal fees and
expenses of such firm incurred in the preparation of such opinion.
8.8 Consulting Agreement. Sheli Lubowski shall have entered into the
Consulting Agreement.
8.9 Delivery of Assets: Assignments. Sellers shall have transferred and
delivered, and Newco shall have received, all the Acquired Assets free and clear
of all Encumbrances. Sellers shall have executed, and Newco or Cellegy shall
have received, assignment agreements, in form and substance reasonably
satisfactory to Cellegy, for all trademark and other intellectual property
rights related to the Acquired Assets.
8.10 Faulding Agreement. The manufacturing agreement dated 22 February
1999 between Quay and Faulding shall have been assigned to Newco, and Faulding
shall have consented in writing to such assignment.
9. Seller's Closing Conditions. Sellers' obligations under this Agreement are
subject to the satisfaction of each of the following conditions, except as any
Seller may waive in writing with respect to itself.
9.1 Representations, Warranties and Covenants. Cellegy's
representations and warranties made in this Agreement shall remain true in all
material respects as if made on the Closing Date (except for representations and
warranties which are themselves qualified by concepts of materiality, in which
case such representations and warranties shall remain true and
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correct in all respects as if made on the Closing Date), and Cellegy shall have
performed in material respects and be in material compliance with all of the
terms and obligations of this Agreement that are required to be performed by
Cellegy at or before the Closing Date.
9.2 Delivery of Purchase Price. Cellegy shall have delivered the
Purchase Price in accordance with the terms of this Agreement, including but not
limited to duly executed certificates relating to the issuance of the Cellegy
Shares and the Warrant.
10. Registration
10.1 Definitions. For purposes of this Section 10:
(a) Act. The term "Act" means the United States Securities Act
of 1933, as amended.
(b) 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 Cellegy with the Commission.
(c) Holder. The term "Holders" means Sellers.
(d) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the requirements of the Act relating
to the form of such registration statement, and the declaration or ordering of
effectiveness of such registration statement.
(e) Registrable Securities. The term "Registrable Securities"
means: (1) all of the Cellegy Shares and Warrant Shares, and (2) any shares of
Common Stock of Cellegy issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of, any of the Cellegy Shares or
Warrant Shares; 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 to a person who
is not a Holder as defined above, (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, any Registrable Securities held by such Holder that can be
publicly sold without volume restriction within a three-month period pursuant to
Rule 144 or another applicable exemption.
(f) 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 Prospectus,
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including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
(g) Shelf Registration Statement. See Section 10.2(a).
10.2 Form S-3 Shelf Registration.
(a) Registration. Within a reasonable period of time after the
Closing, Cellegy shall prepare and file with the Commission a registration
statement on Form S-3 (or, if Cellegy 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 (such registration statement and any additional
registration statements that may be filed pursuant to the next sentence,
referred to as the "Shelf Registration Statement"). The Shelf Registration
Statement may include securities other than those held by Holders. Cellegy will
use all reasonable efforts to cause the Shelf Registration Statement to become
effective before six months after the Closing Date. Cellegy shall use all
reasonable 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 above definition of Registrable Securities, (ii) if all Registrable
Securities have been registered and sold, or (iii) two years after the effective
date of such Shelf Registration Statement; 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 a "Notice of Resale" (as defined below) has been
given, then if Cellegy furnishes to the Holders a certificate signed by the
President or Chief Executive Officer of Cellegy stating that, in the good faith
judgment of the Board of Directors of Cellegy, it would be seriously detrimental
to Cellegy 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 Cellegy which Cellegy 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 Cellegy be
premature or otherwise inadvisable at such time or (B) concurrent public filings
with the Commission of other registration statements, then Cellegy will have the
right (the "Deferral Right") to defer the commencement of the Permitted Window
for a period of not more than 30 days after receipt of the Notice of Resale; and
(iii) that Cellegy will not be required to effect any such
registration, qualification or compliance under applicable state blue sky laws
in any particular jurisdiction in which Cellegy 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, Cellegy 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.
