UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 17, 2012
| LA JOLLA PHARMACEUTICAL COMPANY |
(Exact name of registrant as specified in its charter)
| Delaware | 0-24274 | 33-0361285 | ||
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 4370 La Jolla Village Drive, Suite 400, San Diego, California 92122 |
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (858) 452-6600
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement. |
On January 19, 2012, La Jolla Pharmaceutical Company (“ La Jolla ” or the “ Company ”) entered into an Asset Purchase Agreement (the “ Agreement ”), dated as of January 19, 2012, with Solana Therapeutics, Inc., a Delaware corporation (“ Solana ”). Pursuant to the Agreement, La Jolla agreed to acquire from Solana global development and commercialization rights to and certain assets related to an investigational new drug referred to as GCS-100 (“ GCS-100 ”), which include patents and patent rights, regulatory registrations and study drug supplies (collectively, the “ Purchased Assets ”). The acquisition of the Purchased Assets was completed on January 19, 2012 (the “ Closing ”). In consideration for the Purchased Assets, La Jolla agreed to pay a nominal amount at the Closing and agreed to use commercially reasonable efforts to complete a Phase 2a clinical study of GCS-100.
On January 19, 2012, La Jolla entered into a Consent and Amendment Agreement (the “ Amendment Agreement ”) with certain of its Series C-1 1 Convertible Preferred Stock holders to amend the terms of the Securities Purchase Agreement, dated as of May 24, 2010 (“ Securities Purchase Agreement ”), and the forms of Cash Warrants (as defined in the Securities Purchase Agreement) and Cashless Warrants (as defined in the Securities Purchase Agreement), as well as to adopt the Certificate of Designations, Preferences and Rights of Series C-1 2 Convertible Preferred Stock (“ Series C-1 2 Stock ”), Series C-2 2 Convertible Preferred Stock (“ Series C-2 2 Stock ”), Series D-1 2 Convertible Preferred Stock (“ Series D-1 2 Stock ”) and Series D-2 2 Convertible Preferred Stock (“ Series D-2 2 Stock ”) (the “ Series C/D Certificate ”). Under the Amendment Agreement, the Termination Date (as defined in the Cash Warrants and Cashless Warrants) is amended to extend the Termination Date to the date that is three years following the Closing of the asset purchase.
As part of the Amendment Agreement, La Jolla designated four new series of preferred stock on January 19, 2012: its Series C-1 2 Stock, Series C-2 2 Stock, Series D-1 2 Stock, and Series D-2 2 Stock (collectively, the “ New Preferred Stock ”). It exchanged on a one-for-one exchange ratio each share of its existing Series C-1 1 Convertible Preferred Stock that was outstanding for a new share of Series C-1 2 Stock. Each holder of New Preferred Stock may convert its New Preferred Stock shares into La Jolla’s common stock, par value $0.0001 per share (“ Common Stock ”), subject to a weekly conversion cap equal to the product of the face amount of the outstanding Series C-1 2 Stock held by the stockholder on the Closing multiplied by the Conversion Cap (as defined in the Series C/D Certificate) for such week. Depending on the Volume-Weighted Closing Price, or VWCP (as defined in the Series C/D Certificate), for the last 3 Trading Days (as defined in the Series C/D Certificate) during the previous calendar week, the Conversion Cap can range from 0% to 3.76%. Each New Preferred Stock holder may only convert such preferred shares into Common Stock to the extent that after such conversion such holder owns less than 9.999% of La Jolla’s issued and outstanding Common Stock.
On the first anniversary of the Agreement, the holders of Series C-1 2 Stock may redeem a number of shares of Series C-1 2 Stock equal to the lesser of (i) the entire balance of the outstanding Series C-1 2 Stock, and (ii) 2,900 shares of Series C-1 2 Stock. The New Preferred Stock also allows for redemption by its holders following the occurrence of certain other events. If the holders of Series C-1 2 Stock redeem a number of shares of Series C-1 2 Stock equal to or greater than the lesser of (i) the entire balance of the outstanding Series C-1 2 Stock and (ii) 2,900 shares of Series C-1 2 Stock, then Solana shall have the right for a period of 10 business days following the earlier of (i) or (ii) above, to elect to purchase from La Jolla all right, title and interest in and to the Purchased Assets, including any assets and patent rights arising from the Purchased Assets after the Closing of the asset purchase, upon repaying to La Jolla the nominal consideration paid pursuant to the Agreement.
The Agreement, Amendment Agreement and the Series C/D Certificate (the “ Transaction Agreements ”) are filed herewith. The Transaction Agreements are not intended to provide any other factual information about La Jolla or Solana. The representations, warranties and covenants contained in the Transaction Agreements were made solely for purposes of the Transaction Agreements and, as of specific dates, were solely for the benefit of the parties to the Transaction Agreements, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Transaction Agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders. Security holders of La Jolla are not third-party beneficiaries under the Transaction Agreements and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of La Jolla or Solana. Moreover, information concerning the subject matter of the representations and warranties may have changed after the date of the Transaction Agreements, which subsequent information may or may not be fully reflected in La Jolla’s public disclosures.
The foregoing description of the Transaction Agreements do not purport to be complete and are qualified in their entirety by reference to each Transaction Agreement, copies of which are attached as Exhibits hereto and incorporated herein by reference.
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
The information set forth under Item 1.01 above is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities |
The information set forth under Item 1.01 above is incorporated herein by reference. The exchange of Series C-1 1 Convertible Preferred Stock for Series C-1 2 Convertible Preferred Stock was accomplished pursuant to Section 3(a)(9) under the Securities Act of 1933, as amended.
| Item 3.03 | Material Modification of Rights of Security Holders |
The information set forth under Item 1.01 above regarding the exchange of the Series C-1 1 Convertible Preferred Stock is incorporated herein by reference.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On January 19, 2012, effective upon the Closing of the asset purchase, George F. Tidmarsh, M.D., Ph.D., age 52, was appointed as the President and Chief Executive Officer of the Company. As such, on January 19, 2012, the Company entered into an employment agreement (the “ Employment Agreement ”) with Dr. Tidmarsh. Dr. Tidmarsh’s annual base salary will be $240,000 for the first year of his employment with the Company and will increase to $420,000 on the one- year anniversary of his employment start date. In addition, four weeks following the Conversion Price Adjustment Date (as defined in the Series C/D Certificate), Dr. Tidmarsh will receive an option to purchase the number of shares of Common Stock equal to 7.5% of the Company’s fully diluted, as-converted shares (the “ First Option ”), subject to the terms and conditions of any applicable award agreements and other restrictions and limitations generally applicable to Common Stock or equity awards held by Company executives or otherwise imposed by law. Subject to applicable terms and conditions, the First Option shall vest with respect to 25% of the underlying shares on the one-year anniversary of Dr. Tidmarsh’s employment start date, with the remainder vesting monthly, in equal monthly installments, over the three years thereafter. The First Option will be exercisable at a price equal to the fair market value of a share of Common Stock on the date of the grant of the First Option. Dr. Tidmarsh will also receive an additional option to purchase the number of shares of Common Stock equal to 7.5% of the Company’s fully diluted, as-converted shares on the second anniversary of Dr. Tidmarsh’s employment start date, less the number of shares subject to the First Option on the First Option grant date (the “ Second Option ”), and the Second Option will also be subject to the same terms and conditions as the First Option. Subject to applicable terms and conditions, 50% of the underlying shares of the Second Option will be fully vested on the date of the grant with the remainder vesting monthly, in equal monthly installments, over the two years thereafter. The Second Option will be exercisable at a price equal to the fair market value of a share of Common Stock on the date of the grant of the Second Option.
Dr. Tidmarsh’s employment history of the previous five years is as follows: he has been the Chief Executive Officer of Solana since August 2011; he was a Senior Vice President and Chief Scientific Officer of Spectrum Pharmaceuticals, Inc. from July 2010 to July 2011; he has been an Associate Professor of Neonatology at Stanford University School of Medicine since October 2010; he founded and was the Chief Executive Officer of Metronome Therapeutics, Inc. from March 2006 to July 2010; and he founded and was the Chief Executive Officer of Horizon Pharma, Inc. from September 2005 to July 2008.
On January 19, 2012, Dr. Tidmarsh and Saiid Zarrabian were appointed to the Board of Directors of the Company. Dr. Tidmarsh was appointed as a Class III director and Mr. Zarrabian was appointed as a Class I director, each to serve until their successors are elected and qualified. Bertrand C. Liang, M.D., Ph.D. resigned from the Board of Directors and all committees and related positions of the Company on January 17, 2012 and Robert A. Fildes, Ph.D. and Deirdre Y. Gillespie, M.D. resigned from the Board of Directors and all committees and related positions of the Company on
January 19, 2012. The resignation of Dr. Liang, Dr. Fildes and Dr. Gillespie did not involve any disagreement with the Company. Mr. Zarrabian’s compensation for serving on the Board of Directors of the Company is $8,750 quarterly, and, four weeks following the Conversion Price Adjustment Date (as defined in the Series C/D Certificate), he will also receive an option to purchase a number of shares equal to 0.45% of the Company’s fully diluted, as-converted Common Stock (“ Zarrabian Option ”), subject to the terms and conditions of any applicable award agreements and other restrictions and limitations generally applicable to Common Stock or otherwise imposed by law. The Zarrabian Option will be exercisable at a price equal to the fair market value of a share of Common Stock on the date of the grant, which option will vest equally, on a quarterly basis, for one year following the commencement of his service on the Company’s Board of Directors.
On January 19, 2012, effective upon the Closing of the asset purchase, Dr. Gillespie resigned as the Company’s President and Chief Executive Officer, and Gail A. Sloan, C.P.A., resigned as the Company’s Chief Financial Officer. Both of the Company’s aforementioned officers entered into separation agreements (collectively, the “ Separation Agreements ”) with the Company, and the Company agreed to make separation payments to Dr. Gillespie of $77,778 and to Ms. Sloan of $62,222.
The foregoing description of the Separation Agreements and the Employment Agreement do not purport to be complete and are qualified in their entirety by reference to each Separation Agreement and the Employment Agreement, copies of which are attached as Exhibits hereto and incorporated herein by reference.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
The Company will file its Series C/D Certificate with the State of Delaware on January 20, 2012. The Series C/D Certificate provides the holders with the following rights:
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The holders of New Preferred Stock do not have voting rights unless required by the Delaware General Corporation Law or as set forth below. |
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Cumulative dividends are payable on the Series C-1 2 Stock and Series C-2 2 Stock (together referred to herein as the “ Series C Preferred ”) at a rate of 15% per annum, each accruing from the date of issuance through the date of conversion or redemption, payable semi-annually in shares of Series C-1 2 Stock and Series C-2 2 Stock, respectively. Neither the Series D-1 2 Stock nor the Series D-2 2 Stock is entitled to dividends. |
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The New Preferred Stock is convertible into Common Stock, initially at a rate of 166,667 shares of Common Stock for each share of New Preferred Stock, subject to certain limitations discussed below, at the election of the holders of New Preferred Stock. The conversion rate will be adjusted for certain events, such as stock splits, stock dividends, reclassifications and recapitalizations, and the New Preferred Stock is subject to full-ratchet anti-dilution protection such that any subsequent issuance of Common Stock below the effective conversion price of the New Preferred Stock at the time of such issuance automatically adjusts the conversion price of the New Preferred Stock to such lower price. There are also limits on the amount of New Preferred Stock that can be converted and the timing of such conversions. |
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Upon a Liquidation Event (as defined in each Series C/D Certificate), no other class or series of capital stock can receive any payment unless the New Preferred Stock has first received a payment in an amount equal to $1,000 per share, plus all accrued and unpaid dividends, if applicable. |
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In the event that certain actions occur without the prior written consent of the holders of 80% of the shares of New Preferred Stock and Warrants (as defined in the Securities Purchase Agreement) on an as-converted basis (the “ Requisite Holders ”), such as the Company’s material breach of any material representation or warranty under the Securities Purchase Agreement, a suspension of the trading of the Common Stock, the failure to timely deliver shares on conversion of the New Preferred Stock, the Company commences a bankruptcy proceeding, winding up, dissolution and the like, or the consummation of a Change of Control (as defined in the Series C/D Certificate), then the holders of the Series C Preferred shall have the right, upon the delivery of a notice to the Company by the Requisite Holders, to have such shares redeemed by the Company for an amount equal to the greater of $1,000 per share, plus accrued and unpaid dividends, or the fair market value of the underlying Common Stock issuable upon conversion of the Series C Preferred. |
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In the event that the Company fails to timely deliver shares on conversion of the New Preferred Stock, under certain circumstances, the Company must pay the New Preferred Stock holder’s costs and expenses of acquiring Cover Shares (as defined in the Series C/D Certificate). |
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Upon certain redemption events, such as the Company’s breach of covenants or material representations or warranties under the Securities Purchase Agreement, the conversion price of the New Preferred Stock decreases to 10% of the conversion price in effect immediately before such redemption event. |
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So long as at least 1,000 shares of New Preferred Stock remain outstanding (or at least 3,000 shares of New Preferred Stock remain outstanding if the Cash Warrants have been fully exercised), the Company may not take a variety of actions (such as altering the rights, powers, preferences or privileges of the New Preferred Stock so as to effect the New Preferred Stock adversely, amending any provision of the Company’s certificate of incorporation, setting aside any monies for the redemption, purchase or other acquisition of, or declare or pay any dividend or make any Distribution (as defined in the Series C/D Certificate) or other distribution other than pursuant to the Series C/D Certificate or equity compensation plans, increasing the value of the Common Stock, entering into an agreement for a Strategic Transaction or Change of Control (as each is defined in the Series C/D Certificate), consummating any financing or filing a registration statement with the Securities and Exchange Commission, incurring liabilities for no consideration or for cash consideration, property, services or other exchange, or taking any action or entering into any agreement causing the Company’s Net Cash (as defined in the Series C/D Certificate) to fall below $2,900,000 until the date that is thirteen months from the Closing of the asset purchase) without the prior approval of the Requisite Holders. |
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Subject to the approval of the Requisite Holders, 2,900 shares of the Series C-1 2 Stock are redeemable on, and only on, the twelve month anniversary of the Closing of the asset purchase. |
The disclosure regarding the Reverse Stock Split (defined below) set forth below under Item 8.01 is incorporated herein by reference.
| Item 8.01 | Other Events |
The Company’s stockholders previously approved a proposal that authorized the Company’s Board of Directors, in its discretion, to effect a reverse stock split of the Company’s outstanding Common Stock subject to certain parameters. The Series C-1 1 Convertible Preferred Stock holders of the Company authorized the Company’s Board of Directors to effect and the Board of Directors has since approved a reverse stock split to be implemented within eight weeks of the date of Closing of the asset purchase, with such reverse stock split having an exchange ratio of 1-for-100 (the “ Reverse Stock Split ”). No fractional shares will be issued, and, instead, fractional shares will be rounded up to the nearest whole share. Pursuant to the Series C/D Certificate, the conversion price for the New Preferred Stock will each automatically be adjusted downward if, after the Reverse Stock Split, on the Conversion Price Adjustment Date (as defined in the Series C/D Certificate), the VWCP (as defined in the Series C/D Certificate) for the three consecutive Trading Day period ending on the last Trading Day prior to the Conversion Price Adjustment Date (the “ Adjustment 3-Day Average Price ”) is less than the product of the conversion price then in effect multiplied by ten. If this is the case, then the conversion price of the New Preferred Stock shall be reduced to a price equal to ten percent (10%) of the Adjustment 3-Day Average Price.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) |
Exhibits |
| 2.1 | Asset Purchase Agreement by and between La Jolla Pharmaceutical Company and Solana Therapeutics, Inc., dated as of January 19, 2012. | |
| 3.1 | Certificate of Designations, Preferences and Rights of Series C-1 2 Convertible Preferred Stock, Series C-2 2 Convertible Preferred Stock, Series D-1 2 Convertible Preferred Stock and Series D-2 2 Convertible Preferred Stock. | |
| 10.1 | Consent and Amendment Agreement by and among La Jolla Pharmaceutical Company and the undersigned parties thereto, dated as of January 19, 2012. | |
| 10.2 | Confidential Separation Agreement and General Release of All Claims by and between La Jolla Pharmaceutical Company and Deirdre Y. Gillespie, M.D., dated as of January 13, 2012. | |
| 10.3 | Confidential Separation Agreement and General Release of All Claims by and between La Jolla Pharmaceutical Company and Gail A. Sloan, dated as of January 13, 2012. | |
| 10.4 | Employment Offer Letter by and between La Jolla Pharmaceutical Company and George Francis Tidmarsh, M.D., Ph.D., dated as of January 19, 2012. | |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LA JOLLA PHARMACEUTICAL COMPANY | ||||||
| Date: January 20, 2012 | By: |
/s/ George Tidmarsh |
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| Name: George Tidmarsh | ||||||
| Title: President and Chief Executive Officer | ||||||
Index to Exhibits
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Exhibit No. |
Description |
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| 2.1 | Asset Purchase Agreement by and between La Jolla Pharmaceutical Company and Solana Therapeutics, Inc., dated as of January 19, 2012. | |
| 3.1 | Certificate of Designations, Preferences and Rights of Series C-1 2 Convertible Preferred Stock, Series C-2 2 Convertible Preferred Stock, Series D-1 2 Convertible Preferred Stock and Series D-2 2 Convertible Preferred Stock. | |
| 10.1 | Consent and Amendment Agreement by and among La Jolla Pharmaceutical Company and the undersigned parties thereto, dated as of January 19, 2012. | |
| 10.2 | Confidential Separation Agreement and General Release of All Claims by and between La Jolla Pharmaceutical Company and Deirdre Y. Gillespie, M.D., dated as of January 13, 2012. | |
| 10.3 | Confidential Separation Agreement and General Release of All Claims by and between La Jolla Pharmaceutical Company and Gail A. Sloan, dated as of January 13, 2012. | |
| 10.4 | Employment Offer Letter by and between La Jolla Pharmaceutical Company and George Francis Tidmarsh, M.D., Ph.D., dated as of January 19, 2012. | |
Exhibit 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of January 19, 2012 (the “ Effective Date ”) by and between Solana Therapeutics, Inc., a Delaware corporation (“ Solana ”), and La Jolla Pharmaceutical Company, a Delaware corporation (“ La Jolla ”). Solana and La Jolla may each be referred to herein individually as a “ Party ” and collectively as the “ Parties .”
BACKGROUND
WHEREAS, Solana exclusively owns or possesses certain proprietary rights and know-how and technology related to the Compound (as defined below), as well as API (Active Pharmaceutical Ingredient) and related reference standards;
WHEREAS, Solana desires to sell, assign, transfer, convey and deliver to La Jolla, and La Jolla shall purchase, acquire and accept from Solana, the Purchased Assets (as defined below), upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, in connection with the purchase and sale of the Purchased Assets, La Jolla and Solana desire to enter into the Ancillary Agreements (as defined below).
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
AGREEMENT
I. DEFINITIONS
1.1 “ Ancillary Agreements ” means, collectively, the Bill of Sale, Assignment and Assumption Agreement and Patent Assignment Agreement.
1.2 “ Affiliate(s) ” shall mean a corporation or other entity or person that directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. A corporation or other entity shall be in control of another corporation or entity if it owns, or directly or indirectly controls, more than 50% of the voting stock or other ownership interests of the other corporation or entity, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other corporation or entity.
1.3 “ Applicable Laws ” means all statutes, ordinances, regulations, rules, or orders of any kind whatsoever pertaining to any of the activities contemplated by this Agreement, including, without limitation, the Federal Food, Drug & Cosmetic Act, Prescription Drug Marketing Act, Generic Drug Enforcement Act of 1992 (21 U.S.C. § 335a et seq.), and Anti-Kickback Statute (42 U.S.C. § 1320a-7b et seq.), and any other regulations promulgated by any Regulatory Authority, all as amended from time to time.
1.4 “ Assigned Agreements ” shall have the meaning set forth in Section 3.1(e).
1.5 “ Assignment and Assumption Agreement ” means that certain assignment and assumption agreement in substantially the form and substance attached hereto as Exhibit A .
1.6 “ Assumed Liabilities ” means all obligations and liabilities arising under or relating to the Purchased Assets solely to the extent arising after the Closing, except to the extent such obligations and liabilities would have been paid, performed or discharged by Solana prior to the Closing Date but for breach by Solana or any obligations and liabilities arising out of a breach by Solana.
1.7 “ Bill of Sale ” means a bill of sale in substantially the form and substance attached hereto as Exhibit B .
1.8 “ Books and Records ” means the existing data, books and records, in the possession of Solana or its Affiliates, whether tangible or intangible, of Solana and its Affiliates, directly or indirectly relating to the Purchased Assets, including, without limitation, all books, lab notebooks, lab tissues, records, correspondence, documents and files relating to the Purchased Assets, with, of, from, or pertaining to, the FDA, the USPTO, patent offices of other jurisdictions within the Territory, and other Regulatory Authorities. For avoidance of doubt, the term Books and Records does not include Solana’s stock ledger, minute book, capitalization records, employee records, tax returns, financial statements and other corporate records.
1.9 “ Compounds ” means Solana’s proprietary compound known as GCS-100, having the chemical structure set forth on Exhibit C .
1.10 “ EMA ” means the European Medicines Agency.
1.11 “ Encumbrance ” means any lien, mortgage, security interest, pledge, restriction on transferability, defect of title or other claim, charge or encumbrance of any nature whatsoever on any asset, property or property interest, tangible or intangible.
1.12 “ FDA ” means the United States Food and Drug Administration.
1.13 “ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
1.14 “ Indication ” means the treatment of ovarian cancer.
1.15 “ Inventory ” means study drug supplies incorporating the Compound, wherever located, including raw materials, work in process, semi-finished and finished supplies.
1.16 “ Knowledge ” means all facts actually known, or which reasonably should be known based upon reasonable inquiry, by the relevant personnel with primary responsibility for the matter in question on a day to day basis.
1.17 “ Losses ” means any and all losses, liabilities, damages, claims, awards, judgments, costs and expenses (including, without limitation, reasonable attorneys’ fees) actually suffered or incurred.
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1.18 “ Material Adverse Effect ” means any material adverse effect on the business, operations, properties, prospects, or financial condition of a Party and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of such Party to perform any of its material obligations under this Agreement or any of the Ancillary Agreements in any material respect.
1.19 “ Patent Assignment Agreement ” means a patent assignment in substantially the form and substance attached hereto as Exhibit D .