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(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 Cellegy'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 Cellegy 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, Cellegy 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 Cellegy 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 above), or (C) Cellegy 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
above). If Cellegy 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 Cellegy 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 above or
(ii) that, in the judgment of Cellegy'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), Cellegy 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 Cellegy 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 30 days after it has been terminated pursuant to this
Section, and if the Permitted Window has been closed, then once resumed the
number of days during which such Permitted Window remains open shall be extended
by the number of days that the Permitted Window was closed. If Cellegy 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
Cellegy in connection with each Shelf Registration Statement and actions taken
by Cellegy in connection with each Permitted Window shall be borne by Cellegy.
Holder shall be responsible for any fees and expenses of its counsel or other
advisers.
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10.3 Obligations of Cellegy. Whenever required to effect the
registration of any Registrable Securities under this Agreement, Cellegy 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 Cellegy 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 Cellegy of any notification with
respect to the suspension of the qualification or 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.
(e) Use all reasonable efforts to list the Registrable
Securities for trading on Nasdaq or other stock exchange on which Cellegy's
Common Stock is then traded.
10.4 Furnish Information. It shall be a condition precedent to the
obligations of Cellegy to take any action pursuant to Section 10 that the Holder
shall furnish to Cellegy 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.
10.5 Termination of Cellegy's Obligations. Cellegy 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, (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, or another applicable
exemption, or (iii) two years from the effective date of the Shelf Registration
Statement.
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11. Survival of Representations and Warranties; Termination; Indemnity.
11.1 Survival. The obligation of the parties under this Section shall
survive the Closing.
11.2 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time before the Closing:
(a) by mutual consent of each of the parties hereto;
(b) by either Cellegy or Sellers (i) if the Closing has not
occurred by the end of business (in California) on the End Date; provided,
however, that the right to terminate this Agreement under this Section shall not
be available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the transactions contemplated by this
Agreement to occur on or before such date where such action or failure to act
constitutes a breach of this Agreement; (ii) if there shall be an order of a
court in effect preventing consummation of the transactions contemplated by this
Agreement; or (iii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the transactions
contemplated by this Agreement by any governmental entity that would make
consummation of the transactions contemplated by this Agreement illegal;
(c) by Cellegy if there shall be any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the transactions
contemplated by this Agreement by any governmental entity, which would prohibit
Cellegy's ownership or operation of any portion of the Product, Acquired Assets
or Business;
(d) by Cellegy, upon a material breach of any representation,
warranty, covenant or agreement on the part of any Seller set forth in this
Agreement, or if any representation or warranty of any Seller shall have become
untrue; provided that if such inaccuracy in any such representation and warranty
or breach by any Seller is curable by Seller through the exercise of Sellers'
commercially reasonable efforts, then Cellegy may not terminate this Agreement
under this subsection before End Date, provided that Sellers continue to
exercise commercially reasonable efforts to cure such breach (it being
understood that Cellegy may not terminate this Agreement pursuant to this
subsection if Cellegy shall have materially breached this Agreement or if such
breach by Sellers is cured before the End Date); or
(e) by Sellers, upon a material breach of any representation,
warranty, covenant or agreement on the part of Cellegy set forth in this
Agreement, or if any representation or warranty of Cellegy shall have become
untrue; provided that if such inaccuracy in any such representation and warranty
or breach by Cellegy is curable by Cellegy through the exercise of Cellegy's
commercially reasonable efforts, then Sellers may not terminate this Agreement
under this subsection before the End Date, provided that Cellegy continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that Sellers may not terminate this Agreement pursuant to this
subsection if Sellers shall have materially breached this Agreement or if such
breach by Cellegy is cured before the End Date).