1.20 “ Patent Files ” mean originals (or copies, to the extent that only copies are available to Solana or its agents), of the following, to the extent comprising or relating to the Solana Patent Rights: (i) all patents, patent applications, assignments and correspondence to and from the USPTO and any other foreign patent offices (whether or not to or from Solana); and (ii) all files, records, workbooks (including, without limitation, laboratory notebooks), correspondence, data, notes and information in the possession or control of Solana, its Affiliates or its agents.
1.21 “ Patent Rights ” means all rights arising under patents or patent applications, utility models, utility model applications, petty patents, design patents and certificates of invention and patent disclosures, as well as any substitutions, continuations, continuations-in-part, divisionals and all reissues, renewals, revisions, reexaminations, extensions, supplementary protection certificates, confirmations, revalidations, restorations, registrations or patents of addition in connection with any of the foregoing.
1.22 “ Phase IIa Trial ” means the first controlled clinical study measuring the efficacy of any Product in the Indication.
1.23 “ Product ” means any form or dosage of pharmaceutical composition or preparation, including, without limitation, the active pharmaceutical ingredient, and product (whether or not in finished form labeled and packaged) for sale, or intended for future sale, by prescription, over-the-counter or any other method that contains the Compound as an active ingredient (including combination products).
1.24 “ Purchased Assets ” means: (i) the Solana Technology; (ii) all Registrations of Solana in the Territory relating, directly or indirectly, to the testing, clinical testing, commercialization, promotion or marketing of the Compound or the Products, including, without limitation, the original documents and all related data, records and correspondence related thereto, and all related Registration applications therefor or renewals thereof; (iii) the Inventory; (iv) the Books and Records; and (v) the Assigned Agreements.
1.25 “ Registrations ” means the authorizations, applications, registrations, approvals, clearances, licenses, other permits, certificates or exemptions issued by any Regulatory Authorities of any applicable jurisdiction (including, without limitation, investigational new drug applications, new drug applications, supplemental new drug applications, or similar or foreign equivalents, product recertifications, manufacturing approvals and authorizations, pricing and reimbursement approvals, labeling approvals or their foreign equivalent) that are required for the research, development, clinical testing, manufacture, distribution, import, export, marketing, storage, transportation, use or sale of any Product.
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1.26 “ Regulatory Authority ” means the FDA, the EMA or any other counterparty of the FDA outside the United States, or any other supranational, national, regional, federal, state, provincial or local regulatory agency department, bureau, commission, counsel or other Governmental Authority, regulating or otherwise exercising authority over the research, development, clinical testing, manufacture, distribution, import, export, marketing, storage, transportation, use or sale of the Products.
1.27 “ Solana Know-How ” means information relating to withdrawn, issued or pending registrations, approvals, licenses or other permits, certificates or exemptions issued by any Regulatory Authorities, and all Technical Information, know-how, techniques, processes, methods, formulations, specifications, chemical materials, biologic materials, assays, marketing plans and strategies, software (including source code and related documentation) and other data and information (and all copyrights, trade secret rights and other intellectual property rights relating to any of the foregoing) owned by Solana as of the Closing and which relates, directly or indirectly, to the Compounds.
1.28 “ Solana Patent Rights ” mean all Patent Rights including those listed on Exhibit E as well as all Patent Rights owned by Solana or under obligation to be assigned to Solana related to the Compounds.
1.29 “ Solana Technology ” means the (i) Solana Know-How, and (ii) Solana Patent Rights.
1.30 “ Technical Information ” means any and all technical and/or scientific data and information, including any chemical, formulation, structural, functional biological, chemical, pharmacological, toxicological, pharmaceutical, physical, analytical, process, pre-clinical, clinical, assay, control, safety, manufacturing and quality control data and information, and all copyrights, trade secret rights and other intellectual property rights relating to any of the foregoing.
1.31 “ Territory ” means worldwide.
1.32 “ Third Part(y/ies) ” means any person(s) or entit(y/ies) other than Solana and its Affiliates and La Jolla and its Affiliates.
1.33 “ USPTO ” means the United States Patent and Trademark Office.
II. PURCHASE AND SALE OF PURCHASED ASSETS.
2.1 Sale and Assumption . Subject to the terms and conditions of this Agreement and the satisfaction of the conditions set forth in Article V, Solana shall sell, assign, transfer, convey and deliver to La Jolla, and La Jolla shall purchase, acquire and accept from Solana, at the Closing all right, title and interest in and to the Purchased Assets, free and clear of any and all Encumbrances. In connection with the sale, transfer, conveyance, assignment and delivery of the Purchased Assets, at the Closing, La Jolla shall assume and agree to pay, perform and discharge
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when due the Assumed Liabilities. All assets of Solana, whether tangible or intangible, other than the Purchased Assets, shall remain the sole property of Solana, including, without limitation, all cash and cash equivalents, deposits, corporate records, technology, know how, intellectual property, products, equipment, computers and furniture.
2.2 Purchase Price . The purchase price for the Purchased Assets shall be $100.00, to be paid by La Jolla to Solana at the Closing.
2.3 Excluded Liabilities . Except for the Assumed Liabilities, La Jolla does not assume and shall not be responsible for, and shall not otherwise bear the economic burden of: (A) any liabilities, obligations, debts or expenses of Solana or any of its Affiliates, including, without limitation, any liabilities for accounts payable; accrued expenses; taxes; indebtedness for borrowed money; contractual obligations other than arising under the Assigned Agreements, whether past, accrued or executory; obligations to employees and former employees in respect of accrued salaries, wages, vacation pay, severance pay and obligations under the benefit plans; liabilities to Regulatory Authorities; liabilities for injuries to persons or property; other tort liabilities; liabilities under environmental laws; liabilities under collective bargaining agreements and pending employee grievances; product warranty claims and violations of or obligations under Applicable Laws or otherwise, all of the foregoing from the beginning of time, or (B) any liabilities, obligations, debts or expenses of Solana or any of its Affiliates arising under or relating to the Assigned Agreements, to the extent that such obligations arose on or prior to the Closing Date, (collectively, the “ Excluded Liabilities ”). As between Solana on the one hand and La Jolla on the other hand, Solana shall be exclusively responsible for all of the Excluded Liabilities.
2.4 Closing . The closing of the purchase and sale of the Purchased Assets hereunder (the “ Closing ”) shall take place by the exchange of signed documents and the Parties’ express confirmation and acknowledgment as to the occurrence of the Closing, concurrent with the satisfaction or waiver of the closing conditions set forth in Article V, or on such other date as the Parties may mutually agree upon in writing and will be deemed effective for tax, accounting and other computational purposes as of 11:59 p.m. Pacific Time on such date (the “ Closing Date ”); provided that on the Closing Date, the Parties exchange (or cause to be exchanged) the certificates and/or other documents, or do, or cause to be done, all of the things respectively required of each Party as specified in Sections 2.6(a) and 2.6(b).
2.5 Allocation of Purchase Price . The Purchase Price shall be allocated among the Purchased Assets in the respective proportions shown on Schedule 2.5 (the “ Allocation Schedule ”). Solana and La Jolla agree to file all tax returns and take all tax positions with any taxing authority consistent with the Allocation Schedule. Solana and La Jolla agree to promptly provide the other party upon reasonable request with any additional information and reasonable assistance, at the requesting party’s expense, required to complete all forms or compute taxes arising in connection with (or otherwise affected by) the transactions contemplated hereunder.
2.6 Transactions on the Closing Date . On the Closing Date, subject to the terms and conditions hereof:
(a) Actions and Deliveries by Solana . Solana shall:
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(i) transfer, convey and deliver, or cause to be transferred, conveyed, and delivered, to La Jolla the Purchased Assets, including, without limitation, the Patent Files, and all other Books and Records;
(ii) deliver to La Jolla all Ancillary Agreements to which Solana is a party, each of which shall have been validly executed by a duly authorized representative of Solana;
(iii) deliver to La Jolla control of the Inventory in the quantities stated on Exhibit F , and such Inventory shall conform in all material respects to the specifications for the Compound and the Product set forth on Exhibit F and shall be delivered in accordance with La Jolla’s written instructions;
(iv) deliver to La Jolla certified copies of resolutions of Solana’s directors and stockholders authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements; and
(v) deliver to La Jolla such other documents, certificates or instruments, in form and substance reasonably satisfactory to La Jolla, as La Jolla may reasonably request in order to effectuate the transactions contemplated by this Agreement or any Ancillary Agreements.
(b) Actions and Deliveries by La Jolla . La Jolla shall deliver the respective deliverables to Solana:
(i) the consideration due to Solana at Closing in accordance with Section 2.2;
(ii) all Ancillary Agreements to which they are a party, each of which shall have been validly executed by a duly authorized representative of La Jolla;
(iii) certified copies of resolutions of La Jolla’s directors and preferred stockholders authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements;
(iv) deliver to La Jolla a lien release by Tang Capital Partners, L.P. (“Tang”) providing for the full release, discharge and satisfaction of any and all Encumbrances and/or other claims that Tang or any of its Affiliates may have against any Purchased Assets;
(v) confirmation that George Tidmarsh is appointed as the Chief Executive Officer and Secretary of La Jolla and as a member of the Board of Directors of La Jolla effective upon the Closing;
(vi) confirmation that Saiid Zarrabian is appointed as a member of the Board of Directors of La Jolla effective upon the Closing;
(vii) separation agreement with Dr. Deirdre Gillespie providing for a one-time separation payment of $77,778 to Dr. Gillespie in lieu of any severance payment she is otherwise entitled to receive under any agreement with La Jolla and contingent upon the execution by Dr. Gillespie of a release and waiver of any and all claims against La Jolla;
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(viii) separation agreement with Ms. Gail Sloan providing for a one-time separation payment of $62,222 to Ms. Sloan in lieu of any severance payments she may otherwise be entitled to receive under any agreement with La Jolla, contingent upon the execution by Ms. Sloan of a release and waiver of any and all claims against La Jolla; and
(ix) such other documents and instruments, in form and substance reasonably satisfactory to Solana, as Solana may reasonably request in order to effect or evidence the transactions contemplated by this Agreement or any Ancillary Agreements.
III. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of Solana . Solana hereby represents and warrants to La Jolla that, as of the Closing Date, except as set forth in the schedule of exceptions attached hereto with each numbered schedule thereof corresponding to the section number herein:
(a) Organization, Good Standing and Power . Solana is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. Solana does not have any direct or indirect subsidiaries or own securities of any kind in any other entity. Solana is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to do so would not constitute a Material Adverse Effect.
(b) Authorization; Enforcement . Solana has the requisite corporate power and authority to enter into and perform this Agreement and the Ancillary Agreements and to sell and convey the Purchased Assets in accordance with the terms hereof. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Solana and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of Solana, or its Board of Directors or stockholders is required. When executed and delivered by Solana, this Agreement shall constitute a valid and binding obligation of Solana, enforceable against Solana in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.
(c) No Conflicts . The execution, delivery and performance of this Agreement and the Ancillary Agreements by Solana and the consummation by Solana of the transactions contemplated hereby and thereby, and the sale and transfer of the Purchased Assets as contemplated hereby and thereby, do not and will not: (i) violate or conflict with any provision of the Certificate or the Bylaws, each as amended to date; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any
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agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which Solana is a party or by which Solana or any of its properties or assets are bound, including, without limitation, the Assigned Agreements; (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to Solana or by which any property or asset of Solana is bound or affected; or (iv) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of Solana (including any of the Purchased Assets) under any agreement or any commitment to which Solana is a party or by which Solana is bound or by which any of its properties or assets are bound. Solana is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the Ancillary Agreements. The business of Solana is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, where such violation would constitute a Material Adverse Effect.
(d) Title to Purchased Assets . Solana has the sole right, title and interest in and to the Purchased Assets, free and clear of all Encumbrances, except Encumbrances for taxes not yet due or delinquent, statutory Encumbrances arising in the ordinary course of business by operation of law, and minor Encumbrances that do not materially impair the value of the property subject to such Encumbrance. The Purchased Assets constitute all of the assets and rights held by Solana relating to the Compounds.
(e) Assigned Agreements . Set forth on Schedule 3.1(e) is a complete and accurate list of all licenses, contracts and other agreements pursuant to which Solana has either obtained from a Third Party or granted to a Third Party any material rights or obligations arising under or relating to the Compound, any Products or Solana Technology, including, without limitation, any licenses or assignments for any Patent Rights, as well as agreements with any Contract Research Organization, consultant or other Third Party (collectively, a “ CRO ”) with whom Solana contracted for research, development or manufacturing services related to the Compound or Solana Technology prior to the Closing Date (collectively, the “ Assigned Agreements ”). Solana is not in material breach of any Assigned Agreement and, to Solana’s Knowledge, no counterparty is in material breach of any such agreement. No party to any Assigned Agreement has provided written notice of termination or non-renewal of any such agreement and, to Solana’s Knowledge, no Third Party: (i) has expressed any intention to terminate or not renew, or (ii) has any reasonable grounds on which to terminate any of the Assigned Agreements.
(f) Intellectual Property .
(i) Solana has not received any written or, to its Knowledge, oral claim of ownership, inventorship or patent infringement adverse to Solana from any Third Party (including, without limitation, from current or former officers, directors, employees, consultants, personnel or agents of Solana or any predecessor, collaborator or partner of Solana) with respect to the Purchased Assets, and Solana is not aware of any reasonable basis for any such claim. No Purchased Assets are subject to, or were developed pursuant to, any funding agreement with any government, government agency, university or college facilities.
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(ii) To Solana’s Knowledge, the development, manufacture, offer for sale, sale of the Product or use of the Solana Technology or the other Purchased Assets does not infringe or misappropriate the Intellectual Property of others. To the Knowledge of Solana, none of the Solana Technology is being infringed by activities, products or services of, or is being misappropriated by, any Third Party.
(iii) No issued patent or patent application included in the Solana Patent Rights has been declared or adjudicated invalid, null or void, or its subject matter declared unpatentable or finally rejected as unpatentable without recourse for appeal or without further right for refiling or continued prosecution, in any judicial or administrative proceeding. Solana is not aware of any prior art or other facts which would invalidate or render unenforceable any of the material claims comprising the Solana Patent Rights.
(iv) Solana has taken reasonable precautions to file and prosecute all patents and patent applications included in the Solana Patent Rights in accordance with all applicable rules and regulations, including the rules and regulations respecting full disclosure in the relevant patent office, and to its Knowledge, Solana is not aware of any facts or circumstances that would render any of the Solana issued patents, unenforceable, or subject La Jolla to any liability for inequitable conduct. Solana has duly recorded all assignments and transfers of title to Solana of any of the Solana Patent Rights in the USPTO or other appropriate foreign patent office or other governmental agency.
(g) Inventory . Solana has sole ownership, possession and/or control of the Inventory set forth on Exhibit F , and has no obligations to warehousemen, distributors or other Persons for, or related to, the manufacture, storage, distribution, sale or marketing of the Inventory, except for Assumed Obligations. The quantities of the respective items of Inventory are as stated on Exhibit F . At the time of storage and, to Solana’s Knowledge through the date hereof, the Inventory conformed to the specifications for the Compound or Product and has been stored under conditions designed to ensure that the Compound or Product will comply with such specifications and is located at the locations set forth on Exhibit F .
(h) No Executory Payments . Solana has no current or otherwise anticipated obligations or liabilities for any royalty, commission or other executory payment agreements, arrangements or understandings, applicable to the Purchased Assets, including, without limitation, under the Assigned Agreements.
(i) No Litigation . There is no litigation or proceeding, in law or in equity, and there are no proceedings or governmental investigations before any commission or other administrative authority, pending, or, to Solana’s Knowledge, threatened, against Solana or its Affiliates, or with respect to the consummation of the transactions contemplated hereby, or the use of the Purchased Assets (whether used by La Jolla after the Closing or by Solana prior thereto). To its Knowledge, Solana and its Affiliates are in, and since their inception have been in, compliance in all material respects with all Applicable Laws, including, without limitation, the rules and regulations of any Regulatory Authority with respect to the Registrations, research, development, clinical testing, manufacture, sale, labeling, storing, testing, distribution, handling of prescription drug samples, record-keeping, reporting, import, export, advertising and promotion of or for the Products, except such that, individually or in the aggregate, the noncompliance therewith could not reasonably be expected to have a Material Adverse Effect.
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(j) Regulatory Matters .
(i) All Registrations that Solana has obtained or that are pending are listed on Schedule 3.1(j) .
(ii) None of Solana, its Affiliates, nor to Solana’s Knowledge, any of their respective directors, officers, employees or other agents (acting on behalf of any Solana or its Affiliates) is currently, or has been, excluded or debarred under any Applicable Law or otherwise made ineligible to participate in any United States health care programs or similar programs in the United States or elsewhere.
(iii) None of Solana or its Affiliates have been notified in writing by any CRO or any Regulatory Authority of any material failure (or any material investigation with respect thereto) by them or any licensor, licensee, partner or distributor to comply with, or maintain systems and programs to ensure compliance with, any Applicable Laws.
(iv) No Product or product candidate manufactured, tested, distributed, held and/or marketed by Solana relating to the Compound or the other Solana Technology has been recalled, withdrawn, suspended or discontinued (whether voluntarily or otherwise) by a Regulatory Authority since their inception. Solana, prior to the execution of this Agreement, provided to La Jolla access to all material reports and all material information about adverse drug experiences and medical device reports pertaining to the Compound in the possession or control of Solana.
(v) To the Knowledge of Solana, the Third Party contractors manufacturing Products have all of the material Registrations necessary for the manufacture of such Products and are not in breach of or default in any material respect under any such material Registrations.
(k) Certain Fees . Solana has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with this Agreement.
3.2 Representations and Warranties of La Jolla . La Jolla hereby represents and warrants to Solana that, as of the Closing Date, except as set forth in the Public Filings:
(a) Organization, Good Standing and Power . La Jolla is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. La Jolla does not have any direct or indirect subsidiaries or own securities of any kind in any other entity. La Jolla is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary.
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(b) Authorization; Enforcement . La Jolla has the requisite corporate power and authority to enter into and perform this Agreement and the Ancillary Agreements. The execution, delivery and performance of this Agreement and the Ancillary Agreements by La Jolla and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of La Jolla, or its Board of Directors or stockholders is required. When executed and delivered by La Jolla, this Agreement shall constitute a valid and binding obligation of La Jolla, enforceable against La Jolla in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.
(c) No Conflicts . The execution, delivery and performance of this Agreement and the Ancillary Agreements by La Jolla and the consummation by La Jolla of the transactions contemplated hereby and thereby, do not and will not: (i) violate or conflict with any provision of the La Jolla Certificate of Incorporation or the Bylaws, each as amended to date, subject to the filing of the Series C-1 2 , C-2 2 , D-1 2 and D-2 2 Certificate of Designations; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which La Jolla is a party or by which La Jolla or any of its properties or assets are bound; (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to La Jolla or by which any property or asset of La Jolla is bound or affected; or (iv) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of La Jolla under any agreement or any commitment to which La Jolla is a party or by which La Jolla is bound or by which any of its properties or assets are bound. La Jolla is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the Ancillary Agreements. The business of La Jolla is not being conducted in violation of any laws, ordinances or regulations of any governmental entity.
(d) Certain Fees . La Jolla has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the transactions contemplated hereby or pursuant to the Ancillary Agreements.
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IV. COVENANTS.
4.1 Confidentiality . From and after the Closing, Solana and its Affiliates shall keep confidential and not disclose to any Third Party or use for their own benefit or the benefit of any Third Party, any information or data included within the Purchased Assets. From and after the Closing until the day following the thirteen-month anniversary of the Closing (unless the Repurchase Right has been exercised, in which case the confidentiality obligation shall continue), La Jolla shall keep confidential any scientific or technical information or data included within the Purchased Assets that would, as of the Closing, constitute a “trade secret” under the California Uniform Trade Secrets Act, and shall provide that any disclosure of such information to a Third Party shall be made only pursuant to a non-disclosure agreement in customary form. The obligations under this Section 4.1 shall not apply to information that: (i) is or becomes generally available to the public without breach of the commitment provided for in this Section; (ii) is disclosed by a Third Party without breach of confidentiality obligation to the other party, or (iii) is required to be disclosed by law, order or regulation of a court or tribunal or non-tax government authority; provided, however , that in any such case under (iii) and if permitted by law, the disclosing party shall notify the other party as early as reasonably practicable prior to disclosure to allow the other party to take appropriate measures to preserve the confidentiality of such information.
4.2 Inspection of Records . Solana agrees to use commercially reasonable efforts to facilitate access for La Jolla to records retained by any CRO with whom Solana contracted for research, development or manufacturing services related to the Compound or Solana Technology prior to the Closing Date (the “ CRO Records ”). For a three-year period following the Closing Date, and upon written request from La Jolla, Solana shall authorize such CRO to permit access to La Jolla of any and all CRO Records retained by such CRO and shall, at the request of La Jolla, direct the CRO to transfer all CRO Records to La Jolla or its designated agent(s). La Jolla shall bear all costs and expenses charged by the CRO to provide such CRO Records to La Jolla after the Closing, as well as reasonable out-of-pocket expenses incurred by Solana in providing assistance pursuant to this Section 4.2.
4.3 Diligence Covenants . La Jolla will use commercially reasonable efforts to implement and conduct all development, manufacturing and regulatory activities required in order to complete the Phase IIa Trial.
V. CONDITIONS TO CLOSING
5.1 Conditions to the Obligations of La Jolla . The obligations of La Jolla to purchase the Purchased Assets and effect the other transactions contemplated by this Agreement shall be subject to the fulfillment of each of the following conditions, any one or more of which may be waived in writing by La Jolla, provided that any such waiver shall preclude La Jolla from subsequently pursuing any such waived rights:
(a) The representations and warranties of Solana contained in this Agreement (without regard to any materiality exceptions or provisions therein) shall be true and correct, in all material respects, as of the Closing Date, except (i) for changes specifically permitted by the terms of this Agreement, and (ii) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date;
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(b) Solana shall have performed and complied in all material respects with all agreements, obligations, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing Date, including the satisfaction of the conditions set forth in Section 2.6(a); and
(c) Solana shall have obtained and delivered to La Jolla any and all Third Party consents needed to effect the transactions contemplated herein, including the assignment of the Assigned Agreements.