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11.3 Indemnity by Warrantors/Sellers. Warrantors and Sellers shall
jointly and severally indemnify and hold harmless Cellegy, its directors,
officers, shareholders, employees and agents from any Loss arising from out of
or relating to (A) breach of any covenant or inaccuracy or untruth of a
representation or warranty of any Warrantor in this Agreement, (B) taxes,
assessments or other governmental charges arising from the Business through the
Closing Date, (C) any claim alleging liability against Seller or Newco or
Purchaser for any act, omission of any Seller or their directors, officers or
employees or circumstance relating to the business of any Seller arising before
the Closing Date, (D) other than relating to matters previously disclosed by
Sellers to Cellegy before the date hereof (whether verbally or in writing), any
claim of infringement or violation of the intellectual property rights of a
third party relating to the Product or Acquired Assets or the failure of Seller
to be the owner of the intellectual property included in the Product or Acquired
Assets or otherwise to have good title to the Product or Acquired Assets, (E)
any claim or cause of action by or on behalf of a creditor of any Seller
asserting liability against Newco as purchaser of the Acquired Assets, or
Cellegy as a shareholder of Newco, or seeking to impose any lien or any other
encumbrance upon any of the Acquired Assets, for obligations of Seller, (F) any
pilot, pre-clinical, clinical or other studies or trials or other use by any
person of the Product or Acquired Assets authorized by or conducted by, for or
at the request of any Seller relating to the Product or any of the Acquired
Assets, in each case based on acts or omissions occurring before the Closing
Date, and (G) any expenses in excess of $5,000 that are incurred by Cellegy or
Newco to obtain consents of third parties to assignment or transfer of the
Product or Acquired Assets. Except with respect to claims based on fraud or
intentional misrepresentation, the indemnity obligations of the Sellers
hereunder and the liability of the Sellers and the Warrantors collectively in
relation to any claim which may be brought against any of them by Cellegy in
connection with this Agreement, whether in respect of the indemnity obligations
or otherwise, shall in no event exceed the amounts paid to Sellers under Section
2.2 and 2.3 (with respect to the Cellegy Shares, valued on the date on which the
Cellegy Shares are received by Sellers (i.e., the Closing Date) or, if less, on
the date on which the Cellegy Shares cease to be subject to the six month
restriction set forth in Section 6.3), plus any amounts that are withheld
pursuant to Section 11.5 below.
11.4 Cellegy Indemnification. Cellegy shall indemnify and hold harmless
each Seller, its directors, officers, shareholders or unitholders (as the case
may be), employees and agents from or relating to any Loss arising from any of
the following: (A) any breach of a covenant or inaccuracy or untruth of any
representation or warranty of Cellegy in this Agreement; and (B) any claim by a
third party against Sellers, their respective directors, officers, shareholders
or unitholders (as the case may be), employees or agents, relating to the
Product or Acquired Assets to the extent caused by acts or omissions of Cellegy
or its directors, officers, employees or agents after the Closing Date relating
to the Product or Acquired Assets.
11.5 Offset of Contingent Payments. Cellegy may recover the amount of
any Loss from any contingent payment amounts otherwise payable pursuant to
Section 2.3 of this Agreement.
11.6 Basket. No claim for indemnification may be paid until the
aggregate of such claims exceeds $20,000.