5.2 Conditions to the Obligations of Solana . The obligations of Solana to sell and convey the Purchased Assets and effect the other transactions contemplated by this Agreement shall be subject to the fulfillment of each of the following conditions, any one or more of which may be waived in writing by Solana, provided that any such waiver shall preclude Solana from subsequently pursuing any such waived rights:
(a) The representations and warranties of La Jolla contained in this Agreement (without regard to any materiality exceptions or provisions therein) shall be true and correct, in all material respects, as of the Closing Date, except (i) for changes specifically permitted by the terms of this Agreement, and (ii) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date; and
(b) La Jolla shall have performed and complied in all material respects with all agreements, obligations, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing Date, including the satisfaction of the conditions set forth in Section 2.6(b).
VI. TERMINATION
6.1 Termination . Subject to the provisions of this Section 6.1, this Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent duly authorized by the boards of directors of Solana and La Jolla;
(b) by either Solana or La Jolla if the Closing has not occurred by January 31, 2012, which date may be extended by mutual consent of the Parties hereto (the “ Termination Date ”); provided, however , that the right to terminate this Agreement under this Section 6.1(b) shall not be available to any Party whose action or failure to act has proximately caused the failure of the Closing to occur on or before such date and such action or failure to act constitutes a breach of this Agreement;
(c) by La Jolla if there exists a breach or breaches of any representation, warranty or covenant of Solana contained in this Agreement such that the closing conditions set forth in Section 5.1 would not be satisfied by the Termination Date; or
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(d) by Solana if there exists a breach or breaches of any representation, warranty or covenant of La Jolla contained in this Agreement such that the closing conditions set forth in Section 5.2 would not be satisfied by the Termination Date.
6.2 Notice of Termination; Effect of Termination . Any termination of this Agreement under Section 6.1 will be effective immediately upon the delivery of a written notice of the terminating Party to the other Parties hereto. In the event of the termination of this Agreement as provided in Section 6.1, this Agreement shall be of no further force or effect, except that nothing herein shall relieve any Party from liability for any intentional breach of this Agreement or fraud.
6.3 Termination Fees and Expenses . If the Parties terminate this Agreement pursuant to Section 6.1, then each Party shall bear its out-of-pocket expenses incurred in connection with the negotiation and execution of this Agreement.
VII. INDEMNIFICATION
7.1 General Indemnity . From and after the Closing, and subject to the terms and limitations contained herein, each Party (“ Indemnifying Party ”) agrees to indemnify and hold harmless the other Party (and their respective directors, officers, Affiliates, members, managers, employees, agents, successors and assigns) (each an “ Indemnified Party ”) from and against any and all Losses incurred by the Indemnified Party as a result of claims, including those brought by Third Parties, arising out of or relating to any inaccuracy in or breach of the representations, warranties or covenants made by the Indemnifying Party herein.
7.2 Indemnification Procedure . Any Indemnified Party seeking indemnification under this Article VII shall give written notice to the Indemnifying Party within the Survival Period (as defined in Section 9.2) of any matter giving rise to a claim for indemnification, including a Third party action, which notice shall contain a description of the breach, the section(s) of this Agreement alleged to be breached, any related documents and stating the amount of Losses if known (the “Claim”). Claims not made within the Survival Period applicable to the claimed breach shall be barred. In case any such action, proceeding or claim is brought against an Indemnified Party in respect of which indemnification is sought hereunder, the Indemnifying Party shall be entitled to participate in and, unless in the reasonable judgment of the Indemnifying Party a conflict of interest between it and the Indemnified Party exists with respect to such action, proceeding or claim (in which case the Indemnifying Party shall be responsible for the reasonable fees and expenses of one separate counsel for the Indemnified Parties), to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. In the event that the Indemnifying Party advises an Indemnified Party that it will contest such a claim for indemnification hereunder, or fails, within 30 days of receipt of any indemnification notice (the “ Defense Period ”) to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the Indemnified Party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the Indemnifying Party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the Indemnified Party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding, only to the extent incurred after the expiration of the Defense Period, shall be losses subject to
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indemnification hereunder. The Indemnified Party shall cooperate fully with the Indemnifying Party in connection with any negotiation or defense of any such action or claim by the Indemnifying Party and shall furnish to the Indemnifying Party all information reasonably available to the Indemnified Party which relates to such action or claim. The Indemnifying Party shall keep the Indemnified Party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the Indemnifying Party elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. Notwithstanding anything herein to the contrary, the Indemnifying Party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent. Notwithstanding anything in this Article VII to the contrary, the Indemnifying Party shall not, without the Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the Indemnified Party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim.
7.3 Limitations on Indemnification .
(a) No Party shall be entitled to assert a claim for indemnification under Section 7.1 until such time as the Losses suffered by the affected Indemnified Parties exceed $50,000 in the aggregate, at which time all such claims may be asserted in full from the first dollar thereof.
(b) The aggregate indemnification obligations of each Party pursuant to this Article VII shall be limited to $100,000.00; provided, however , that the foregoing limit shall not apply to any Losses suffered by an Indemnified Party relating to: (i) a breach by the Indemnifying Party of any of the Fundamental Representations, or (ii) any Third Party claim relating to an Excluded Liability.
(c) No claim for indemnification arising out of a breach of a representation or warranty may be asserted after the expiration of such representation or warranty, as set forth in Section 9.2; provided that any such expiration of time shall not affect a claim for indemnification made prior to such expiration.
7.4 Right to Indemnification Not Affected by Knowledge . The right to indemnification based on a Party’s representations, warranties, covenants and obligations under this Agreement will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation by the other Party.
7.5 Exclusive Remedy . Except in the case of: (i) fraud and equitable remedies (including injunctive relief and specific performance); (ii) exercise of the Repurchase Right (defined in Section 8.1); (iii) the satisfaction of La Jolla’s obligations pursuant to Section 2.2 of this Agreement; or (iv) any breach of the provisions of Article VIII hereof, the indemnification pursuant to the provisions of this Article VII shall be the sole and exclusive remedy of the
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Indemnified Parties with respect to any matters arising under or relating to this Agreement or any Ancillary Agreement, and the transactions contemplated hereby and thereby, and no legal action sounding in contribution, breach of contract, damages, tort or strict liability may be maintained by any Party against the other Party with respect to any matter that is the subject of this Article VII.
VIII. REPURCHASE RIGHT.
8.1 Repurchase Right . If the holders of La Jolla’s Series C-1 2 Preferred Stock, par value $0.0001 per share (the “ Series C-1 2 Preferred ”), deliver written notice to La Jolla to redeem a number of shares of Series C-1 2 Preferred equal to or greater than the lesser of (i) the entire balance of the outstanding Series C-1 2 Preferred and (ii) 2,900 shares of Series C-1 2 Preferred (either of clauses (i) and (ii), a “ Redemption Event ”), then Solana shall have the right for a period of 10 Business Days following the first Redemption Event, if any, to elect to purchase from La Jolla all right, title and interest in and to the Compound Assets (as defined below) (the “ Repurchase Right ”), upon paying to La Jolla $100.00.
8.2 Maintenance of Purchased Assets . From the Closing Date through the exercise of the Repurchase Right: (i) all of the Purchased Assets and any Patent Rights related to the Compounds arising from the Solana Technology after the Closing, including any assets created or improved by La Jolla after the Closing that are related to the Purchased Assets (i.e., new patent applications, patents, data, etc.) (collectively, the “ Compound Assets ”) shall be held by La Jolla, which will be the sole record owner of the Compound Assets and no agreements to transfer or assign the Compound Assets, or rights, licenses or commitments with respect thereto, shall have been entered into and (ii) La Jolla shall not grant any liens, security interests or other Encumbrances on the Compound Assets. In the event that Solana exercises the Repurchase Right, Solana will thereupon acquire all right, title and interest in and to the Compound Assets, to the same extent that such title was conveyed by Solana to La Jolla at the Closing, and the Compound Assets shall be free of Encumbrances at the time of the completion of the transfer contemplated under the Repurchase Right. Following the exercise of the Repurchase Right, Solana shall indemnify La Jolla (and its directors, officers, Affiliates, members, managers, employees, agents, successors and assigns) for any Third Party claims arising out of the Assigned Agreements, other than claims related to the time when the Compound Assets were held by La Jolla.
8.3 Exercise of Repurchase Right . Upon exercise of the Repurchase Right, this Agreement shall automatically terminate and be of no further force or effect, except for Articles VII and IX, which shall survive termination of this Agreement.
IX. MISCELLANEOUS.
9.1 Governing Law, Jurisdiction; Dispute Resolution .
(a) Governing Law . The interpretation and construction of this Agreement shall be governed by the laws of the State of California, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
16
(b) Specific Performance . The Parties acknowledge and agree that irreparable damage may occur in the event that any of the executory provisions of this Agreement or the other Ancillary Agreements were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to seek an injunction or injunctions to prevent or cure such breaches of the provisions of this Agreement or the other Ancillary Agreements and to enforce specifically the terms and provisions hereof or thereof without the requirement of posting a bond or providing any other security, this being in addition to any other remedy to which any of them may be entitled by law or equity.
(c) Dispute Resolution . The Parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in the City and County of San Diego, California, and the Parties irrevocably waive any right to raise forum non conveniens or any other argument that California is not the proper venue. The Parties irrevocably consent to personal jurisdiction in the state and federal courts of the State of California. The Parties consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such Party at the address in effect for notices to it under this Agreement and agree that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 9.1 shall affect or limit any right to serve process in any other manner permitted by law. The Parties hereby waive all rights to a trial by jury. In addition, the prevailing Party in any dispute arising under this Agreement shall be entitled to recover its fees and expenses, including, without limitation, all reasonable attorneys’ fees and expenses.
9.2 Survival of Representations and Warranties; Waiver and Non-Exclusion of Remedies . The Parties’ representations and warranties set forth in this Agreement shall survive closing for a period of 12 months, provided , that the representations and warranties of Solana set forth in Sections 3.1(a), 3.1(b). 3.1(c), and 3.1(d) (the “ Solana Fundamental Representations ”) and the representations and warranties of La Jolla set forth in Sections 3.2(a), 3.2(b) and 3.2(c) (the “ La Jolla Fundamental Representations ” and, together with the Solana Fundamental Representations, the “ Fundamental Representations ”) shall survive indefinitely (each period, the applicable “ Survival Period ”). A Party’s failure to enforce, at any time or for any period of time, any provision of this Agreement, or to exercise any right or remedy shall not constitute a waiver of that provision, right or remedy or prevent such Party from enforcing any or all provisions of this Agreement and exercising any rights or remedies. To be effective any waiver must be in writing. The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by law or otherwise available except as expressly set forth herein.
9.3 Notices .
(a) Notice Requirements . Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if delivered by hand or sent by electronic transmission (with a conforming copy delivered by hand or sent via overnight delivery service) or by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 9.3
17
or to such other address as the Party to whom notice is to be given may have provided to the other Party in accordance with this Section 9.3. Such Notice shall be deemed to have been given as of the date delivered by hand, upon electronic transmission, or on the second business day (at the place of delivery) after deposit with an internationally recognized overnight delivery service.
| (b) |
Address for Notice. |
Solana Therapeutics, Inc.
4747 Executive Drive, Suite 510
San Diego, CA 92121
Attention: John Lemkey
E-mail: jlemkey@tangcapital.com
If to La Jolla:
La Jolla Pharmaceutical Company
4370 La Jolla Village Drive, Suite 400
San Diego, California 92122
Attention: Chief Executive Officer
E-mail:
With a copy (which shall not constitute notice) to:
Ropes & Gray LLP
3 Embarcadero Center
San Francisco, CA 94111
Attention: Ryan Murr
E-mail: ryan.murr@ropesgray.com
9.4 Entire Agreement . This Agreement and the Ancillary Agreements constitute the entire agreement between the Parties with respect to the subject matter of the Agreement. This Agreement and the Ancillary Agreements supersede all prior agreements, whether written or oral, with respect to the subject matter hereof. Each Party confirms that it is not relying on any representations, warranties or covenants of the other Party except as specifically set out in this Agreement and the Ancillary Agreements. All Schedules or Exhibits referred to in this Agreement are intended to be and are hereby specifically incorporated into and made a part of this Agreement. In the event of any inconsistency between any such Schedules or Exhibits and this Agreement, the terms of this Agreement shall govern.
9.5 Amendment . Any amendment or modification of this Agreement must be in writing and signed by authorized representatives of both Parties.
9.6 Assignment . Neither Party may assign its rights or delegate its obligations under this Agreement, in whole or in part without the prior written consent of the other Party, except (a) that a Party may make such an assignment without the other Party’s consent to Affiliates or to a successor to substantially all of the business or assets of such Party, whether in a merger, sale of stock, sale of assets or other transaction, provided that such successor shall acquire all rights
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and obligations hereunder, and (b) as contemplated in Section 4.4. Any permitted successor or assignee of rights and/or obligations hereunder shall, in writing to the other Party, expressly assume performance of such rights and/or obligations. Any attempted assignment or delegation in violation of this Section shall be void. For the avoidance of doubt, nothing in this Section 9.6, shall limit La Jolla from licensing or sub-licensing to any Third Parties any rights obtained hereunder.
9.7 No Benefit to Others . The provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights in any other persons, except as otherwise expressly provided in this Agreement.
9.8 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. An executed signature page of this Agreement delivered by facsimile or PDF transmission shall be as effective as an original executed signature page.
9.9 Severability . To the fullest extent permitted by applicable law, the Parties waive any provision of law that would render any provision in this Agreement invalid, illegal or unenforceable in any respect. If any provision of this Agreement is held to be invalid, illegal or unenforceable, in any respect, then such provision will be given no effect by the Parties and shall not form part of this Agreement. To the fullest extent permitted by applicable law and if the rights or obligations of any Party will not be materially and adversely affected, all other provisions of this Agreement shall remain in full force and effect and the Parties will use their best efforts to negotiate a provision in replacement of the provision held invalid, illegal or unenforceable that is consistent with applicable law and achieves, as nearly as possible, the original intention of the Parties.
9.10 Representation by Legal Counsel . Each Party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting of this Agreement. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be implied against the Party which drafted such terms and provisions.
9.11 Expenses . Except as otherwise set forth in Section 6.3 and this Section 9.11, each Party hereto shall bear all fees and expenses incurred by such Party in connection with, relating to or arising out of the execution, delivery and performance of this Agreement and the consummation of the transaction contemplated hereby, including, without limitation, financial advisors’, attorneys’, accountants’ and other professional fees and expenses. Solana shall pay when due from assets other than the Purchased Assets, all sales taxes and/or use taxes, bulk transfer taxes and all other taxes and fees on transfer of the Purchased Assets arising by virtue of the sale of the Purchased Assets to La Jolla.
9.12 Further Assurance . For a period of 12 months from Closing, each of the Parties will use commercially reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper or advisable under Applicable Law, and execute and deliver such documents and other papers, as may be reasonably requested to consummate the transactions contemplated by this Agreement.
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9.13 Bulk Sales . The Parties hereby waive compliance with all bulk sales acts and other comparable statutory provisions of each applicable jurisdiction that may apply the purchase and sale of the Purchase Assets contemplated by this Agreement.
* * *
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IN WITNESS WHEREOF, duly authorized representatives of the Parties have duly executed this Agreement to be effective as of the Effective Date.
| LA JOLLA PHARMACEUTICAL COMPANY | SOLANA THERAPEUTICS, INC. | |||||||
| By: | /s/ Deirdre Y. Gillespie | By: | /s/ Kevin Tang | |||||
| Name: Deirdre Y. Gillespie | Name: Kevin Tang | |||||||
| Title: President and Chief Executive Officer | Title: Sole Member of the Board and President, Chief Financial Officer, Treasurer and Secretary | |||||||
INDEX OF SCHEDULES AND EXHIBITS
Schedule 2.5 – Allocation of Purchase Price*
Schedule of Exceptions*
Exhibit A – Assignment and Assumption Agreement
Exhibit B – Bill of Sale
Exhibit C – Chemical Structure*
Exhibit D – Patent Assignment Agreement
Exhibit E – Solana Patent Rights*
Exhibit F – Inventory*
| * |
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request. |
Schedule 2.5
Allocation of Purchase Price
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request.
SCHEDULE OF EXCEPTIONS
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request.
Exhibit A
Assignment and Assumption Agreement
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the “ Assignment and Assumption Agreement ”) is made and entered into as of January 19, 2012, by and between La Jolla Pharmaceutical Company, a Delaware corporation (“ Buyer ”), and Solana Therapeutics, Inc., a Delaware corporation (the “ Company ”). All capitalized terms used herein and not otherwise defined shall have the meanings given them in the Asset Purchase Agreement (as defined below).
WHEREAS, the Buyer and the Company are parties to that certain Asset Purchase Agreement, dated as of January 19, 2012 (the “ Asset Purchase Agreement ”), pursuant to which, among other things, the Company is to sell to Buyer, and Buyer is to purchase from the Company, the Purchased Assets; and
WHEREAS, pursuant to the Asset Purchase Agreement, the Company has agreed to assign to Buyer all right, title and interest in and to the Assigned Agreements, as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Assignment . The Company hereby transfers and assigns to Buyer all of the Company’s right, title and interest in, to and under, all of the Assigned Agreements, to have and hold the same unto Buyer and its successors and assigns from and after the date hereof subject to the covenants, conditions and provisions therein provided. Notwithstanding anything contained herein to the contrary, this Assignment and Assumption Agreement shall not constitute an assignment of any Assigned Agreement if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer or the Company thereunder, and such assignment shall not occur until such time as such consent has been obtained, at which time it shall occur automatically under this Assignment and Assumption Agreement without further action by the Company or Buyer. Until such consent has been obtained, the Company and Buyer will use their reasonable best efforts (but without the requirement of any payment of money by the Company or Buyer) to obtain the consent of the other parties to any such Assigned Agreement for the assignment thereof to Buyer as Buyer may request. Unless and until such consent is obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of the Company thereunder so that Buyer would not in fact receive all rights under such Assigned Agreement, the Company and Buyer will cooperate in an arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to Buyer, or under which the Company would enforce, at Buyer’s expense, for the benefit of Buyer, with Buyer assuming at Buyer’s expense the Company’s obligations in accordance with this Agreement, any and all rights of the Company against a third party thereto. The Company will promptly pay to Buyer when received all monies received by the Company under any Assigned Agreement.
2. Assumption . Buyer hereby accepts the transfer and assignment of the Assigned Agreements, and Buyer hereby agrees to pay, defend, discharge and perform all obligations and liabilities of the Company which accrue and are to be performed under any Assigned Agreement after the Closing Date, other than any such obligations or liabilities attributable to any failure by the Company to comply with the terms thereof.
3. Excluded Liabilities . Except as expressly provided herein and in the Asset Purchase Agreement, Buyer shall not assume or be bound by any obligations or liabilities of the Company or any Affiliate of the Company of any kind or nature, known, unknown, accrued, absolute, contingent or otherwise, whether now existing or hereafter arising, whatsoever.
4. Contest . The assignment and assumption of the Assigned Agreements hereunder shall not enlarge any rights of third parties and nothing herein or in any instrument of transfer shall prevent Buyer from contesting in good faith the claim of any third party with respect to any of the Assigned Agreements.
5. Guarantee by the Company . To the extent required in connection with the assignment of any of the Assigned Agreements to Buyer, the Company agrees to guarantee the obligations of Buyer under such Assigned Agreement to the counterparty thereto. The Company and Buyer agree that, as between such two parties, any such guarantee by the Company shall not relieve Buyer of its obligations under Section 2 of this Assignment and Assumption Agreement. The guarantee under this Section 5 shall expire upon (a) the Company’s exercise of its Repurchase Right, (b) the termination of the Asset Purchase Agreement pursuant to Section 6.1 of the Asset Purchase Agreement or (c) mutual agreement of the Company and Buyer.
6. Miscellaneous .
(a) This Assignment and Assumption Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, assigns, and legal representatives.
(b) This Assignment and Assumption Agreement may not be orally changed, modified or terminated, nor shall any oral waiver of any of its terms be effective. This Assignment and Assumption Agreement may be changed, modified or terminated only by an agreement in writing signed by the Company and Buyer.
(c) This Assignment and Assumption Agreement may be executed by the Company and Buyer in separate and several counterparts, each of which shall be an original, but which together shall constitute one and the same instrument. An executed signature page of this Assignment and Assumption Agreement delivered by facsimile or PDF transmission shall be as effective as an original executed signature page.
(d) This Assignment and Assumption Agreement is subject to and limited by the terms and provisions of the Asset Purchase Agreement, and in the event of any conflict between this Assignment and Assumption Agreement and the Asset Purchase Agreement, the terms, provisions and limitations of the Asset Purchase Agreement shall control.
(e) The interpretation and construction of this Agreement shall be governed by the laws of the State of California, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, each of the undersigned has executed this Assignment and Assumption Agreement as of the date first above written.
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THE COMPANY :
SOLANA THERAPEUTICS, INC. |
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| By: | ||
| Name: Kevin C. Tang | ||
| Title: President, Chief Financial Officer, Treasurer and Secretary | ||
|
BUYER :
LA JOLLA PHARMACEUTICAL COMPANY |
||
| By: | ||
| Name: Gail A. Sloan | ||
| Title: Chief Financial Officer and Secretary | ||
Exhibit B
Bill of Sale
This Bill of Sale (“ Bill of Sale ”) is entered into as of January 19, 2012, pursuant to that certain Asset Purchase Agreement dated as of January 19, 2012 (the “ Asset Purchase Agreement ”) by and between Solana Therapeutics, Inc., a Delaware corporation (“ Seller ”) and La Jolla Pharmaceutical Company, a Delaware corporation (“ Buyer ”). Capitalized terms used and not defined herein have the respective meanings ascribed to them in the Asset Purchase Agreement.
1. Sale and Transfer of Acquired Assets . Effective as of the Closing Date, Seller, for good and valuable consideration received, hereby sells, transfers, conveys, assigns and delivers (and shall cause to be sold, transferred, conveyed, assigned and delivered) to Buyer, free and clear of all Encumbrances, all of Seller’s rights, titles and interests in and to all of the Purchased Assets, including without limitation, the Solana Technology and the Inventory.
2. Terms of Asset Purchase Agreement . All the terms of the Asset Purchase Agreement are incorporated herein by this reference. In the event of a conflict between the terms and conditions of this Bill of Sale and the terms and conditions of the Asset Purchase Agreement, the terms and conditions of the Asset Purchase Agreement shall govern, supersede and prevail. Notwithstanding anything to the contrary in this Bill of Sale, nothing herein is intended to, nor shall it, limit or otherwise alter the representations, warranties, covenants and obligations of the parties contained in the Asset Purchase Agreement or the survival thereof.