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11.7 Procedures for Indemnification. An indemnified party asserting a
claim must first notify the indemnifying parties. If the indemnifying parties
dispute the claim, they shall deliver a notice of dispute within thirty (30)
days of the date on which the notice of Loss was delivered. Any such disputes
shall be resolved (if possible) by mediation pursuant to Section 13 below. If
any action, suit or proceeding shall be commenced by a third party against, or
any claim or demand be asserted by a third party against, any Seller or Cellegy,
as the case may be, in respect of which any Seller or Cellegy is entitled to
demand indemnification under this Section, then as a condition precedent
thereto, the party seeking indemnification ("Indemnitee") shall promptly notify
the other party ("Indemnitor") in writing to that effect and with reasonable
particularity. The Indemnitor shall have the right to assume the control of the
defense, compromise or settlement of such action, suit, proceeding or claim,
including the selection of counsel, subject to the right of the Indemnitee to
participate (at its own expense and with counsel of its choice) in the defense,
compromise or settlement of such action, suit, proceeding, claim or demand, and
in connection therewith the Indemnitee shall cooperate fully in all respects
with the Indemnitor in any such defense, compromise or settlement. The
Indemnitor will not compromise or settle any such action, suit, proceeding,
claim or demand without the prior written consent of the Indemnitee, which
consent will not be unreasonably withheld or delayed. So long as the Indemnitor
is defending in good faith any such action, suit, proceeding, claim or demand
asserted by a third party against the Indemnitee, the Indemnitee shall not
settle or compromise such action, suit, proceeding, claim or demand without the
prior written consent of the Indemnitor, which consent will not be unreasonably
withheld or delayed. The Indemnitee shall make available to the Indemnitor or
its agents all records and other materials in the Indemnitee's possession
reasonably required for contesting any third party claim or demand. If the
Indemnitor elects not to defend any such action, suit, proceeding, claim or
demand or fails to promptly and adequately defend any such action, suit,
proceeding, claim or demand, or if there is an inherent conflict between the
legal or factual positions of Indemnitor and Indemnitee, then the Indemnitee may
defend, through counsel of its own choosing, such action, suit, proceeding,
claim or demand and (so long as Indemnitee gives the Indemnitor at least ten
(10) days' notice of the terms of the proposed settlement thereof and permits
the Indemnitor to then undertake the defense thereof if Indemnitor objects to
the proposed settlement) to settle such action, suit, proceeding, claim or
demand (provided that the Indemnitee uses all reasonable efforts to minimize the
extent of such Losses and consults with and cooperates fully in all respects
with the Indemnitor in any such defense, compromise or settlement) and to
recover from the Indemnitor the amount of such Losses. If Cellegy is the
Indemnitee, then in addition to exercising any other rights or remedies Cellegy
may have under this Agreement, at law or in equity, Cellegy shall have the
right, at any time, at Cellegy's sole option after Cellegy gives Sellers written
notice of Cellegy's intent to do so, to offset and/or withhold all or any part
of any amounts payable by Cellegy to Seller that Cellegy considers necessary to
satisfy any claim of which Cellegy becomes aware prior to the date such payments
are made and for which Cellegy is entitled to be indemnified hereunder.
12. Confidentiality; Disclosure. The parties have separately executed a
confidentiality agreement, which shall remain in full force and effect.
Notwithstanding that agreement, the parties understand that Cellegy may issue a
press release upon the execution of this Agreement and/or the Closing, with the
form and content of such release subject to the prior written consent of
Lubowski which consent shall not be unreasonably withheld. In addition, Cellegy
will not publicly disclose on its web site any details concerning the purchase
price (including the number
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of shares of Cellegy stock or warrants issued to Sellers) or the amount of
contingent payments until such information is disclosed by Cellegy in SEC
filings or otherwise. Without limiting the foregoing, Cellegy may include
information concerning Seller, the "Product", the transactions contemplated by
the Agreement and related matters in filings that Cellegy makes with the U.S.
Securities and Exchange Commission or other federal and state regulatory
authorities. Sellers agree to cooperate with Cellegy to provide such information
(including without limitation any financial information) that may be required.
13. Governing Law; Mediation. This Agreement and any disputes arising out of or
relating to this Agreement, shall be governed by the laws of New South Wales.
The parties agree that the parties shall first attempt to resolve any dispute
arising out of or relating to this Agreement by mediation to be held in Sydney,
Australia by a mediator appointed by the parties and a filing agreement, by a
mediator nominated by the President for the time being of The Law Society of New
South Wales. Each party shall select one mediator, and the two mediators so
selected shall appoint the third mediator. The parties shall each pay one-half
of the costs of the mediators. The mediation shall be resolved as soon as
reasonably possible. The parties irrevocably and unconditionally submit to the
jurisdiction of the courts of New South Wales and any courts which have
jurisdiction to hear appeals from any of those courts and waive any right to
object to any proceedings being brought in those courts for any reason.
14. Miscellaneous
14.1 Notices. Every notice, consent and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed given
if delivered personally or by commercial messenger service, by reputable
overnight mail or similar courier services, mailed by registered or certified
mail (return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice), provided,
however, that notices sent by ordinary mail will not be deemed guaranteed
received:
if to Purchaser, to:
Cellegy Pharmaceuticals, Inc.