3. Further Assurances . At the reasonable request of Buyer, Seller shall (without additional compensation or charge) execute and deliver and shall cause to be executed and delivered such instruments of transfer, conveyance, assignment and confirmation, and shall take such actions as Buyer may reasonably deem necessary in order to effectively transfer, contribute, assign and deliver to Buyer title to all of the Purchased Assets.
4. Power of Attorney . With respect to the Purchased Assets, Seller hereby appoints, effective as of the Closing Date, Buyer as Seller’s agent and attorney-in-fact, effective as of the Closing Date, to act for Seller in obtaining the benefits of the Purchased Assets. Seller hereby acknowledges that the foregoing powers are coupled with an interest and shall be irrevocable by Seller, and shall remain in effect notwithstanding the dissolution or liquidation of Seller or any other event or circumstance. Buyer shall be entitled to retain for its own account any amounts collected pursuant to the foregoing powers, including any amounts payable as interest with respect thereto.
5. Governing Law . The interpretation and construction of this Bill of Sale shall be governed by the laws of the State of California, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Bill of Sale to the substantive law of another jurisdiction.
6. Successors and Assigns . This Bill of Sale shall be binding upon and be enforceable against Seller and its respective successors and permitted assigns and shall inure to the benefit of and be enforceable by Buyer and its successors and permitted assigns.
7. Counterparts . This Bill of Sale may be executed in multiple counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument. An executed signature page of this Bill of Sale delivered by facsimile or PDF transmission shall be as effective as an original executed signature page.
[Remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, Buyer and Seller have duly executed this Bill of Sale as of the date first set forth above.
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SELLER:
SOLANA THERAPEUTICS, INC. |
||
| By: | ||
| Name: Kevin C. Tang | ||
|
Title: President, Chief Financial Officer, Treasurer and Secretary |
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BUYER:
LA JOLLA PHARMACEUTICAL COMPANY |
||
| By: | ||
| Name: Gail A. Sloan | ||
| Title: Chief Financial Officer and Secretary | ||
Exhibit C
Chemical Structure
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request.
Exhibit D
Patent Assignment Agreement
This ASSIGNMENT (the “ Assignment ”) is made as of this 19th day of January, 2012, by Solana Therapeutics, Inc. , a Delaware corporation (“ Assignor ” ) . Assignor hereby assigns certain patent rights to La Jolla Pharmaceutical Company , a Delaware corporation (“ Assignee ”).
WHEREAS , Assignor is the sole owner of the patents and patent applications set forth on Schedule A hereto (the “ Patents ”); and
WHEREAS , Assignor has agreed with Assignee for the transfer to Assignee of Assignor’s whole right, title and interest in and to such Patents and the inventions claimed therein.
WITNESSETH that, for the consideration provided pursuant to that certain Asset Purchase Agreement, dated as of January 19, 2012, by and between the Assignor and Assignee (the “ Agreement ”), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor, as sole and beneficial owner, hereby assigns and transfers to Assignee Assignor’s whole right, title and interest throughout the world in and to the Patents, free and clear of any and all liens and other Encumbrances, and the inventions they claim (including subject matter capable of being reduced to a patent claim in a reissue or reexamination proceeding relating to any of the Patents and subject matter that could have been included as a claim in any of the Patents), and any and all divisional, continuation, continuation-in-part or substitute patent applications that claim priority (directly or indirectly, in whole or in part) to any of the Patents, and any patents granted therefor and thereon, and in and to any and all reissues or extensions of the Patents, and in and to any application, filed in any foreign country, claiming priority (directly or indirectly, in whole or in part) from the Patents (including, without limitation, the right to file said foreign applications and claim priority under the provisions of any international convention or treaty), and the full exclusive benefits thereof, and all rights, privileges and advantages appertaining thereto, including any and all rights to damages, profits or recoveries of any nature for infringement, whether arising prior to or subsequent to the date of this Assignment, of any of the foregoing patents and patent applications including without limitation, all actions and other enforcement rights for damages, injunctive relief and any other remedies of any kind for any past, current or future infringement or other impairment of any of the Patents and the right to receive all proceeds and damages therefrom; and rights to collect royalties or other payments under or on account of any of the Patent Rights or any of the foregoing; and the right to pay any and all maintenance fees, taxes and the like, to hold the same unto and to the use of Assignee, its successors and assigns absolutely during the residue of the respective terms for which the Patents and such other patents were granted and during any such terms (all of the foregoing patent rights and other rights, collectively referred to as the “ Patent Rights ”). Assignor hereby authorizes and requests the appropriate governmental authority to issue all patents resulting from any of the foregoing patent applications or patents to the Assignee, as the assignee of the entire interest therein. Assignor hereby covenants that Assignor has not executed and will not execute any agreements inconsistent with this Assignment.
Upon Assignee’s written request, Assignor hereby agrees to execute, at Assignee’s expense, such additional form(s) of assignment for the foregoing patents and patent applications as may be reasonably required by the appropriate governmental authority for recordation of this Assignment and as Assignee in its sole discretion deems advisable or necessary in order to fully vest all rights herein transferred to Assignee in Assignee, and will testify as to the same in any interference or other litigation or legal proceeding when requested so to do. To facilitate the execution and filing of such forms, Assignor hereby appoints Assignee as its attorney-in-fact for the limited purpose of executing and filing any such assignments as may be necessary to perfect and record the assignment of the Patent Rights hereunder.
The interpretation and construction of this Assignment shall be governed by the laws of the State of California, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Assignment to the substantive law of another jurisdiction.
This Assignment may be executed by the Assignor and Assignee in separate and several counterparts, each of which shall be an original, but which together shall constitute one and the same instrument. An executed signature page of this Agreement delivered by facsimile or PDF transmission shall be as effective as an original executed signature page.
Assignor and Assignee hereby grant to Cooley LLP the authority and power to insert on this instrument any further identification which may be necessary or desirable for purposes of recordation in foreign Patent and Trademark Offices.
Executed at , this day of January, 2012.
| SOLANA THERAPEUTICS, INC. | ||
| By: |
|
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| Name: Kevin C. Tang | ||
| Title: President, Chief Financial Officer, Treasurer and Secretary | ||
| STATE OF |
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)ss. |
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| COUNTY OF |
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On , 20 , before me, the undersigned, a Notary Public in and for such State, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person who executed the within instrument.
WITNESS my hand and official seal.
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| [S EAL ] | Notary Public | |||
| My Commission expires on: | ||||
AGREED AND ACKNOWLEDGED:
Executed at , this day of January, 2012.
| LA JOLLA PHARMACEUTICAL COMPANY | ||
| By: |
|
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| Name: Gail A. Sloan | ||
| Title: Chief Financial Officer and Secretary | ||
SCHEDULE A
PATENTS
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request.
Exhibit E
Solana Patent Rights
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request.
Exhibit F
Inventory
Not filed herewith pursuant to Item 601(b)(2) of Regulation S-K. The registrant will supplementally provide a copy of such schedule or exhibit to the Commission upon request.
Exhibit 3.1
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C-1 2 CONVERTIBLE PREFERRED STOCK, SERIES C-2 2 CONVERTIBLE
PREFERRED STOCK, SERIES D-1 2
CONVERTIBLE PREFERRED STOCK AND SERIES D-2 2 CONVERTIBLE
PREFERRED STOCK
of
LA JOLLA PHARMACEUTICAL COMPANY
Pursuant to Section 151 of the
Delaware General Corporation Law
The undersigned, being an authorized officer of La Jolla Pharmaceutical Company (the “ Corporation ”), a corporation organized and existing under the laws of the State of Delaware, in accordance with the provisions of Section 151(g) of the Delaware General Corporation Law (“ DGCL ”), does hereby certify that:
Pursuant to the authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation and Bylaws of the Corporation, each as amended and restated through the date hereof, the Board of Directors of the Corporation, in accordance with DGCL Section 151, duly adopted the following resolution on January 13, 2012, which authorizes four series of the Corporation’s previously authorized Preferred Stock, par value $0.0001 per share (the “ Preferred Stock ”):
RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation (the “ Board of Directors ”) by the Certificate of Incorporation and Bylaws of the Corporation, the Board of Directors hereby establishes a Series C-1 2 Convertible Preferred Stock, Series C-2 2 Convertible Preferred Stock, Series D-1 2 Convertible Preferred Stock and Series D-2 2 Convertible Preferred Stock of the Corporation, each with par value $0.0001 per share, and hereby states the number of shares and fixes the powers, designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions thereof, of each such series of shares as follows:
I. DESIGNATION AND AMOUNT
The designation of the first new series, which consists of 11,000 shares of Preferred Stock, is the Series C-1 2 Convertible Preferred Stock (the “Series C-1 2 Preferred Stock ”). The designation of the second new series, which consists of 22,000 shares of Preferred Stock, is the Series C-2 2 Convertible Preferred Stock (the “ Series C-2 2 Preferred Stock ” and together with the Series C-1 2 Preferred Stock, the “ Series C Preferred Stock ”). The designation of the third
new series, which consists of 5,134 shares of Preferred Stock, is the Series D-1 2 Convertible Preferred Stock (the “ Series D-1 2 Preferred Stock ”). The designation of the fourth new series, which consists of 10,868 shares of Preferred Stock, is the Series D-2 2 Convertible Preferred Stock (the “ Series D-2 2 Preferred Stock ” and, together with the Series C Preferred Stock and Series D-1 2 Preferred Stock, the “ New Preferred Stock ”).
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designations, the following terms shall have the following meanings:
A. “ Asset Purchase Agreement ” means the Asset Purchase Agreement, dated as of January 19, 2012, by and between the Corporation and the seller named therein, as the same may be amended from time to time.
B. “Change of Control” means the following, provided, however , that in no event shall a Strategic Transaction that is approved by the Requisite Holders also be deemed to constitute a Change of Control:
(i) the consolidation, merger or other business combination of the Corporation with or into another entity (other than a consolidation, merger or other business combination in which holders of the Corporation’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, in substantially the same proportion as immediately preceding the transaction, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities);
(ii) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation (including, without limitation, any such action effected by the Corporation or any subsidiary of the Corporation by merger, consolidation or otherwise) of all or substantially all of the intellectual property or assets of the Corporation and its subsidiaries, taken as a whole, or the sale or disposition (including, without limitation, any such action effected by the Corporation or any subsidiary of the Corporation by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries; or
(iii) the consolidation, merger or other business combination of the Corporation with or into another entity that results in the cancellation of shares of any one or more series of New Preferred Stock or that results in the conversion of shares of any one or more series of New Preferred Stock into: (1) shares of any other class or series of capital stock of the Corporation; (2) securities of the Corporation or any other person (or the right to receive any such securities); (3) any property (including, without limitation, cash and the right to receive cash or other property); or (4) any combination of the foregoing.
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C. “ Closing Date ” means 11:59 p.m. on the date of the closing under the Securities Purchase Agreement dated May 24, 2010 by and among the Corporation and the purchasers named therein, as the same may be amended from time to time (the “ Securities Purchase Agreement ”).
D. “ Closing Sales Price ” means, on any particular date: (i) the last trading price per share of the Common Stock on such date during regular trading hours on the principal Trading Market on which the Common Stock is then listed as reported by Bloomberg Financial L.P (or a comparable reporting service of national reputation selected by the Corporation and reasonably acceptable to the Requisite Holders, if Bloomberg Financial L.P. is not then reporting closing sales prices of the Common Stock) (collectively, “ Bloomberg ”), or if there is no such price on such date, then the last trading price during regular trading hours on such Trading Market on the date nearest preceding such date as reported by Bloomberg; or (ii) if the Common Stock is not listed then on a Trading Market, the last trading price for a share of Common Stock in the over-the-counter market during regular trading hours, as reported in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices at the close of business on such date; or (iii) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes on such date, as determined in good faith by the Holder; or (iv) if the Common Stock is not then publicly traded, the fair market value of a share of Common Stock as determined by the Corporation and reasonably acceptable to the Requisite Holders.
E. “ Common Stock ” means the Corporation’s common stock, par value $0.0001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.
F. “ Common Stock Equivalents ” means any securities of the Corporation or of any subsidiary of the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any time, Common Stock or any security of any subsidiary of the Corporation, including, without limitation, any debt, preferred stock, right, option, warrant or other agreement, document or instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, Common Stock or any security of any subsidiary of the Corporation.
G. “ Conversion Date ” means, for any Optional Conversion (as defined in Article IV.A.), the date specified in the notice of conversion in the form attached hereto (the “ Notice of Conversion ”), so long as a copy of the Notice of Conversion is delivered via electronic mail resulting in notice to the Corporation before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however , that if the Notice of Conversion is not so e-mailed before such time, then the Conversion Date shall be the date the holder e-mails the Notice of Conversion to the Corporation.
H. “ Conversion Price ” means the price obtained by dividing $1,000 by 166,666.667, and shall be subject to adjustment as set forth in Article X below.
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I. “ Face Amount ” means, with respect to the New Preferred Stock, $1,000.00 per share, as adjusted (i) for stock splits, stock dividends, combinations, recapitalizations, reclassifications or the like and (ii) with respect to any given share or shares of New Preferred Stock, to account for any accretion in the Face Amount as a result of accrued but unpaid dividends or any other increase provided for in this Certificate of Designations.
J. “ Measurement Date ” means for purposes of any issuance of securities, the date of issuance thereof.
K. “ Net Cash ” means (i) the sum of the Corporation’s unrestricted, consolidated (x) cash, (y) cash equivalents and (z) short term investments, available for sale; less (ii) the amount of the Corporation’s liabilities that may be settled in cash, including any off-balance sheet obligations that may be settled in cash.
L. “ Original Issue Date ” means, with respect to each share of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, the date of issuance of such share.
M. “ Other Stock ” means (i) any class or series of preferred stock or other capital stock of the Corporation, other than Common Stock, Common Stock Equivalents and New Preferred Stock and (ii) any securities of the Corporation or of any subsidiary of the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any time any capital stock listed in clause (i), including, without limitation, any debt, preferred stock, right, option, warrant or other agreement, document or instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, any capital stock listed in clause (i).
N. Unless otherwise expressly provided in this Certificate of Designations, each reference to a “ person ” refers to any individual, entity or association, including, without limitation, any corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, and trust, business trust or other organization, whether or not a legal entity, or a government or agency or any political subdivision thereof.
O. “ Requisite Holders ” means the holders of at least 80% of the then outstanding shares of New Preferred Stock and any shares of New Preferred Stock issuable upon exercise of any Warrants, voting together as one class. Any shares of New Preferred Stock issuable upon exercise of any Warrants shall be included in the Requisite Holders calculation even if such Warrant has not been exercised at the time of the calculation.
P. “ Strategic Transaction ” means: (i) any joint venture, partnership, development agreement, research agreement, marketing agreement or license agreement, in each case relating to any drug or drug candidate, medical device or diagnostic; (ii) any disposition of any material asset of the Corporation or any subsidiary, in each case whether by sale, lease, license, exchange, transfer or otherwise; (iii) any material acquisition of any stock or assets of a third party by the Corporation or any subsidiary; or (iv) a resolution of the Board of Directors authorizing the further development of the Corporation’s drug candidate Riquent in future human clinical trials, but only if such further development is first approved by the Requisite Holders.
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Q. “ Trading Day ” means, except as set forth below, a day on which the Corporation’s securities are traded on a Trading Market; provided, however, that in the event that the Corporation’s securities are not traded on a Trading Market, then Trading Day shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York are authorized or required by law or other government action to close. Notwithstanding the foregoing , the following shall not be deemed Trading Days:
| • |
December 24 to January 2; |
| • |
The Fridays immediately before Memorial Day and immediately before Labor Day; |
| • |
The weekday immediately before and the weekday immediately after Independence Day, provided that if Independence Day is on a Wednesday, then the two following weekdays; |
| • |
Columbus Day; or |
| • |
The Friday immediately after Thanksgiving. |
R. “ Trading Market ” means the OTC Bulletin Board or the Pink Sheets, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange (“ NYSE ”) or the NYSE Amex, or any successor markets thereto.
S. “ VWCP ” means, for any specified period of consecutive Trading Days, the quotient of: (i) the sum of the individual products, calculated for each Trading Day within such period, of (A) the Closing Sales Price for such Trading Day in such specified period (as reported by Bloomberg) multiplied by (B) the trading volume for the Common Stock for such Trading Day in such specified period as reported by the Trading Market (as reported by Bloomberg), National Quotation Bureau Incorporated or other reporting organization or agency, as applicable, and (ii) the total aggregate trading volume for the Common Stock for all Trading Days in such specified period, as reported by the Trading Market (as reported by Bloomberg), National Quotation Bureau Incorporated or other reporting organization or agency, as applicable.
T. “ Warrants ” means the Cashless Warrants, Cash Warrants and Subsequent Cashless Warrants (each as defined in the Securities Purchase Agreement).
U. “ Week ” means a consecutive seven (7) calendar day period.
III. DIVIDENDS
A. Except as set forth below, holders of Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative mandatory dividends at the rate per share of 15% of the Face Amount per annum, payable semi-annually on November 25 and May 25 beginning on the first such date after the applicable Original Issue Date (each such date, a “ Dividend Payment Date ”) (if any Dividend Payment Date is not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day). Such dividends shall be payable in such number of additional shares of Series C-1 2 Preferred Stock with respect to the Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock with respect to the Series C-2 2 Preferred Stock, in each case determined by dividing the amount of the
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cumulative dividends by the Face Amount; provided, however , that if funds are not legally available for the payment of dividends on the Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, such dividends shall, effective on the close of business on a Dividend Payment Date with respect to an unpaid dividend, accrete to, and increase, the Face Amount of the Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, respectively. Dividends on the Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock shall be calculated on the basis of a 360-day year, consisting of twelve 30-day periods, shall accrue daily commencing on the applicable Original Issue Date, and, subject to the preceding sentence, shall be deemed to accrue from such applicable Original Issue Date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The record date for determining the holders of Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock entitled to dividends pursuant to this paragraph shall be the fifth (5 th ) Trading Day before the Dividend Payment Date. If any such cumulative dividends would result in the issuance of a fractional share of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, the Corporation shall issue a fractional share therefor, rounded to the nearest 1/1000 th of a share. For the avoidance of doubt, (i) for purposes of any conversion or redemption of shares of Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock, any amount accreted to the Face Amount of such shares pursuant to this paragraph as of such conversion or redemption shall not be deemed accrued but unpaid dividends and (ii) in the event of a conversion or redemption that occurs between Dividend Payment Dates, dividends shall be deemed to accrue through the date of such conversion or redemption, even if such accrual is less than a full semi-annual dividend period.
B. Shares of Series D-1 2 Preferred Stock and Series D-2 2 Preferred Stock shall not entitle the holder thereof to receive any dividends.
IV. CONVERSION
A. Conversion at the Option of the Holder . Subject to the limitations on conversions contained in Paragraph C of this Article IV, each holder of shares of New Preferred Stock may, at any time and from time to time, convert (an “ Optional Conversion ”) each of its shares of New Preferred Stock into a number of fully paid and non-assessable shares of Common Stock determined in accordance with the following formula:
Face Amount
Conversion Price
Following the effectiveness of any Optional Conversion, the shares of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, as applicable, so converted shall also entitle the former holder of such shares to receive, on the Dividend Payment Date next following such conversion, a number of shares of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, respectively, equal to the unpaid dividends that accrued on the shares so converted through the date of such conversion, divided by the Face Amount.
B. Mechanics of Conversion . In order to effect an Optional Conversion, a holder shall deliver via electronic mail a copy of the fully executed Notice of Conversion (in the form attached hereto) to the Corporation (Attention: Secretary). Such notice shall be delivered to
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conversions@ljpc.com or such other address as the Corporation may, from time to time, provide to the holders upon delivery of a written notice. Upon receipt by the Corporation of a copy of a Notice of Conversion from a holder, the Corporation shall promptly send, via facsimile or electronic mail, a confirmation to such holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion.
(i) Delivery of Common Stock Upon Conversion. The Corporation (itself, or through its transfer agent) shall, no later than the second Trading Day following the Conversion Date (the “Delivery Period ”), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the holder or its nominee a certificate representing that number of shares of Common Stock issuable upon conversion of such shares of New Preferred Stock being converted. Notwithstanding the foregoing, if the Corporation’s transfer agent is participating in the Depository Trust Company ( “DTC ”) Fast Automated Securities Transfer program or any other program that provides for the electronic delivery of Common Stock, the Corporation shall cause its transfer agent, by the end of the Delivery Period, to electronically transmit the Common Stock (not in physical stock certificate form) issuable upon conversion to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system or with any such equivalent program.
(ii) Taxes . The Corporation shall pay any and all taxes that may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the conversion of the New Preferred Stock.
(iii) No Fractional Shares. If any conversion of New Preferred Stock would result in the issuance of a fractional share of Common Stock, such fractional share shall be payable in cash based upon the Closing Sales Price on the Trading Day immediately preceding the Conversion Date and the number of shares of Common Stock issuable upon conversion of the New Preferred Stock shall be the next lower whole number of shares.
(iv) Conversion Disputes . In the case of any dispute with respect to a conversion, the Corporation shall promptly issue such number of shares of Common Stock as are not disputed in accordance with subparagraph (i) above. If such dispute involves the calculation of the Conversion Price, and such dispute is not promptly resolved by discussion between the relevant holder and the Corporation, the Corporation shall submit the disputed calculations to an independent outside accountant within three Trading Days of receipt of the Notice of Conversion. The accountant, at the Corporation’s sole expense, shall promptly audit the calculations and notify the Corporation and the holder of the results no later than three Trading Days from the date it receives the disputed calculations. The accountant’s calculation shall be deemed conclusive, absent manifest error. The Corporation shall then issue the appropriate number of shares of Common Stock in accordance with subparagraph (i) above.
C. Limitations on Conversions . The conversion of shares of New Preferred Stock shall be subject to the following limitations (each of which limitations shall be applied independently):
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(i) Timing and Volume Limitations . Each holder of shares of New Preferred Stock (each a “Holder”) shall be eligible for an Optional Conversion on any day of a Monday through Sunday calendar week (each a “ Conversion Week ”) to the extent that, together with all prior conversions of such Holder’s New Preferred Stock, if any, the total shares of the New Preferred Stock that has been converted by such Holder during such Conversion Week (rounded to the nearest 1/1,000th of a share) does not exceed the product of (x) the Face Amount of the Outstanding New Preferred Stock (as defined below) held by such Holder, multiplied by (y) the Conversion Cap for such calendar week. In determining the “ Conversion Cap ” for any Conversion Week, if the quotient of (A) the VWCP (as adjusted to reflect any stock splits, stock dividends or similar recapitalizations occurring on or before the Conversion Date) for the three consecutive Trading Days during the previous Monday through Sunday calendar week ending on the last Trading Day prior to the applicable Conversion Week, divided by (B) the applicable Conversion Price of the New Preferred Stock on the first Trading Day of such Conversion Week is: (1) less than one, then the Conversion Cap shall be 0%; (2) greater than or equal to one and less than two, then the Conversion Cap shall be 0.21%; (3) greater than or equal to two and less than three, then the Conversion Cap shall be 0.42%; (4) greater than or equal to three and less than four, then the Conversion Cap shall be 0.84%; (5) greater than or equal to four and less than five, then the Conversion Cap shall be 1.25%; (6) greater than or equal to five and less than six, then the Conversion Cap shall be 1.67%; (7) greater than or equal to six and less than seven, then the Conversion Cap shall be 2.09%; (8) greater than or equal to seven and less than eight, then the Conversion Cap shall be 2.51%; (9) greater than or equal to eight and less than nine, then the Conversion Cap shall be 2.93%; (10) greater than or equal to nine and less than ten, then the Conversion Cap shall be 3.34%; or (11) greater than or equal to ten, then the Conversion Cap shall be 3.76%. For purposes of this Article IV.C.(i), “ Outstanding New Preferred Stock ” means all of the Company’s Series C-1 2 Preferred Stock, including the Series C-1 2 Preferred Stock that has been issued by way of payment of dividends in kind pursuant to Article III, issued and outstanding immediately following the Closing (as defined in the Asset Purchase Agreement). Notwithstanding anything to the contrary in this Article IV.C.(i), any holder of New Preferred Stock shall have the right to convert all or any portion of its shares of New Preferred Stock into shares of Common Stock immediately prior to a Change of Control. The foregoing conversion limits shall apply to the New Preferred Stock on an aggregate basis; to the extent that ownership of the New Preferred Stock is divided among multiple holders, the conversion limits shall be apportioned, on a weekly basis, among the holders on a pro rata basis by dividing the Outstanding New Preferred Stock among the holders of New Preferred Stock based on their relative holdings of the New Preferred Stock.
(ii) Additional Restrictions on Conversion or Transfer . Notwithstanding anything in this Certificate of Designations to the contrary, at no time may the Corporation issue or sell shares of Common Stock (including transfers by the Corporation of treasury stock) to a holder of New Preferred Stock, and in no event shall any holder of shares of New Preferred Stock have the right to convert shares of New Preferred Stock into shares of Common Stock, in each such case (x) to the extent that such issuance or sale or right to effect such conversion would result in the holder or any of its affiliates together beneficially owning more than 9.999% of the then issued and outstanding shares of Common Stock or (y) if such holder or any of its affiliates together beneficially own more than 9.999% of the then issued and outstanding Common Stock immediately prior to such purported issuance, sale, transfer or conversion. For purposes of this
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subparagraph, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and Regulation 13D-G thereunder. The restriction contained in this subparagraph may not be waived. Any purported issuance, sale, transfer or conversion effected in violation of this paragraph shall be null and void. Certificates representing shares of New Preferred Stock shall have imprinted, typed, stamped or otherwise affixed thereon a legend in substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND CONVERSION RESTRICTIONS AND MAY BE TRANSFERRED OR CONVERTED ONLY AS PERMITTED BY THE TERMS OF THE CERTIFICATE OF DESIGNATIONS SETTING FORTH THE RIGHTS, POWERS AND PREFERENCES OF SUCH PREFERRED STOCK, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE UPON A REQUEST THEREFOR SUBMITTED TO THE SECRETARY.
V. RESERVATION OF SHARES OF COMMON STOCK
A. If the authorized and unissued number of shares of Common Stock (the “Reserved Amount”) for any three consecutive Trading Days shall be less than a number sufficient to provide for the conversion in full, at the then current Conversion Price thereof, without taking into account the conversion limitations set forth in Article IV.C.(i) and without taking into account the conversion limitations set forth in Article IV.C.(ii), of all of the New Preferred Stock then outstanding, (the “Required Reserve Amount”), then the Corporation shall immediately notify the holders of New Preferred Stock of such occurrence and shall take immediate action (including, if necessary, seeking stockholder approval to increase the number of shares of Common Stock that the Corporation is authorized to issue) to increase the Reserved Amount to at least the Required Reserve Amount. Nothing contained in this Article V.A. shall limit any other rights or remedies of the holders of the New Preferred Stock hereunder or under applicable law.
VI. FAILURE TO SATISFY CONVERSIONS
A. Conversion Defaults . If, at any time, (x) a holder of shares of New Preferred Stock submits a Notice of Conversion and the Corporation fails for any reason (including without limitation because such issuance would exceed such holder’s allocated portion of the Reserved Amount, but not including because of the limitations set forth in Article IV.C.) to deliver in strict accordance with the terms hereof, on or prior to the last Trading Day of the Delivery Period for such conversion, such number of shares of Common Stock to which such holder is entitled upon such conversion, or (y) the Corporation provides written notice to any holder of New Preferred Stock (or makes a public announcement via press release) at any time of its intention not to issue shares of Common Stock upon exercise by any holder of its conversion rights in accordance with the terms of this Certificate of Designations (each of (x) and (y) being a “ Conversion Default ”), then, in either such case, if such Conversion Default is not cured within five Trading Days of its initial occurrence, each holder of Series C Preferred Stock may elect, by delivery of a notice (the “ Conversion Default Notice ”) to the Corporation, to have such holder’s outstanding shares of Series C Preferred Stock redeemed to the fullest extent permitted by law. Any such redemption
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shall be made pursuant to the process and in the amount described in Sections A through C of Article VII (deeming the Conversion Default Notice delivered pursuant to this Article VI.A to be a “Redemption Trigger Notice” for such purpose and deeming the Conversion Default pursuant to this Article VI.A to be a “ Redemption Event ” for such purpose).
B. Buy-In Cure . Without limiting the other rights or remedies of the holders (including, but not limited to, the right to redemption under Article VI.A. or Article VII), unless the Corporation has notified the applicable holder in writing prior to the delivery by such holder of a Notice of Conversion that the Corporation is unable to honor conversions, if (i) the Corporation fails to timely deliver during the Delivery Period shares of Common Stock to a holder upon a conversion of shares of New Preferred Stock and (ii) thereafter, such holder purchases (in an open market transaction or otherwise) shares of Common Stock (the “ Cover Shares ”) to make delivery in satisfaction of a sale by such holder of the shares of Common Stock (the “ Sold Shares ”) that such holder anticipated receiving upon such conversion (a “ Buy-In ”), at the election of the holder as a redemption to the fullest extent permitted by law, the Corporation shall pay such holder (in addition to any other remedies available to the holder) the amount equal to such holder’s total purchase price (including brokerage commissions, if any) for the Cover Shares and, upon making such payment, the Corporation’s conversion obligations shall be deemed satisfied and the New Preferred Stock that was tendered pursuant to the Notice of Conversion shall thereupon be cancelled and the holder shall not have any further right or remedy against the Corporation with respect to such shares of New Preferred Stock that were tendered pursuant to the Notice of Conversion. A holder shall provide the Corporation written notification and supporting documentation indicating any amounts payable to such holder pursuant to this Article VI.B. The Corporation shall make any payments required pursuant to this Article VI.B in accordance with and subject to the provisions of Article XIII.E.
VII. SERIES C PREFERRED STOCK REDEMPTION RIGHTS
A. Redemption Events . In the event (each of the events described below after expiration of the applicable cure period (if any) being a “ Redemption Event ”) that any of the following occur without the prior approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders, but only if such approval expressly specifies that the Requisite Holders signing the consent are consenting for purposes of this Article VII:
(i) the Corporation shall fail to observe or perform any covenant, condition or agreement contained in this Certificate of Designations or any of the Transaction Documents (as defined in the Securities Purchase Agreement) (including, without limitation, the failure to obtain approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders under Article XII, but excluding those covenants referred to below in paragraphs (iii) and (iv)), which failure is not cured within eight Trading Days after receiving notice of such default sent by a holder of New Preferred Stock;
(ii) the failure of the Common Stock to be listed on a Trading Market for a period of 20 consecutive Trading Days;
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(iii) the Corporation provides written notice (or otherwise indicates in writing) to any holder of New Preferred Stock, or states by way of public announcement distributed via a press release, at any time, of its intention not to issue shares of Common Stock to any holder of New Preferred Stock upon conversion in accordance with the terms of this Certificate of Designations (other than due to the circumstances contemplated by Article V, for which the holders shall have the remedies set forth in such Article), which notice or announcement is not rescinded within five Trading Days and provided that the Requisite Holders elect in writing to designate such event as a Redemption Event;
(iv) the Corporation shall fail to timely deliver the shares of Common Stock as and when required herein for any reason (not including because of the limitations set forth in Article IV.C.), which failure is not cured within ten Trading Days and provided that the Requisite Holders elect in writing to designate such event as a Redemption Event;
(v) any material representation or warranty made by the Corporation or any of its subsidiaries in the Securities Purchase Agreement shall prove to have been materially false or incorrect or breached in a material respect, in each case as of the date made, provided that the Corporation receives written notice of the breach or alleged falsity from any holder of Series C Preferred Stock within one year from the consummation of a Strategic Transaction and such breach or alleged falsity is not cured within five Trading Days of the receipt of such written notice;
(vi) the Corporation or any of its subsidiaries shall: (a) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (b) make a general assignment for the benefit of its creditors; (c) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (d) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally; (e) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (f) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same; or (g) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
(vii) a proceeding or case shall be commenced in respect of the Corporation or any of its subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Corporation or any of its subsidiaries; or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 30 days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Corporation or action under the laws of any jurisdiction (foreign or
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domestic) analogous to any of the foregoing shall be taken with respect to the Corporation and shall continue undismissed, or unstayed and in effect for a period of 60 days;
(viii) the Corporation consummates a “going private” transaction and as a result the Common Stock is no longer registered under Sections 12(b) or 12(g) of the Exchange Act;
(ix) there shall be any SEC or judicial stop trade order or trading suspension stop-order or any restriction in place with the transfer agent for the Common Stock restricting the trading of such Common Stock for a period of 20 consecutive Trading Days;
(x) there shall be a determination by the SEC or the Corporation such that the Corporation’s representations, warranties or covenants set forth in Section 2.1(hh) of the Securities Purchase Agreement are breached or inaccurate, which breach or inaccuracy is not cured within five Trading Days of such determination; or
(xi) the Corporation consummates a Change of Control;
then, upon (i) the occurrence of any such Redemption Event, and (ii) the affirmative election delivered to the Corporation by the Requisite Holders to permit a redemption in accordance with this paragraph (the “ Redemption Trigger Notice ”), each holder of shares of Series C Preferred Stock shall thereafter have the option by delivery of a notice (the “ Redemption Event Notice ”) to the Corporation prior to the Redemption Date (defined below) to require the Corporation to redeem for cash, to the fullest extent permitted by law, all of the then outstanding shares of Series C Preferred Stock held of record by such holder for an amount per share equal to the Redemption Event Amount in effect at the time of the redemption hereunder. Upon the Corporation’s receipt of any Redemption Trigger Notice hereunder, the Corporation shall immediately (and in any event within one Trading Day following such receipt) deliver a written notice (a “ Redemption Announcement ”) to all holders of Series C Preferred Stock stating the date upon which the Corporation received such Redemption Trigger Notice. The Corporation shall not redeem any shares of Series C Preferred Stock during the three Trading Day period following the delivery of a required Redemption Announcement hereunder. At any time and from time to time during such three Trading Day period, each holder of Series C Preferred Stock may request (either orally or in writing) information from the Corporation with respect to the instant redemption (including, but not limited to, the aggregate number of shares of Series C Preferred Stock covered by Redemption Event Notices received by the Corporation) and the Corporation shall furnish (either orally or in writing) as soon as practicable such requested information to such requesting holder. On the fifth Trading Day following the date of the delivery of the Redemption Trigger Notice (the “ Redemption Date ”), the Corporation shall, to the fullest extent permitted by law, redeem all shares of Series C Preferred Stock subject to all Redemption Event Notices received by the Corporation prior to such date. For the avoidance of doubt, the occurrence of a Redemption Event shall not preclude the occurrence of one or more subsequent Redemption Events.
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B. Definition of Redemption Event Amount . The “ Redemption Event Amount ” with respect to a share of Series C Preferred Stock means an amount equal to the greater of (i) the Face Amount plus all accrued and unpaid dividends on such share of Series C Preferred Stock and (ii) an amount determined by the following formula:
( V / CP) x M
where:
“ V ” means the Face Amount plus all accrued and unpaid dividends on such share of Series C Preferred Stock;
“ CP ” means the Conversion Price in effect on the date on which the Corporation receives the Redemption Event Notice; and
“ M ” means the Closing Sales Price on the date on which the Corporation receives the Redemption Trigger Notice.
C. Twelve Month Redemption . On, and only on, the date that is one (1) year following the Closing (as defined in the Asset Purchase Agreement) (the “ 12-Month Anniversary ”), 2,900 shares of the Corporation’s Series C-1 2 Preferred Stock (or the total number of shares of Series C-1 2 Preferred Stock then issued and outstanding, if less than 2,900 shares, such amount being the “ Redemption Shares ”) will be redeemable, to the fullest extent permitted by law, for a cash amount equal to their aggregate Face Amount (the “ 12-Month Redemption ”), but only upon the affirmative election delivered to the Corporation by the Requisite Holders no later than five Trading Days prior to the 12-Month Anniversary (the “ 12-Month Redemption Notice ”). If the 12-Month Redemption Notice is received by the Corporation, then the Corporation shall redeem the Redemption Shares on a pro rata basis among all holders of the Redemption Shares. Such redemption shall occur on the 12-Month Anniversary, provided that, if the 12-Month Anniversary is not a Trading Day, the redemption will be effected on the first Trading Day after the 12-Month Anniversary.
D. Redemption Defaults . If the Corporation fails to pay any holder the Redemption Event Amount or any other redemption amount owed to such holder pursuant to this Certificate of Designations (including without limitation the amounts owed as a result of the 12-Month Redemption) with respect to any share of Series C Preferred Stock within five Trading Days after its receipt of a Redemption Event Notice or 12-Month Redemption Notice, then the holder of Series C Preferred Stock entitled to redemption shall be entitled to an additional amount of cash equal to interest on the applicable Redemption Event Amount or other redemption amount (excluding the interest payable pursuant to this paragraph) at a per annum rate equal to the lower of 18% and the highest interest rate permitted by applicable law from the date on which the Corporation receives the Redemption Event Notice (or, in the case of the 12-Month Redemption, from the date that is one (1) year following the Closing) until the date of payment of the applicable Redemption Event Amount or other redemption amount hereunder. Such interest shall be deemed a cash payment to be made, to the fullest extent permitted by law, upon redemption of the Series C Preferred Stock. In the event the Corporation is not permitted by applicable law to redeem all of the shares of Series C Preferred Stock submitted for redemption, the Corporation shall use all funds legally available to redeem shares of Series C Preferred Stock from each
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holder pro rata, based on the total number of shares of Series C Preferred Stock outstanding at the time of redemption included by such holder in the Redemption Event Notice or the 12-Month Redemption Notice delivered prior to the date upon which such redemption is to be effected relative to the total number of shares of Series C Preferred Stock outstanding at the time of redemption included in all of the Redemption Event Notices or the 12-Month Redemption Notice delivered prior to the date upon which such redemption is to be effected, and shall redeem all the remaining shares to have been redeemed as soon as practicable after the Corporation is permitted to effect such redemption by applicable law. The Corporation shall use its best efforts to create sufficient liquidity and to perform its obligation to pay all amounts owed as redemption to holders of Series C Preferred Stock on the date on which redemption is to occur, or, if the Corporation is prohibited by applicable law from paying the redemption on such date, as soon as possible after such scheduled date of redemption, and shall, to the extent required to enable it to satisfy such obligation, take such actions, including but not limited to the following actions, as shall be required to enable it to satisfy such obligation (but subject to the consent rights set forth in Article XI, Article XII, Article XIII and the other provisions of this Certificate of Designations): (A) the issuance and sale of any notes, bonds or other debt securities; (B) the issuance and sale of (I) any notes or debt securities containing equity features (including any notes or debt securities convertible into or exchangeable for equity securities of the Corporation) or (II) any equity securities of the Corporation (or any securities convertible into or exchangeable for any equity securities of the Corporation) or rights to acquire any equity securities of the Corporation; (C) the sale of any or all assets of the Corporation; (D) the merger or consolidation of the Corporation with any other entity; or (E) the liquidation of the Corporation and the winding up of its business and affairs. The Corporation hereby further agrees that, unless prohibited by law, in determining whether the Corporation can pay the amounts owed as a redemption pursuant to this Certificate of Designations and in accordance with applicable law, the Corporation’s assets will be valued at the highest possible value, without regard to the impact of such redemption on the Corporation’s business, including its ability to continue as a going concern.
E. Redemption Right Waivers .
(i) Any and all Redemption Events that may have occurred prior to the consummation of a Strategic Transaction and for which a Redemption Trigger Notice has not been delivered to the Corporation shall be deemed irrevocably waived if the Requisite Holders approve a Strategic Transaction.
(ii) Unless the Corporation and the Requisite Holders agree in writing to a longer period of time, if a Redemption Event Notice is not tendered to the Corporation within two years from the date of the occurrence of a particular Redemption Event, then the resulting redemption rights under this Article VII, solely with respect to that particular Redemption Event, shall be irrevocably waived.
(iii) Any redemption rights arising under this Article VII that are waived either by operation of Article VII.D or upon the written approval of the Requisite Holders shall be binding on all holders of Series C Preferred Stock.
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VIII. RANK
All shares of the New Preferred Stock shall rank (i) senior to (a) the Corporation’s Common Stock; (b) the Common Stock Equivalents (other than Senior Securities) in existence as of the Closing Date; and (c) any Common Stock Equivalents (other than Senior Securities) and any Other Stock (other than Senior Securities) issued after the Closing Date (unless, with the consent of the Requisite Holders obtained in accordance with Article XII hereof, such Common Stock Equivalents or Other Stock specifically, by their terms, rank senior to or pari passu with the New Preferred Stock) (collectively with the Common Stock and the Common Stock Equivalents in existence as of the Closing Date, “ Junior Securities ”); (ii) pari passu with any Common Stock Equivalents (other than Senior Securities) and Other Stock (other than Senior Securities) issued after the Closing Date (with the written consent of the Requisite Holders obtained in accordance with Article XII hereof) specifically ranking, by their terms, on parity with the New Preferred Stock (the “ Pari Passu Securities ”); and (iii) junior to any Common Stock Equivalents or Other Stock issued after the Closing Date (with the written consent of the Requisite Holders obtained in accordance with Article XII hereof) specifically ranking, by their terms, senior to the New Preferred Stock (collectively, the “ Senior Securities ”), in each case as to dividends or distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. Each share of New Preferred Stock shall rank pari passu with each other share of New Preferred Stock as to dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.
IX. LIQUIDATION PREFERENCE
A. If (i) the Corporation shall: (1) commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law; (2) consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property; or (3) make an assignment for the benefit of its creditors; (ii) a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of 60 consecutive days; or (iii) the Corporation sells or transfers all or substantially all of its assets in one transaction or in a series of related transactions and, on account of any such event as set forth in clauses (i), (ii) or (iii), the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up (a “ Liquidation Event ”), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities pursuant to the rights, preferences and privileges thereof) upon liquidation, dissolution or winding up unless prior thereto the holders of shares of New Preferred Stock shall have received the Liquidation Preference with respect to each share then outstanding. If, upon the occurrence of a Liquidation Event, the assets and funds legally available for distribution among the holders of the New Preferred Stock and holders of Pari Passu Securities, if any, shall be insufficient to permit the payment to such holders of the preferential amounts payable
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thereon, then the entire assets and funds of the Corporation legally available for distribution to the New Preferred Stock and the Pari Passu Securities, if any, shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares.
B. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of less than substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation.
C. The “ Liquidation Preference ” with respect to a share of New Preferred Stock means an amount equal to the Face Amount thereof plus all accrued and unpaid dividends on the New Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares). The Liquidation Preference with respect to any Pari Passu Securities, if any, shall be as set forth in the Certificate of Designations filed in respect thereof.
X. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the Closing Date, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, combination, reclassification or other similar event (in each case, whether by merger or otherwise), then, after the date of record for such event, the Conversion Price shall be proportionately reduced. If the number of outstanding shares of Common Stock is decreased by a reverse stock split, combination or reclassification of shares, or other similar event (in each case, whether by merger or otherwise), then, after the date of record for such event, the Conversion Price shall be proportionately increased. In any such event described in this paragraph, the Corporation shall notify the Corporation’s transfer agent of such change on or before the effective date thereof.
B. Adjustment Due to Merger, Consolidation, Etc. With respect to each share of New Preferred Stock, if, at any time after the Closing Date, there shall be (i) any recapitalization, reclassification or change of the outstanding shares of Common Stock (but not of such share of New Preferred Stock), other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a transaction causing an adjustment pursuant to Article X.A.; (ii) any Change of Control or any merger, conversion, consolidation or other business combination, in each case pursuant to which the Common Stock (but not such share of New Preferred Stock) is converted into or exchanged for capital stock or other securities of the Corporation or any subsidiary of the Corporation or any other person (or the right to receive any such stock or securities) or into any property (including, without limitation, cash and the right to receive cash or other property) or any combination of the foregoing; or (iii) any share exchange pursuant to which all of the outstanding shares of Common Stock (but not such share of New Preferred Stock) are converted into or exchanged for capital stock or other securities of the
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Corporation or any subsidiary of the Corporation or any other person (or the right to receive any such securities) or into any property (including, without limitation, cash and the right to receive cash or other property) or into any combination of the foregoing (each of (i) — (iii) above being a “ Corporate Change ”), then the holder of such share of New Preferred Stock shall thereafter have the right to receive upon conversion, in lieu of the shares of Common Stock otherwise issuable, such shares of stock, securities and/or other property as would have been issued or payable in such Corporate Change if such share of New Preferred Stock had been converted into Common Stock immediately prior to such Corporate Change without taking into account the limitations on conversion set forth in Article IV. The Corporation shall not effect any Corporate Change unless: (i) each holder of New Preferred Stock has received written notice of such transaction at least 20 days prior thereto, but in no event later than 10 days prior to the record date for the determination of stockholders entitled to vote with respect thereto; (ii) the Requisite Holders approve (by vote or written consent, as provided by the DGCL) such transaction in writing or at a meeting; and (iii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument (in form and substance reasonable satisfactory to the Requisite Holders) the obligations of this Certificate of Designations. The above provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of New Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive recapitalizations, changes, conversions, combinations, reclassifications, consolidations, mergers, sales, transfers or share exchanges.