349 Oyster Point Boulevard, Suite 200
South San Francisco, California 94080
Attention: President
Telephone No.: (650) 616-2200
Facsimile No.: (650) 616-2222
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: C. Kevin Kelso, Esq.
Telephone No.: (650) 858-7600
Facsimile No.: (650) 494-1417
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if to Sellers, to:
4 Cranbrook Rd., Rose Bay, NSW
Australia 2029
Attention: Mr. David Lubowski
Telephone No.: (02) 9587 8309
Facsimile No.: (02) 9362 0367
with a copy to:
8/21 Thornton St, Darling Point, NSW
Australia 2027
Attention: Mr. Michael Kloster
Telephone No.: 9363 3316
Facsimile No.: 9363 5526
Notices shall be deemed delivered upon receipt if delivered personally
or by messenger service, two (2) business days after delivery with a reputable
courier service for delivery as soon as possible to the other party, seven (7)
days after deposit in the mail if sent by registered or certified mail, and one
business day after transmission by facsimile.
14.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
14.4 Entire Agreement; Assignment. This Agreement, and the Exhibits and
Schedules hereto (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other person any
rights or remedies hereunder; and (c) may not be assigned unless agreed to by
the other parties hereto, except that Cellegy may assign its rights and delegate
its obligations hereunder to majority-owned subsidiaries of Cellegy provided
that Cellegy remains contingently liable.
14.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will
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achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
14.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
14.7 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
14.8 Expenses; Attorneys Fees. Each party will be responsible for its
own fees and expenses in connection with the proposed transaction. Sellers
acknowledge that they have not entered into, and will not enter into, any
agreement that would result in a broker's or finder's fee pertaining to the
proposed transaction.
14.9 Further Assurances. Each party shall promptly execute all
documents and do all things that any other party from time to time reasonably
requires of it to effect, perfect or complete the provisions of this Agreement
and any transaction contemplated by it.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first written above.
CELLEGY PHARMACEUTICALS, INC. CELLEGY AUSTRALIA PTY LTD
By: /s/ K. Michael Forrest By: /s/ Michael Kloster
-------------------------------- ------------------------------
By:
Its: President & CEO ------------------------------
-------------------------------
Its: Directors
RICHCONE PTY LTD QUAY PHARMACEUTICALS PTY. LTD.
By: /s/ David Zachary Lubowski By: /s/ Michael Kloster
-------------------------------- ------------------------------
By: /s/ David Zachary Lubowski By:
-------------------------------- ------------------------------
Its: Directors Its: Directors
OTHER PARTIES:
/s/ David Zachary Lubowski
----------------------------------
David Lubowski
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EXHIBIT A
Acquired Assets
Australian Patent Application No. 708694 (74545/94)
Australian Patent Application No. 88330/98
Republic of South Africa Patent No. 95/0511
Australian Trade Mark: Rectogesic No. 776161
Australian Trade Mark: Xemrol No. 745752
Australian Trade Mark: Anogesic No. 777250
South African Trade Mark Application (pending): Rectogesic No. 99/03101
South African Trade Mark Application (pending): Anogesic No. 099/02620
Australian TGA Registration: Rectogesic ARTG Registration No. AUST R 66382
South African Registration package (to be submitted), Volumes 1&2, dated Jan
2000
Closing inventory
Agreements:
FH Faulding Ltd & Quay Pharmaceuticals Ltd, 22 Feb 1999
Publicis Wellcare (Mojo Advertising) & Quay Pharmaceuticals Ltd, 2 June 1999
Intercity Business Centre & Quay Pharmaceuticals Ltd, 1 Oct 1998
Clear Sales & Quay Pharmaceuticals Ltd, 14 Dec 1998
Assumed obligations:
None.
Excluded obligations:
Assets
1. Debtors
2. Cash on hand
Liabilities
1. Bank overdraft
2. Loans from Koren Laboratories
3. Accrued expenses
4. Payables
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