C. Adjustment Due to Distribution . If, at any time after the Closing Date, the Corporation shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock other than a dividend for which an adjustment is provided under Section A. or Section D. of this Article X.), by way of return of capital or otherwise (including, without limitation, any dividend or distribution to the Corporation’s stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary ( i.e., a spin-off)) (a “ Distribution ”), then the holders of New Preferred Stock shall be entitled, upon any conversion of shares of New Preferred Stock after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the holder with respect to the shares of Common Stock issuable upon such conversion had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. If the Distribution involves rights, warrants, or options and the right to exercise or convert such right, warrant or option would expire in accordance with its terms prior to the conversion of the New Preferred Stock, then the terms of such right, warrant or option shall provide that such exercise or convertibility right shall remain in effect until 10 days after the date the holder of New Preferred Stock receives such right, warrant or option pursuant to the conversion thereof.
D. Purchase Rights . If, at any time after the Closing Date, the Corporation issues any securities (“ Purchase Rights ”) that are convertible into or exercisable or exchangeable for or impart a right to purchase securities other than Common Stock or Common Stock Equivalents (whether of the Corporation or any subsidiary of the Corporation) pro rata to the record holders of any class of Common Stock, then the holders of New Preferred Stock will be entitled to acquire (at the same time the holders of Common Stock receive such Purchase Rights), upon the
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terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the New Preferred Stock (without giving effect to the limitations contained in Article IV) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
E. Adjustment Due to Dilutive Issuances .
(i) Dilutive Issuance . Except as otherwise provided in Paragraphs A, B and F of this Article X, if and whenever the Corporation issues or sells, or in accordance with Article X.E.(ii) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Conversion Price on the Measurement Date for such shares of Common Stock (a “Dilutive Issuance” ), then effective immediately upon the such Dilutive Issuance, the Conversion Price will be adjusted to equal the per share price at which such shares were issued, sold or deemed to have been issued or sold in such Dilutive Issuance, provided that such adjustment may be reversed as set forth below.
(ii) Effect on Conversion Price of Certain Events . For purposes of determining the adjusted Conversion Price under subparagraph (i), the following will be applicable:
(a) Issuance of Options . If the Corporation in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or Common Stock Equivalents (such warrants, rights and options to purchase Common Stock or Common Stock Equivalents are hereinafter referred to as “ Options ”) and the price per share for which Common Stock is issuable upon the exercise of such Options (and the price of any conversion of Common Stock Equivalents, if applicable) is less than the Conversion Price (in effect on the Measurement Date of such Options) (“ Below Conversion Price Options ”), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Conversion Price Options (assuming full exercise, conversion or exchange of Common Stock Equivalents, if applicable) will, as of the date of the issuance or grant of such Below Conversion Price Options, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Below Conversion Price Options” is determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the issuance or granting of all such Below Conversion Price Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise of all such Below Conversion Price Options, plus, in the case of Common Stock Equivalents issuable upon the exercise of such Below Conversion Price Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Common Stock Equivalents first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Conversion Price Options (assuming full conversion of Common Stock Equivalents, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such
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Common Stock upon the exercise of such Below Conversion Price Options or upon the exercise, conversion or exchange of Common Stock Equivalents issuable upon exercise of such Below Conversion Price Options although the forfeiture or expiration of any such Below Conversion Price Options may result in a subsequent increase in the Conversion Price as set forth below.
(b) Issuance of Common Stock Equivalents . If the Corporation in any manner issues or sells any Common Stock Equivalents, whether or not immediately exercisable, convertible or exchangeable (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such exercise, conversion or exchange of such Common Stock Equivalents is less than the Conversion Price (in effect on the Measurement Date for such Common Stock Equivalents), then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents will, as of the date of the issuance of such Common Stock Equivalents, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such exercise, conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the issuance or sale of all such Common Stock Equivalents, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise, conversion or exchange thereof at the time such Common Stock Equivalents first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon exercise, conversion or exchange of such Common Stock Equivalents, although the forfeiture or expiration of any such Common Stock Equivalent may result in a subsequent increase in the Conversion Price as set forth below.
(c) Expiration of Options or Common Stock Equivalents . If any Dilutive Issuance is deemed to have occurred as a result of the issuance of Below Conversion Price Options or the issuance of Common Stock Equivalents at a price per share below the Conversion Price (each, a “ Dilutive Instrument ”), and if the Dilutive Instrument expires, terminates or is otherwise forfeited without having been exercised, converted or exchanged in any manner whatsoever that has resulted in the issuance of any shares of Common Stock or Common Stock Equivalents, then in each case, the adjustment to the Conversion Price made upon the issuance of such Dilutive Instrument shall be reversed; provided, however , that any such reversal shall not impact any Conversion Price adjustment made as a result of any other Dilutive Issuance; and provided further, however , such reversal shall not impact the Conversion Price for any conversion of New Preferred Stock with respect to which conversion the Conversion Date is prior to such reversal.
(iii) Change in Option Price or Conversion Rate . If there is a change at any time in: (a) the amount of consideration payable to the Corporation upon the exercise of any Options; (b) the amount of consideration, if any, payable to the Corporation upon the exercise, conversion or exchange of any Common Stock Equivalents; or (c) the rate at which any Common Stock Equivalents are convertible into or exchangeable for Common Stock, such change shall be deemed to be a new issuance of such Option or Common Stock Equivalent as of the date of such change for purposes of this Article X.E., and the Conversion Price in effect at the time of such change will be readjusted in accordance with Paragraphs (i), (ii) or (iii) of this Article X.E., as applicable.
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(iv) Calculation of Consideration Received . If any Common Stock, Options or Common Stock Equivalents are issued, granted or sold for cash, the consideration received therefor will be the amount received by the Corporation therefor, after deduction of all underwriting discounts or allowances in connection with such issuance, grant or sale. In case any Common Stock, Options or Common Stock Equivalents are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Corporation will be the fair market value of such consideration as determined by a majority of the Board of Directors and the Requisite Holders, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation will be the market price thereof as of the date of receipt; in the event that the Board of Directors and the Requisite Holders cannot agree on the value of such consideration, then the matter shall be promptly submitted to an independent accountant mutually agreed upon by the Board of Directors and the Requisite Holders, whose determination shall be binding, absent manifest error. In case any Common Stock, Options or Common Stock Equivalents are issued in connection with any merger or consolidation in which the Corporation is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Common Stock Equivalents, as the case may be. Notwithstanding anything else herein to the contrary, if Common Stock, Options or Common Stock Equivalents are issued, granted or sold in conjunction with each other as part of a single transaction or in a series of related transactions, no deduction shall be made to the issuance price of any such securities to account for the fair value of any of the other securities issued, granted or sold in conjunction therewith or as part of the same transaction or series of related transactions. An adjustment pursuant to this Article X shall be made, if applicable, for each separate security issued, granted or sold as if such security was not issued, granted or sold in conjunction with any other security as part of a single transaction or in a series of related transactions.
(v) No adjustment shall be made pursuant to this Paragraph E (other than a reversal pursuant to subparagraph (ii)(c)) if such adjustment would result in an increase in the Conversion Price.
F. Adjustment of Conversion Price Upon Redemption Event . If, at any time on or after the Closing Date, a Redemption Event shall have occurred as a result of any of the events described in subparagraphs (i), (iii), (iv), (v), (x), (xi), (xiii) or (xiv) of Article VII.A., then the Conversion Price shall immediately and automatically be reduced to 10% of the Conversion Price in effect immediately prior to such Redemption Event.
G. Exceptions to Adjustment of Conversion Price . No adjustment to the Conversion Price will be made (i) except in the case of Article X.E.(iii), upon the conversion or exercise of any warrants, options or convertible securities issued and outstanding on the Closing Date that are set forth on Schedule 2.1(c) of the Securities Purchase Agreement in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options to employees, directors or consultants of the Corporation which may hereafter be granted to or
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exercised by any employee, director or consultant under any stock option, employee stock purchase or similar benefit plan of the Corporation now existing or to be implemented in the future, so long as the issuance of such stock or options is approved (by vote or written consent, as provided by the DGCL) by a majority of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon issuance or conversion of the New Preferred Stock or exercise of the Warrants, or (iv) upon the issuance of securities approved (by vote or written consent, as provided by the DGCL) by the Requisite Holders, which approval specifies that the issuance is intended to be exempt hereunder.
H. Notice of Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article X amounting to a more than 5% change in such Conversion Price, the Corporation, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each holder of New Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of New Preferred Stock, furnish to such holder a like certificate setting forth: (i) such adjustment or readjustment; (ii) the Conversion Price at the time in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of a share of New Preferred Stock.
I. Adjustment Following Reverse Stock Split . If, on the Conversion Price Adjustment Date (as defined below), the VWCP (as adjusted to reflect any stock splits, anti-dilution adjustments, stock dividends or similar recapitalizations occurring on or before the Conversion Price Adjustment Date) for the three (3) consecutive Trading Day period ending on the last Trading Day prior to the Conversion Price Adjustment Date (the “3-Day VWCP”) is less than the product of the Conversion Price then in effect multiplied by 10, as adjusted to reflect any stock splits, anti-dilution adjustments, stock dividends or similar recapitalizations occurring on or before the Conversion Price Adjustment Date, then, effective as of the Conversion Price Adjustment Date, the Conversion Price shall be reduced to a price equal to ten percent (10%) of the 3-Day VWCP. The “ Conversion Price Adjustment Date ” shall mean the Saturday that is two (2) calendar weeks following the Saturday of the week the Reverse Split (defined below) is effected. The Company hereby agrees that it will not issue any press releases or file any periodic reports on Form 8-K under the Exchange Act, except where required by law, during the period beginning on the day after the effective date of the Reverse Split and ending on the Conversion Price Adjustment Date. The “ Reverse Split ” means a reverse stock split of the Corporation’s outstanding Common Stock at an exchange ratio of 1-for-100, and effected between two (2) and eight (8) weeks from the Closing (as defined in the Asset Purchase Agreement).
J. Adjustment Due to Delayed Reverse Split . If a reverse stock split of the Corporation’s outstanding Common Stock at an exchange ratio of 1-for-100 has not been effected by the date that is eight (8) weeks from the Closing (as defined in the Asset Purchase Agreement) (the “ Reverse Split Deadline ”), then on the next Saturday to occur after the Reverse Split Deadline, the Conversion Price of the New Preferred Stock shall be reduced to $0.0001 per share.
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XI. VOTING RIGHTS
The holders of the New Preferred Stock have no voting power whatsoever, except as otherwise required by the DGCL in this Article XI and in Article XII below.
Notwithstanding the above, the Corporation shall provide each holder of New Preferred Stock with prior notification of any meeting of the stockholders (and copies of proxy materials and other information sent to stockholders). If the Corporation takes a record of its stockholders for the purpose of determining stockholders entitled to (a) receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation or recapitalization) any share of any class or any other securities or property, or to receive any other right, or (b) to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Corporation, or any proposed merger, consolidation, liquidation, dissolution or winding up of the Corporation, the Corporation shall mail a notice to each holder, at least 10 days prior to the record date specified therein (or 20 days prior to the consummation of the transaction or event, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), of the date on which any such record is to be taken for the purpose of such vote, dividend, distribution, right or other event, and a brief statement regarding the amount and character of such vote, dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of the New Preferred Stock, voting together as a single class, is required to authorize a given action of the Corporation, the affirmative vote of the Requisite Holders (except as otherwise may be required under the DGCL) shall constitute the approval of such action by such class; provided, however, that if the DGCL requires only the separate vote of any one or more, but not all, of the series of New Preferred Stock, the affirmative vote of at least 80% of the voting power of such one or more series, voting together as a single class, shall constitute the approval of such action by the New Preferred Stock in lieu of the approval of the Requisite Holders. To the extent that under the DGCL holders of the New Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of New Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV.C.(ii)) using the record date for the taking of such vote of stockholders as the date as of which the Conversion Price is calculated. The Corporation shall not (i) combine the outstanding shares of any series of New Preferred Stock into a smaller number of shares of such series (whether by reclassification, merger, stock split or otherwise) or (ii) subdivide the outstanding shares of any series of New Preferred Stock into a greater number of shares of such series (whether by reclassification, merger, stock split, stock dividend or otherwise) without the approval (by vote or written consent, as provided by the DGCL) of the holders of at least 80% of the voting power of such series of New Preferred Stock to be combined or subdivided, voting as a separate class.
XII. PROTECTION PROVISIONS
So long as at least 1,000 shares of New Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares) are outstanding, or after all of the Cash Warrants have been fully exercised, at least 3,000 shares of New Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations
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and the like with respect to such shares) are outstanding, the Corporation shall not, and shall not allow any of its subsidiaries to, take any of the following actions (in each case whether by merger, consolidation, conversion or otherwise) without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders (and any of the following actions taken without such approval of the Requisite Holders shall be null and void ab initio and of no force and effect):
A. amend, alter, change or repeal the rights, powers, preferences or privileges of the New Preferred Stock so as to affect the New Preferred Stock adversely; provided, however, that if such amendment, alteration, change or repeal would affect adversely the rights, powers, preferences or privileges of any one or more series of New Preferred Stock but shall not so affect each series of New Preferred Stock, this subparagraph A shall require the approval (by vote or written consent, as provided by the DGCL) of the holders of at least 66-2/3% of the voting power of the one or more series of New Preferred Stock adversely affected, voting together as a single class, in lieu of the approval of the Requisite Holders required by this subparagraph A;
B. amend, alter, change or repeal any provision of the Certificate of Incorporation of the Corporation (including, for the avoidance of doubt, any Certificate of Designation or Certificate of Designations (including this Certificate of Designations) filed pursuant to Section 151(g) of the DGCL);
C. redeem, purchase or otherwise acquire, or apply to or set aside any monies for the redemption, purchase or other acquisition of, or permit any subsidiary of the Corporation to redeem, purchase or otherwise acquire, or apply to or set aside any monies for the redemption, purchase or other acquisition of, or declare or pay any dividend or make any Distribution or other distribution on or with respect to, any capital stock, other than (i) under this Certificate of Designations with respect to the New Preferred Stock or (ii) in connection with the redemption of unvested shares of Common Stock issued pursuant to equity compensation plans or arrangements;
D. increase the par value of the Common Stock;
E. enter into a definitive agreement that, if consummated, would represent, or take any other corporate action that would represent, a Strategic Transaction;
F. enter into a definitive agreement that, if consummated, would result in, or take any other corporate action that would result in, a Change of Control, Corporate Change or Liquidation Event;
G. file a registration statement under the Securities Act of 1933, as amended (the “ Act ”), relating to the sale of any securities of the Corporation, other than registration statements filed on Form S-8 and any successor thereto;
H. (i) issue, sell, transfer from the Corporation or distribute any capital stock or other equity security of the Corporation or any subsidiary of the Corporation including, without limitation, Common Stock, Options, Purchase Rights or Common Stock Equivalents, whether for no
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consideration or for cash consideration, property, services or other exchange; (ii) issue, sell, transfer from the Corporation or distribute any promissory note or other instrument evidencing indebtedness for borrowed money, whether for no consideration or for cash consideration, property, services or other exchange; or (iii) incur indebtedness for borrowed money by the Corporation or any subsidiary of the Corporation, whether for no consideration or for cash consideration, property, services or other exchange;
I. take any action, including authorizing any expenditure or entering into any contract, to cause the Corporation’s Net Cash to fall below $2,900,000 until the date that is thirteen months from the date of the Asset Purchase Agreement.
Notwithstanding anything to the contrary contained herein, nothing in this Article XII, shall require the consent of the Requisite Holders for (i) issuances of shares of Common Stock or options to employees, officers, directors, or consultants of the Corporation pursuant to any stock option plan duly adopted by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employees directors established for such purpose, duly approved (by vote or written consent, as provided by the DGCL) by the Corporation’s stockholders and described in the Public Filings (as described in the Securities Purchase Agreement), provided that the number of shares of Common Stock authorized for issuance under such plan(s) shall have been (since the inception of such plan) and, from and after the date of such grant, shall be ratably adjusted concurrent with any stock split, reverse stock split or similar adjustment to the outstanding Common Stock of the Corporation; (ii) issuances of securities upon the exercise, exchange of or conversion of any Common Stock Equivalents issued and outstanding on the Closing Date and described in the Public Filings, provided that such securities have not been amended since the Closing Date (other than adjustments due to stock splits or recapitalization events) to increase the number of such securities or to decrease the exercise, exchange or conversion price of any such securities; and (iii) the issuance of any Common Stock or Common Stock Equivalents under the terms of the Securities Purchase Agreement or the Warrants (including in connection with any adjustments to the conversion price of any such securities pursuant to their terms).
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XIII. CORPORATE CAPACITY AND POWER
Without the prior written consent of the Requisite Holders, the Corporation shall not have the corporate capacity or power to take any action, including authorizing any expenditure or entering into any contract, to cause the Corporation’s Net Cash to fall below $2,900,000 until the date that is thirteen months from the date of the Asset Purchase Agreement, with any such prohibited action or expenditure being deemed ultra vires under the DGCL, and, if any such action is taken without the prior written consent of the Requisite Holders, then the Corporation and the Corporation’s stockholders shall have, among other rights and remedies arising under the DGCL or other applicable law, all rights and remedies set forth in Section 124(2) of the DGCL.
XIV. MISCELLANEOUS
A. Cancellation of New Preferred Stock . If any shares of New Preferred Stock are converted pursuant to Article IV or redeemed or repurchased by the Corporation, the Corporation shall take all actions necessary to cause the shares so converted or redeemed to be canceled and return to the status of authorized, but unissued preferred stock of no designated series, and such shares shall not be issuable by the Corporation as New Preferred Stock.
B. Lost or Stolen Certificates . Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any stock certificate(s) representing shares of New Preferred Stock (each a “ Preferred Stock Certificate ”) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Corporation shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the holder contemporaneously requests the Corporation to convert in full all shares of New Preferred Stock represented by such Preferred Stock Certificate(s).
C. Allocation of Reserved Amount . The Reserved Amount shall be allocated pro rata among the holders of New Preferred Stock based on the number of shares of New Preferred Stock issued to each holder and issuable to each holder upon exercise of all outstanding Warrants then held of record by such holder. Each increase to the Reserved Amount shall be allocated pro rata among the holders of New Preferred Stock based on the number of shares of New Preferred Stock held by each holder at the time of the increase Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any New Preferred Stock or Warrants shall be allocated to the remaining holders of shares of New Preferred Stock and Warrants, pro rata based on the number of shares of New Preferred Stock and the number of shares of New Preferred Stock underlying the Warrants then held of record by such holders.
D. Quarterly Statements of Available Shares . For each calendar quarter beginning in the Closing Date occurs and thereafter so long as any shares of New Preferred Stock are outstanding, the Corporation shall deliver (or cause its transfer agent to deliver) to each holder upon its written request a written report notifying such holder of any occurrence which prohibits the
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Corporation from issuing Common Stock upon any such conversion. The report shall also specify: (i) the total number of shares of New Preferred Stock outstanding as of the end of such quarter; (ii) the total number of shares of Common Stock issued upon all conversions of New Preferred Stock prior to the end of such quarter; (iii) the total number of shares of Common Stock which are reserved for issuance upon conversion of the New Preferred Stock as of the end of such quarter; and (iv) the total number of shares of Common Stock which may thereafter be issued by the Corporation upon conversion of the New Preferred Stock before the Corporation would exceed the Reserved Amount. In addition, the Corporation shall provide (or cause its transfer agent to provide), as promptly as practicable delivery to the Corporation of a written request by any holder, any of the information enumerated in clauses (i) — (iv) of this Paragraph D as of the date of such request.
E. Payment of Cash; Defaults . Whenever the Corporation is required to make any cash payment to a holder under this Certificate of Designations (upon redemption or otherwise), such cash payment shall be made to the holder within ten Trading Days after delivery by such holder of a notice specifying that the holder elects to receive such payment in cash and the method ( e.g. , by check, wire transfer) in which such payment should be made and any supporting documentation reasonably requested by the Corporation to substantiate the holder’s claim to such cash payment or the amount thereof. If such payment is not delivered within such ten Trading Day period, such holder shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of 18% and the highest interest rate permitted by applicable law until such amount is paid in full to the holder. Such amount shall be deemed to be paid as a redemption to the fullest extent permitted by law on the shares of New Preferred Stock giving rise to such default.
F. Status as Stockholder . Upon submission of a Notice of Conversion by a holder of New Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the holder’s rights as a holder of such converted shares of New Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such holder because of a failure by the Corporation to comply with the terms of this Certificate of Designations. Notwithstanding the foregoing, if a holder has not received all shares of Common Stock prior to the last Trading Day of the Delivery Period with respect to a conversion of New Preferred Stock for any reason, then (unless the holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Corporation within five Trading Days after the expiration of such Delivery Period) the holder shall regain the rights of a holder of New Preferred Stock with respect to such unconverted shares of New Preferred Stock and the Corporation shall, as soon as practicable, return any certificate representing such unconverted shares to the holder. In all cases, the holder shall retain all of its rights and remedies for the Corporation’s failure to convert New Preferred Stock.
G. Waiver . Notwithstanding any provision in this Certificate of Designations to the contrary, any provision contained herein and any right of the holders of New Preferred Stock granted hereunder may be waived as to all shares of New Preferred Stock (and the holders thereof) upon the written consent of the Requisite Holders, unless a higher percentage is required by applicable law, in which case the written consent of the holders of not less than such higher
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percentage shall be required; provided, however, that if a waiver would affect adversely the rights, powers, preferences or privileges of any one or more series of New Preferred Stock but shall not so affect the rights, powers, preferences or privileges of each series of New Preferred Stock, this paragraph shall require the written consent of the holders of at least 66-2/3% of the voting power (or such higher percentage required by applicable law) of such one or more series of New Preferred Stock adversely affected, voting together as a single class, in lieu of the written consent of the Requisite Holders required by this paragraph.
H. Reference to Other Agreements and Documents . When the terms of this Certificate of Designations refers to a specific agreement or other document to determine the meaning or operation of a provision hereof, the secretary of the Corporation shall maintain a copy of such agreement or document at the principal executive offices of the Corporation and a copy thereof shall be provided free of charge to any stockholder who makes a request therefor. Unless otherwise provided in this Certificate of Designations, a reference to any specific agreement or other document shall be deemed a reference to such agreement or document as amended from time to time in accordance with the terms of such agreement or document.
I. Severability. If any term of any series of New Preferred Stock is invalid, unlawful, or incapable of being enforced by reason of any rule of law or public policy, all other terms of such series of New Preferred Stock as set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term of any series of New Preferred Stock will be deemed dependent upon any other such term unless so expressed in this Certificate of Designations.
J. Force Majeure . Notwithstanding any provision herein to the contrary, the failure of any party to timely satisfy obligations hereunder shall be excused to the extent that (i) such failure follows the occurrence of a Force Majeure Event (defined below), and (ii) such Force Majeure Event has materially adversely affected the ability of such party (or its agents, including banks, transfer agents, and clearinghouses) to perform hereunder. A failure to perform shall be excused only for so long as the Force Majeure Event continues to materially adversely affect such person’s ability to perform. For purposes of this Section, “ Force Majeure Event ” shall mean the occurrence of any of the following events: (a) trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the SEC or FINRA; (b) a general banking moratorium shall have been declared by any of federal, New York or California authorities; (c) an act of war, terrorism or hostility shall have occurred, or (d) a strike, fire, flood, earthquake, accident or other calamity or Act of God shall have occurred.
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IN WITNESS WHEREOF , this Certificate of Designations is executed on behalf of the Corporation this day of January, 2012.
| La Jolla Pharmaceutical Company | ||
| By: | ||
| Name: George Tidmarsh | ||
| Title: Chief Executive Officer and President | ||
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the [Series C-1 2 ] [Series C-2 2 ] [Series D-1 2 ] [Series D-2 2 ] Preferred Stock)
The undersigned hereby irrevocably elects to convert [insert number of shares to nearest 1/1000 th ] shares of [Series C-1 2 ] [Series C-2 2 ] [Series D-1 2 ] [Series D-2 2 ] Preferred Stock (the “ Conversion ”), represented by stock certificate No(s). (the “ Preferred Stock Certificates ”), into shares of common stock (“ Common Stock ”) of La Jolla Pharmaceutical Company (the “ Corporation ”) according to the conditions of the Certificate of Designations, Preferences and Rights of Series C-1 2 Convertible Preferred Stock, Series C-2 2 Convertible Preferred Stock, Series D-1 2 Convertible Preferred Stock and Series D-2 2 Convertible Preferred Stock, as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. Each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof).
The Corporation shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee (which is ) with DTC through its Deposit Withdrawal Agent Commission System (“ DTC Transfer ”).
The undersigned acknowledges that these securities are “restricted securities” under the Securities Act of 1933, as amended (the “ Act ”) and accordingly agrees that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the [Series C-1 2 ] [Series C-2 2 ] [Series D-1 2 ] [Series D-2 2 ] Preferred Stock have been or will be made only pursuant to an effective registration of the transfer of the Common Stock under the Act, or pursuant to an exemption from registration under the Act.
| Date of Conversion: | ||
| Applicable Conversion Price: | ||
| Shares of Common Stock beneficially owned (determined in accordance with Section 13(d) of the Exchange Act): | ||
| Signature: | ||
| Name: | ||
| Address: | ||
Exhibit 10.1
CONSENT AND AMENDMENT AGREEMENT
This CONSENT AND AMENDMENT AGREEMENT (this “ Agreement ”), entered into as of the 19th day of January, 2012 (the “ Effective Date ”), is made by and among La Jolla Pharmaceutical Company, a Delaware corporation (the “ Company ”), and the undersigned parties (each a “ Holder ” and collectively the “ Holders ”).
WHEREAS , the Company and Holders entered into a Securities Purchase Agreement dated as of May 24, 2010 (the “ Securities Purchase Agreement ”);
WHEREAS , the Company and the Holders entered into a Consent and Amendment Agreement dated as of March 29, 2011 (the “ Consent and Amendment Agreement ”), amending certain of the rights and obligations of the parties arising under the Securities Purchase Agreement;
WHEREAS , the Company and the Holders entered into an Amendment Agreement dated as of June 30, 2011 (the “ First Amendment Agreement ”), amending certain of the rights and obligations of the parties arising under the Securities Purchase Agreement and New Certificate of Designations (as defined in the Consent and Amendment Agreement);
WHEREAS , the Company and the Holders entered into an Amendment Agreement dated as of August 24, 2011 (the “ Second Amendment Agreement ”), amending certain of the rights and obligations of the parties arising under the Securities Purchase Agreement and New Certificate of Designations (as defined in the Consent and Amendment Agreement);
WHEREAS , the Company, desires to acquire certain assets of Solana Therapeutics, Inc. (“ Solana ”) pursuant to an asset purchase agreement, dated January 19, 2012, (the “ Asset Purchase Agreement ”) through which the Company will acquire certain of Solana’s patent rights by assignment, study drug supplies, study data, contract rights and certain related regulatory records and assets;
WHEREAS , in order to facilitate the consummation of the Asset Purchase Agreement and in consideration of the Holders’ consent to the Asset Purchase Agreement the parties desire to enter into this Agreement;
WHEREAS , the parties are in agreement that it is in the best interest of the Company and the Holders to effect a reverse split of the Company’s outstanding Common Stock at a ratio of 1-for-100;
WHEREAS , in connection with the Asset Purchase Agreement, certain Holders that are parties to the Securities Purchase Agreement have agreed to amend certain provisions of the Securities Purchase Agreement, Warrants and Certificate of Designations (each as defined in the Securities Purchase Agreement) as set forth below; and
WHEREAS , the undersigned Holders represent the required threshold to amend each of the following provisions of each of the Certificate of Designations, the Warrants and the Securities Purchase Agreement.
NOW, THEREFORE , in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Capitalized Terms . Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Securities Purchase Agreement.
2. Representations and Warranties of the Company . The Company hereby represents and warrants that all representations and warranties of the Company made pursuant to the Securities Purchase Agreement not herein amended, or previously amended, are true and accurate in all material respects as if made as of the date hereof, except with respect to those representations and warranties in the Securities Purchase Agreement that speak as of an earlier date, which shall be true and accurate in all material respects as of such earlier date.
3. Representations and Warranties of the Holders . Each of the Holders hereby represents and warrants to the Company that, with respect solely to itself and not with respect to any other Holder, each Holder has the requisite power and authority to enter into and perform the Agreement, and if the Holder is an entity, such Holder is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization.
4. Amendments to the Securities Purchase Agreement . The Securities Purchase Agreement is amended such that Section 4.3 of the Securities Purchase Agreement is hereby deleted in its entirety. Additionally, the term “Requisite Holders”, as defined in Section 1.3(a) of the Securities Purchase Agreement shall be redefined to mean “80% of the then outstanding Preferred Stock and Warrants held by all holders of Preferred Stock, with any shares of Preferred Stock issuable upon exercise of any Warrants to be included in the Requisite Holders calculation, even if such Warrant has not been exercised at the time of the calculation.”
5. Amendments to the Form of Cash Warrants . The outstanding Cash Warrants issued pursuant to the Securities Purchase Agreement are hereby amended such that Section 1(d) of each of the Cash Warrants is hereby deleted in its entirety.
6. Amendments to the Form of the Cash Warrants and Cashless Warrants . The Termination Date (as defined in each of the Cash Warrants and the Cashless Warrants) shall be amended such that the Termination Date is the date that is three (3) years following the Closing (as defined in the Asset Purchase Agreement).
7. Adoption of Certificate of Designations; Exchange of Shares .
(a) The Certificate of Designations establishing the rights, preferences and privileges for the Company’s Series C-1 2 Convertible Preferred Stock (the “ Series C-1 2 Preferred ”), Series C-2 2 Convertible Preferred Stock (the “ Series C-2 2 Preferred ”), Series D-1 2 Convertible Preferred Stock (the “ Series D-1 2 Preferred ”) and Series D-2 2 Convertible Preferred Stock (the “ Series D-2 2 Preferred ”), in the form attached hereto as Exhibit A (the
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“ New Certificate of Designations ”) is hereby approved by the Requisite Holders pursuant to Article XII of the New Certificate of Designations. The Company shall file the New Certificate of Designations with the Delaware Secretary of State on the Closing (as defined in the Asset Purchase Agreement).
(b) The undersigned holders of Series C-1 1 Preferred hereby agree to exchange each share (including fractional shares) of Series C-1 1 Preferred for an equal number of shares of Series C-1 2 Preferred, with such exchange to take place immediately after the filing of the New Certificate of Designations (the “ Exchange ”). The parties hereto agree that the Exchange is being effected pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Securities Act ”) and that the holders of Series C-1 2 Preferred shall be entitled to “tack” their holding periods of the Series C-1 1 Preferred pursuant to Rule 144(d)(3)(ii) under the Securities Act.
(c) Promptly after the receipt of (i) a letter of transmittal from a holder of Series C-1 1 Preferred, which shall include stockholder representations regarding title to the tendered shares and state that the tendered shares are delivered free of encumbrances, and (ii) original stock certificate(s), properly endorsed or otherwise in proper form for transfer, representing shares of Series C-1 1 Preferred, the Company shall, within three Trading Days issue a certificate to such undersigned holder for an equal number of shares of Series C-1 2 Preferred, with the same restrictive legends, if any, as may be imprinted on the certificates representing the Series C-1 1 Preferred.
(d) From and after the Closing (as defined in the Asset Purchase Agreement), all references in the Securities Purchase Agreement and the Warrants (as defined in the Certificate of Designations) to the Series C-1 1 Preferred, Series C-2 1 Preferred, Series D-1 1 Preferred and Series D-2 1 Preferred shall thereafter change to become references to the Series C-1 2 Preferred, Series C-2 2 Preferred, Series D-1 2 Preferred and Series D-2 2 Preferred, respectively.
(e) Promptly after the filing of the New Certificate of Designations and the completion of the Exchange, the Company shall file a Certificate of Elimination for the Series C-1 1 Preferred, Series C-2 1 Preferred, Series D-1 1 Preferred and Series D-2 1 Preferred, whereupon references herein to the “Certificate of Designations” shall thereafter, unless the context clearly requires otherwise, refer to the “New Certificate of Designations.”
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8. Consent of Holders :
(a) Approval of Asset Purchase Agreement . Pursuant to Article XII of the Certificate of Designations, the undersigned Holders, constituting the Requisite Holders, hereby irrevocably approve, for all purposes and in all respects, the Asset Purchase Agreement and the “ Ancillary Agreements ” (as defined in the Asset Purchase Agreement), and the consummation of the transactions contemplated therein, including without limitation the Repurchase Right (as defined in the Asset Purchase Agreement).
(b) Designation as Strategic Transaction . Upon the Closing (as defined in the Asset Purchase Agreement), the acquisition of the Purchased Assets (as defined in the Asset Purchase Agreement) under the Asset Purchase Agreement shall be deemed to be the completion of a Strategic Transaction, as contemplated under the Certificate of Designations, and any Redemption Events (as defined in the Certificate of Designations) triggered by Article VII(A)(xii) of the Certificate of Designations then in existence, and before the filing of the New Certificate of Designations and the completion of the Exchange, shall be irrevocably waived.
(c) Approval of Reverse Stock Split . Pursuant to Article XII of the Certificate of Designations, the undersigned Holders, constituting the Requisite Holders, hereby irrevocably approve, and for all purposes and in all respects authorize the Company’s Board of Directors to effect a reverse stock split of the Company’s outstanding Common Stock at an exchange ratio of 1-for-100. The Company’s Board of Directors shall use their reasonable best efforts to cause the reverse stock split to become effective on the date that is two weeks from the Closing (as defined in the Asset Purchase Agreement), but in any event shall cause the reverse stock split to be effected not later than eight weeks from the Closing.
(d) Increase in Authorized Common Stock . In the event the Company notifies the undersigned Holders the Company has less than the number of shares sufficient to provide for conversion of the New Preferred Stock (as defined in the New Certificate of Designations) in accordance with Article VI.A of the New Certificate of Designations, each Holder shall vote all of the shares of Common Stock held by such Holder in favor of an amendment to the Certificate of Incorporation to increase the number of authorized but unissued shares of Common Stock to the amount of authorized but unissued shares of Common Stock requested by the Company.
(e) Approval of Option Grants. Pursuant to Article XII of the Certificate of Designations, the undersigned Holders, constituting the Requisite Holders, hereby irrevocably approve, and for all purposes and in all respects authorize the Company’s Board of Directors to grant the following options to purchase Common Stock of the Company subject to the terms and conditions as determined by the Company’s Board of Directors: (i) on the date that is four weeks following the Conversion Price Adjustment Date, an option to George Tidmarsh to purchase the number of shares of Common Stock of the Company equal to 7.5% of the Company’s fully diluted shares (on an as-converted to Common Stock basis) outstanding at the time of such grant (the “ First Option ”); (ii) on the two-year anniversary of George Tidmarsh’s employment with the Company, a second option to George Tidmarsh to purchase the number of shares of Common Stock of the Company equal to 7.5% of the Company’s fully diluted shares (on an as-converted to Common Stock basis) outstanding at such time, less the number of shares subject to the First Option at the time of the grant of the First Option (the “ Second Option ”); and (iii) on the date that is four weeks following the Conversion Price Adjustment Date, an option to
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Saiid Zarrabian to purchase the number of shares of Common Stock of the Company equal to 0.45% of the Company’s fully-diluted shares (on an as-converted to Common Stock basis) outstanding at such time (the “ Third Option ”). The undersigned Holders hereby irrevocably approve any issuances of Common Stock by the Company upon the exercise of all or any portion of the First Option, Second Option or Third Option.
9. Fees and Expenses . Each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement and the transactions contemplated hereby.
10. Specific Performance; Consent to Jurisdiction; Venue .
(a) The Company and the Holders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement (including the agreements and instruments amended hereby) (collectively, the “ Asset Purchase Transaction Documents ”) were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Asset Purchase Transaction Documents and to enforce specifically the terms and provisions hereof or thereof without the requirement of posting a bond or providing any other security, this being in addition to any other remedy to which any of them may be entitled by law or equity.
(b) The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in San Diego, California, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that California is not the proper venue. The parties irrevocably consent to personal jurisdiction in the state and federal courts of the state of California. The Company and each Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 10 shall affect or limit any right to serve process in any other manner permitted by law. The parties hereby waive all rights to a trial by jury. In addition, the prevailing party in any dispute arising under this Agreement shall be entitled to recover its fees and expenses, including, without limitation, all reasonable attorneys’ fees and expenses.
11. Entire Agreement; Amendment . This Agreement, including the schedules and exhibits attached hereto, and the Asset Purchase Transaction Documents contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the other Asset Purchase Transaction Documents, neither the Company nor any Holder make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended on behalf of all Holders other than by a written instrument signed by the Company and the Requisite Holders. In addition to the foregoing, no provision of this Agreement may be amended to increase the financial obligations of any Holder under this Agreement other than by a written instrument signed by such Holder. Nothing provided in this Section 11 shall limit an individual Holder’s right to waive or amend any provision of this
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Agreement on its own behalf. The Holders acknowledge that any waiver effected in accordance with this Section 11 shall be binding upon each Holder (and their permitted assigns) and the Company, including, without limitation, a waiver that has an adverse effect on any or all Holders.
12. Notices . Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or by electronic mail or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
| If to the Company or its Subsidiaries: |
La Jolla Pharmaceutical Company 4370 La Jolla Village Drive, Suite 400 San Diego, CA 92122 Attention: Chief Executive Officer Telephone No.: (858) 452-6600 Email address: |
|
| with copies to: |
Ropes & Gray LLP Three Embarcadero Center San Francisco, CA 94111 Attention: Ryan Murr Telephone No.: (415) 315-6395 Facsimile No.: (415) 315-6026 Email address: Ryan.Murr@ropesgray.com |
|
| If to any Holder: |
At the address of such Holder set forth on the signature page to this Agreement, with copies to Holder’s counsel, if any, as set forth on the signature page or as specified in writing by such Holder. |
|
Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto.
13. Waivers . No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.
14. Headings . The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Securities Purchase Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.
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15. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Subject to the limitations set forth in Article 4 of this Agreement, the Holders may assign the Securities and its rights under this Agreement and the other Asset Purchase Transaction Documents and any other rights hereto and thereto without the consent of the Company.
16. No Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
17. Governing Law . To the fullest extent permitted by law, this Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.
18. Survival . The representations and warranties of the Company and the Holders shall terminate upon the Closing (as defined in the Asset Purchase Agreement); provided, however, that such termination shall have no affect on the rights of the Holders under Section 7 of the Securities Purchase Agreement or Article VII of the Certificate of Designations. The agreements and covenants set forth in Articles 1, 3, 4, 6, 7 and 8 of the Securities Purchase Agreement shall survive the Closing (as defined in the Asset Purchase Agreement) for the duration of the applicable statute of limitations.
19. Counterparts . This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.
20. Publicity . Except as contemplated in Section 21, the Company agrees that it will not disclose, and will not include in any public announcement, the names of the Holders without the consent of the Holders, or unless and until such disclosure is required by law, rule or applicable regulation, and then only to the extent of such requirement. Notwithstanding the foregoing, the Holders consent to being identified in any filings the Company makes with the SEC to the extent required by law or the rules and regulations of the SEC.
21. Disclosure of Transaction . The Company shall issue a press release describing the material terms of the transactions contemplated hereby and under the Asset Purchase Agreement and file with the SEC a Current Report on Form 8-K describing the material terms of the transactions contemplated hereby and thereby, with the filing of the Form 8-K to be made as close in time as practicable to the issuance of the press release, and with such disclosures to be made no later than 7:00 a.m. (Eastern Time) on the first Business Day following the date of this Agreement. The Company will provide representatives from Tang Capital Partners, LP and Boxer Capital, LLC with the opportunity to review and approve the press release and Form 8-K prior to issuance and filing, respectively, which approval will not be unreasonably withheld.
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22. Severability . The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.
23. Further Assurances . From and after the date of this Agreement, upon the request of the Holders or the Company, the Company and each Holder shall execute and deliver such instruments, documents and 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 and the other Asset Purchase Transaction Documents
24. Independent Nature of Holders’ Obligations and Rights . The obligations of each Holder under any Asset Purchase Transaction Documents are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder under any Asset Purchase Transaction Documents. Nothing contained herein or in any other Asset Purchase Transaction Documents, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holder as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Asset Purchase Transaction Documents. Each Holder confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Asset Purchase Transaction Documents, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.
25. Force Majeure . Notwithstanding any provision herein to the contrary, the failure of any party to timely satisfy obligations hereunder shall be excused to the extent that (i) such failure follows the occurrence of a Force Majeure Event (defined below), and (ii) such Force Majeure Event has materially adversely affected the ability of such party (or its agents, including banks, transfer agents, and clearinghouses) to perform hereunder. A failure to perform shall be excused only for so long as the Force Majeure Event continues to materially adversely affect such person’s ability to perform. For purposes of this Section, “ Force Majeure Event ” shall mean the occurrence of any of the following events: (a) trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the SEC or FINRA; (b) a general banking moratorium shall have been declared by any of federal, New York or California authorities; (c) an act of war, terrorism or hostility shall have occurred, or (d) a strike, fire, flood, earthquake, accident or other calamity or Act of God shall have occurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the parties hereto have caused this Consent and Amendment Agreement to be duly executed by their respective authorized officers as of the date first above written.
| LA JOLLA PHARMACEUTICAL COMPANY | ||
| By: |
/s/ Deirdre Y. Gillespie |
|
| Name: Deirdre Y. Gillespie | ||
| Title: President and Chief Executive Officer | ||
[SIGNATURE PAGES CONTINUE]
[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Holder: Tang Capital Partners, L.P.
Signature of Authorized Signatory of Holder: /s/ Kevin Tang
Name of Authorized Signatory: Kevin Tang
Title of Authorized Signatory: Managing Director
Email Address of Holder: kevin@tangcapital.com
Fax Number of Holder: 858 200 3837
Address for Notice of Holder:
4747 Executive Drive, Suite 510
San Diego, CA 92121
Address for Delivery of Securities for Holder (if not same as address for notice):
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Holder: The Haeyoung and Kevin Tang Foundation, Inc.
Signature of Authorized Signatory of Holder: /s/ Kevin Tang
Name of Authorized Signatory: Kevin Tang
Title of Authorized Signatory: President
Email Address of Holder: kevin@tangcapital.com
Fax Number of Holder: 858 200 3837
Address for Notice of Holder:
4747 Executive Drive, Suite 510
San Diego, CA 92121
Address for Delivery of Securities for Holder (if not same as address for notice):
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Holder: Boxer Capital, LLC
Signature of Authorized Signatory of Holder : /s/ Chris Fuglesang
Name of Authorized Signatory: Chris Fuglesang
Title of Authorized Signatory: Member
Email Address of Holder: cfuglesang@tavistock.com
Fax Number of Holder: 858 400 3101
Address for Notice of Holder:
440 Stevens Ave., Suite 100
Solana Beach, CA 92075
Address for Delivery of Securities for Holder (if not same as address for notice):
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Holder: MVA Investors, LLC
Signature of Authorized Signatory of Holder: /s/ Chris Fuglesang
Name of Authorized Signatory: Chris Fuglesang
Title of Authorized Signatory: President
Email Address of Holder: cfuglesang@tavistock.com
Fax Number of Holder: 858 400 3101
Address for Notice of Holder:
440 Stevens Ave, Suite 100
Solana Beach, CA 92075
Address for Delivery of Securities for Holder (if not same as address for notice):
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[HOLDER SIGNATURE PAGES TO CONSENT AND AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Consent and Amendment Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Holder: RTW Investments, LLC
Signature of Authorized Signatory of Holder: /s/ Roderick Wong
Name of Authorized Signatory: Roderick Wong
Title of Authorized Signatory: Managing Member
Email Address of Holder: rwong@rtwfunds.com
Fax Number of Holder: 646 597 6998
Address for Notice of Holder:
1350 Avenue of the Americas, 28th Floor
New York, NY 10019
Address for Delivery of Securities for Holder (if not same as address for notice):
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
Exhibit A
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C-1 2 CONVERTIBLE PREFERRED STOCK, SERIES C-2 2 CONVERTIBLE
PREFERRED STOCK, SERIES D-1 2
CONVERTIBLE PREFERRED STOCK AND SERIES D-2 2 CONVERTIBLE
PREFERRED STOCK
of
LA JOLLA PHARMACEUTICAL COMPANY
Pursuant to Section 151 of the
Delaware General Corporation Law
The undersigned, being an authorized officer of La Jolla Pharmaceutical Company (the “ Corporation ”), a corporation organized and existing under the laws of the State of Delaware, in accordance with the provisions of Section 151(g) of the Delaware General Corporation Law (“ DGCL ”), does hereby certify that:
Pursuant to the authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation and Bylaws of the Corporation, each as amended and restated through the date hereof, the Board of Directors of the Corporation, in accordance with DGCL Section 151, duly adopted the following resolution on January 13, 2012, which authorizes four series of the Corporation’s previously authorized Preferred Stock, par value $0.0001 per share (the “ Preferred Stock ”):
RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation (the “ Board of Directors ”) by the Certificate of Incorporation and Bylaws of the Corporation, the Board of Directors hereby establishes a Series C-1 2 Convertible Preferred Stock, Series C-2 2 Convertible Preferred Stock, Series D-1 2 Convertible Preferred Stock and Series D-2 2 Convertible Preferred Stock of the Corporation, each with par value $0.0001 per share, and hereby states the number of shares and fixes the powers, designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions thereof, of each such series of shares as follows:
I. DESIGNATION AND AMOUNT
The designation of the first new series, which consists of 11,000 shares of Preferred Stock, is the Series C-1 2 Convertible Preferred Stock (the “ Series C-1 2 Preferred Stock”). The designation of the second new series, which consists of 22,000 shares of Preferred Stock, is the
Series C-2 2 Convertible Preferred Stock (the “ Series C-2 2 Preferred Stock ” and together with the Series C-1 2 Preferred Stock, the “ Series C Preferred Stock ”). The designation of the third new series, which consists of 5,134 shares of Preferred Stock, is the Series D-1 2 Convertible Preferred Stock (the “ Series D-1 2 Preferred Stock ”). The designation of the fourth new series, which consists of 10,868 shares of Preferred Stock, is the Series D-2 2 Convertible Preferred Stock (the “ Series D-2 2 Preferred Stock ” and, together with the Series C Preferred Stock and Series D-1 2 Preferred Stock, the “ New Preferred Stock ”).
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designations, the following terms shall have the following meanings:
A. “ Asset Purchase Agreement ” means the Asset Purchase Agreement, dated as of January 19, 2012, by and between the Corporation and the seller named therein, as the same may be amended from time to time.
B. “Change of Control” means the following, provided, however , that in no event shall a Strategic Transaction that is approved by the Requisite Holders also be deemed to constitute a Change of Control:
(i) the consolidation, merger or other business combination of the Corporation with or into another entity (other than a consolidation, merger or other business combination in which holders of the Corporation’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, in substantially the same proportion as immediately preceding the transaction, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities);
(ii) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation (including, without limitation, any such action effected by the Corporation or any subsidiary of the Corporation by merger, consolidation or otherwise) of all or substantially all of the intellectual property or assets of the Corporation and its subsidiaries, taken as a whole, or the sale or disposition (including, without limitation, any such action effected by the Corporation or any subsidiary of the Corporation by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries; or
(iii) the consolidation, merger or other business combination of the Corporation with or into another entity that results in the cancellation of shares of any one or more series of New Preferred Stock or that results in the conversion of shares of any one or more series of New Preferred Stock into: (1) shares of any other class or series of capital stock of the Corporation; (2) securities of the Corporation or any other person (or the right to receive any such securities); (3) any property (including, without limitation, cash and the right to receive cash or other property); or (4) any combination of the foregoing.
C. “ Closing Date ” means 11:59 p.m. on the date of the closing under the Securities Purchase Agreement dated May 24, 2010 by and among the Corporation and the purchasers named therein, as the same may be amended from time to time (the “ Securities Purchase Agreement ”).
D. “ Closing Sales Price ” means, on any particular date: (i) the last trading price per share of the Common Stock on such date during regular trading hours on the principal Trading Market on which the Common Stock is then listed as reported by Bloomberg Financial L.P (or a comparable reporting service of national reputation selected by the Corporation and reasonably acceptable to the Requisite Holders, if Bloomberg Financial L.P. is not then reporting closing sales prices of the Common Stock) (collectively, “ Bloomberg ”), or if there is no such price on such date, then the last trading price during regular trading hours on such Trading Market on the date nearest preceding such date as reported by Bloomberg; or (ii) if the Common Stock is not listed then on a Trading Market, the last trading price for a share of Common Stock in the over-the-counter market during regular trading hours, as reported in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices at the close of business on such date; or (iii) if the Common Stock is not then reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes on such date, as determined in good faith by the Holder; or (iv) if the Common Stock is not then publicly traded, the fair market value of a share of Common Stock as determined by the Corporation and reasonably acceptable to the Requisite Holders.
E. “ Common Stock ” means the Corporation’s common stock, par value $0.0001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.
F. “ Common Stock Equivalents ” means any securities of the Corporation or of any subsidiary of the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any time, Common Stock or any security of any subsidiary of the Corporation, including, without limitation, any debt, preferred stock, right, option, warrant or other agreement, document or instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, Common Stock or any security of any subsidiary of the Corporation.
G. “ Conversion Date ” means, for any Optional Conversion (as defined in Article IV.A.), the date specified in the notice of conversion in the form attached hereto (the “ Notice of Conversion ”), so long as a copy of the Notice of Conversion is delivered via electronic mail resulting in notice to the Corporation before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion; provided, however , that if the Notice of Conversion is not so e-mailed before such time, then the Conversion Date shall be the date the holder e-mails the Notice of Conversion to the Corporation.
H. “ Conversion Price ” means the price obtained by dividing $1,000 by 166,666.667, and shall be subject to adjustment as set forth in Article X below.
I. “ Face Amount ” means, with respect to the New Preferred Stock, $1,000.00 per share, as adjusted (i) for stock splits, stock dividends, combinations, recapitalizations, reclassifications or the like and (ii) with respect to any given share or shares of New Preferred Stock, to account for any accretion in the Face Amount as a result of accrued but unpaid dividends or any other increase provided for in this Certificate of Designations.
J. “ Measurement Date ” means for purposes of any issuance of securities, the date of issuance thereof.
K. “ Net Cash ” means (i) the sum of the Corporation’s unrestricted, consolidated (x) cash, (y) cash equivalents and (z) short term investments, available for sale; less (ii) the amount of the Corporation’s liabilities that may be settled in cash, including any off-balance sheet obligations that may be settled in cash.
L. “ Original Issue Date ” means, with respect to each share of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, the date of issuance of such share.
M. “ Other Stock ” means (i) any class or series of preferred stock or other capital stock of the Corporation, other than Common Stock, Common Stock Equivalents and New Preferred Stock and (ii) any securities of the Corporation or of any subsidiary of the Corporation that would entitle the holder thereof to acquire, directly or indirectly, at any time any capital stock listed in clause (i), including, without limitation, any debt, preferred stock, right, option, warrant or other agreement, document or instrument that is at any time convertible into, exercisable for or exchangeable for, or otherwise entitles the holder thereof to receive, directly or indirectly, any capital stock listed in clause (i).
N. Unless otherwise expressly provided in this Certificate of Designations, each reference to a “ person ” refers to any individual, entity or association, including, without limitation, any corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, and trust, business trust or other organization, whether or not a legal entity, or a government or agency or any political subdivision thereof.
O. “ Requisite Holders ” means the holders of at least 80% of the then outstanding shares of New Preferred Stock and any shares of New Preferred Stock issuable upon exercise of any Warrants, voting together as one class. Any shares of New Preferred Stock issuable upon exercise of any Warrants shall be included in the Requisite Holders calculation even if such Warrant has not been exercised at the time of the calculation.
P. “ Strategic Transaction ” means: (i) any joint venture, partnership, development agreement, research agreement, marketing agreement or license agreement, in each case relating to any drug or drug candidate, medical device or diagnostic; (ii) any disposition of any material asset of the Corporation or any subsidiary, in each case whether by sale, lease, license, exchange, transfer or otherwise; (iii) any material acquisition of any stock or assets of a third party by the Corporation or any subsidiary; or (iv) a resolution of the Board of Directors authorizing the further development of the Corporation’s drug candidate Riquent in future human clinical trials, but only if such further development is first approved by the Requisite Holders.
Q. “ Trading Day ” means, except as set forth below, a day on which the Corporation’s securities are traded on a Trading Market; provided, however, that in the event that the Corporation’s securities are not traded on a Trading Market, then Trading Day shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York are authorized or required by law or other government action to close. Notwithstanding the foregoing , the following shall not be deemed Trading Days:
| • |
December 24 to January 2; |
| • |
The Fridays immediately before Memorial Day and immediately before Labor Day; |
| • |
The weekday immediately before and the weekday immediately after Independence Day, provided that if Independence Day is on a Wednesday, then the two following weekdays; |
| • |
Columbus Day; or |
| • |
The Friday immediately after Thanksgiving. |
R. “ Trading Market ” means the OTC Bulletin Board or the Pink Sheets, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the New York Stock Exchange (“ NYSE ”) or the NYSE Amex, or any successor markets thereto.
S. “ VWCP ” means, for any specified period of consecutive Trading Days, the quotient of: (i) the sum of the individual products, calculated for each Trading Day within such period, of (A) the Closing Sales Price for such Trading Day in such specified period (as reported by Bloomberg) multiplied by (B) the trading volume for the Common Stock for such Trading Day in such specified period as reported by the Trading Market (as reported by Bloomberg), National Quotation Bureau Incorporated or other reporting organization or agency, as applicable, and (ii) the total aggregate trading volume for the Common Stock for all Trading Days in such specified period, as reported by the Trading Market (as reported by Bloomberg), National Quotation Bureau Incorporated or other reporting organization or agency, as applicable.
T. “ Warrants ” means the Cashless Warrants, Cash Warrants and Subsequent Cashless Warrants (each as defined in the Securities Purchase Agreement).
U. “ Week ” means a consecutive seven (7) calendar day period.
III. DIVIDENDS
A. Except as set forth below, holders of Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative mandatory dividends at the rate per share of 15% of the Face Amount per annum, payable semi-annually on November 25 and May 25 beginning on the first such date after the applicable Original Issue Date (each such date, a “ Dividend Payment Date ”) (if any Dividend Payment Date is not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day). Such dividends shall be payable in such number of additional shares of Series C-1 2 Preferred Stock with respect to the Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock with respect to the Series C-2 2 Preferred Stock, in each case determined by dividing the amount of the
cumulative dividends by the Face Amount; provided, however , that if funds are not legally available for the payment of dividends on the Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, such dividends shall, effective on the close of business on a Dividend Payment Date with respect to an unpaid dividend, accrete to, and increase, the Face Amount of the Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, respectively. Dividends on the Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock shall be calculated on the basis of a 360-day year, consisting of twelve 30-day periods, shall accrue daily commencing on the applicable Original Issue Date, and, subject to the preceding sentence, shall be deemed to accrue from such applicable Original Issue Date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The record date for determining the holders of Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock entitled to dividends pursuant to this paragraph shall be the fifth (5 th ) Trading Day before the Dividend Payment Date. If any such cumulative dividends would result in the issuance of a fractional share of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, the Corporation shall issue a fractional share therefor, rounded to the nearest 1/1000 th of a share. For the avoidance of doubt, (i) for purposes of any conversion or redemption of shares of Series C-1 2 Preferred Stock and Series C-2 2 Preferred Stock, any amount accreted to the Face Amount of such shares pursuant to this paragraph as of such conversion or redemption shall not be deemed accrued but unpaid dividends and (ii) in the event of a conversion or redemption that occurs between Dividend Payment Dates, dividends shall be deemed to accrue through the date of such conversion or redemption, even if such accrual is less than a full semi-annual dividend period.
B. Shares of Series D-1 2 Preferred Stock and Series D-2 2 Preferred Stock shall not entitle the holder thereof to receive any dividends.
IV. CONVERSION
A. Conversion at the Option of the Holder . Subject to the limitations on conversions contained in Paragraph C of this Article IV, each holder of shares of New Preferred Stock may, at any time and from time to time, convert (an “ Optional Conversion ”) each of its shares of New Preferred Stock into a number of fully paid and non-assessable shares of Common Stock determined in accordance with the following formula:
Face Amount
Conversion Price
Following the effectiveness of any Optional Conversion, the shares of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, as applicable, so converted shall also entitle the former holder of such shares to receive, on the Dividend Payment Date next following such conversion, a number of shares of Series C-1 2 Preferred Stock or Series C-2 2 Preferred Stock, respectively, equal to the unpaid dividends that accrued on the shares so converted through the date of such conversion, divided by the Face Amount.
B. Mechanics of Conversion . In order to effect an Optional Conversion, a holder shall deliver via electronic mail a copy of the fully executed Notice of Conversion (in the form attached hereto) to the Corporation (Attention: Secretary). Such notice shall be delivered to conversions@ljpc.com or such other address as the Corporation may, from time to time, provide to the holders upon delivery of a written notice. Upon receipt by the Corporation of a copy of a Notice of Conversion from a holder, the Corporation shall promptly send, via facsimile or electronic mail, a confirmation to such holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion.
(i) Delivery of Common Stock Upon Conversion. The Corporation (itself, or through its transfer agent) shall, no later than the second Trading Day following the Conversion Date (the “Delivery Period ”), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the holder or its nominee a certificate representing that number of shares of Common Stock issuable upon conversion of such shares of New Preferred Stock being converted. Notwithstanding the foregoing, if the Corporation’s transfer agent is participating in the Depository Trust Company ( “DTC ”) Fast Automated Securities Transfer program or any other program that provides for the electronic delivery of Common Stock, the Corporation shall cause its transfer agent, by the end of the Delivery Period, to electronically transmit the Common Stock (not in physical stock certificate form) issuable upon conversion to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system or with any such equivalent program.
(ii) Taxes . The Corporation shall pay any and all taxes that may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the conversion of the New Preferred Stock.
(iii) No Fractional Shares. If any conversion of New Preferred Stock would result in the issuance of a fractional share of Common Stock, such fractional share shall be payable in cash based upon the Closing Sales Price on the Trading Day immediately preceding the Conversion Date and the number of shares of Common Stock issuable upon conversion of the New Preferred Stock shall be the next lower whole number of shares.
(iv) Conversion Disputes . In the case of any dispute with respect to a conversion, the Corporation shall promptly issue such number of shares of Common Stock as are not disputed in accordance with subparagraph (i) above. If such dispute involves the calculation of the Conversion Price, and such dispute is not promptly resolved by discussion between the relevant holder and the Corporation, the Corporation shall submit the disputed calculations to an independent outside accountant within three Trading Days of receipt of the Notice of Conversion. The accountant, at the Corporation’s sole expense, shall promptly audit the calculations and notify the Corporation and the holder of the results no later than three Trading Days from the date it receives the disputed calculations. The accountant’s calculation shall be deemed conclusive, absent manifest error. The Corporation shall then issue the appropriate number of shares of Common Stock in accordance with subparagraph (i) above.
C. Limitations on Conversions . The conversion of shares of New Preferred Stock shall be subject to the following limitations (each of which limitations shall be applied independently):
(i) Timing and Volume Limitations . Each holder of shares of New Preferred Stock (each a “Holder”) shall be eligible for an Optional Conversion on any day of a Monday through Sunday calendar week (each a “ Conversion Week ”) to the extent that, together with all prior conversions of such Holder’s New Preferred Stock, if any, the total shares of the New Preferred Stock that has been converted by such Holder during such Conversion Week (rounded to the nearest 1/1,000th of a share) does not exceed the product of (x) the Face Amount of the Outstanding New Preferred Stock (as defined below) held by such Holder, multiplied by (y) the Conversion Cap for such calendar week. In determining the “ Conversion Cap ” for any Conversion Week, if the quotient of (A) the VWCP (as adjusted to reflect any stock splits, stock dividends or similar recapitalizations occurring on or before the Conversion Date) for the three consecutive Trading Days during the previous Monday through Sunday calendar week ending on the last Trading Day prior to the applicable Conversion Week, divided by (B) the applicable Conversion Price of the New Preferred Stock on the first Trading Day of such Conversion Week is: (1) less than one, then the Conversion Cap shall be 0%; (2) greater than or equal to one and less than two, then the Conversion Cap shall be 0.21%; (3) greater than or equal to two and less than three, then the Conversion Cap shall be 0.42%; (4) greater than or equal to three and less than four, then the Conversion Cap shall be 0.84%; (5) greater than or equal to four and less than five, then the Conversion Cap shall be 1.25%; (6) greater than or equal to five and less than six, then the Conversion Cap shall be 1.67%; (7) greater than or equal to six and less than seven, then the Conversion Cap shall be 2.09%; (8) greater than or equal to seven and less than eight, then the Conversion Cap shall be 2.51%; (9) greater than or equal to eight and less than nine, then the Conversion Cap shall be 2.93%; (10) greater than or equal to nine and less than ten, then the Conversion Cap shall be 3.34%; or (11) greater than or equal to ten, then the Conversion Cap shall be 3.76%. For purposes of this Article IV.C.(i), “ Outstanding New Preferred Stock ” means all of the Company’s Series C-1 2 Preferred Stock, including the Series C-1 2 Preferred Stock that has been issued by way of payment of dividends in kind pursuant to Article III, issued and outstanding immediately following the Closing (as defined in the Asset Purchase Agreement). Notwithstanding anything to the contrary in this Article IV.C.(i), any holder of New Preferred Stock shall have the right to convert all or any portion of its shares of New Preferred Stock into shares of Common Stock immediately prior to a Change of Control. The foregoing conversion limits shall apply to the New Preferred Stock on an aggregate basis; to the extent that ownership of the New Preferred Stock is divided among multiple holders, the conversion limits shall be apportioned, on a weekly basis, among the holders on a pro rata basis by dividing the Outstanding New Preferred Stock among the holders of New Preferred Stock based on their relative holdings of the New Preferred Stock.
(ii) Additional Restrictions on Conversion or Transfer . Notwithstanding anything in this Certificate of Designations to the contrary, at no time may the Corporation issue or sell shares of Common Stock (including transfers by the Corporation of treasury stock) to a holder of New Preferred Stock, and in no event shall any holder of shares of New Preferred Stock have the right to convert shares of New Preferred Stock into shares of Common Stock, in each such case (x) to the extent that such issuance or sale or right to effect such conversion would result in the holder or any of its affiliates together beneficially owning more than 9.999% of the then issued and outstanding shares of Common Stock or (y) if such holder or any of its affiliates together beneficially own more than 9.999% of the then issued and outstanding Common Stock immediately prior to such purported issuance, sale, transfer or conversion. For purposes of this
subparagraph, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and Regulation 13D-G thereunder. The restriction contained in this subparagraph may not be waived. Any purported issuance, sale, transfer or conversion effected in violation of this paragraph shall be null and void. Certificates representing shares of New Preferred Stock shall have imprinted, typed, stamped or otherwise affixed thereon a legend in substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND CONVERSION RESTRICTIONS AND MAY BE TRANSFERRED OR CONVERTED ONLY AS PERMITTED BY THE TERMS OF THE CERTIFICATE OF DESIGNATIONS SETTING FORTH THE RIGHTS, POWERS AND PREFERENCES OF SUCH PREFERRED STOCK, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE UPON A REQUEST THEREFOR SUBMITTED TO THE SECRETARY.
V. RESERVATION OF SHARES OF COMMON STOCK
A. If the authorized and unissued number of shares of Common Stock (the “Reserved Amount”) for any three consecutive Trading Days shall be less than a number sufficient to provide for the conversion in full, at the then current Conversion Price thereof, without taking into account the conversion limitations set forth in Article IV.C.(i) and without taking into account the conversion limitations set forth in Article IV.C.(ii), of all of the New Preferred Stock then outstanding, (the “Required Reserve Amount”), then the Corporation shall immediately notify the holders of New Preferred Stock of such occurrence and shall take immediate action (including, if necessary, seeking stockholder approval to increase the number of shares of Common Stock that the Corporation is authorized to issue) to increase the Reserved Amount to at least the Required Reserve Amount. Nothing contained in this Article V.A. shall limit any other rights or remedies of the holders of the New Preferred Stock hereunder or under applicable law.
VI. FAILURE TO SATISFY CONVERSIONS
A. Conversion Defaults . If, at any time, (x) a holder of shares of New Preferred Stock submits a Notice of Conversion and the Corporation fails for any reason (including without limitation because such issuance would exceed such holder’s allocated portion of the Reserved Amount, but not including because of the limitations set forth in Article IV.C.) to deliver in strict accordance with the terms hereof, on or prior to the last Trading Day of the Delivery Period for such conversion, such number of shares of Common Stock to which such holder is entitled upon such conversion, or (y) the Corporation provides written notice to any holder of New Preferred Stock (or makes a public announcement via press release) at any time of its intention not to issue shares of Common Stock upon exercise by any holder of its conversion rights in accordance with the terms of this Certificate of Designations (each of (x) and (y) being a “ Conversion Default ”), then, in either such case, if such Conversion Default is not cured within five Trading Days of its initial occurrence, each holder of Series C Preferred Stock may elect, by delivery of a notice (the “ Conversion Default Notice ”) to the Corporation, to have such holder’s outstanding shares of Series C Preferred Stock redeemed to the fullest extent permitted by law. Any such redemption
shall be made pursuant to the process and in the amount described in Sections A through C of Article VII (deeming the Conversion Default Notice delivered pursuant to this Article VI.A to be a “Redemption Trigger Notice” for such purpose and deeming the Conversion Default pursuant to this Article VI.A to be a “ Redemption Event ” for such purpose).
B. Buy-In Cure . Without limiting the other rights or remedies of the holders (including, but not limited to, the right to redemption under Article VI.A. or Article VII), unless the Corporation has notified the applicable holder in writing prior to the delivery by such holder of a Notice of Conversion that the Corporation is unable to honor conversions, if (i) the Corporation fails to timely deliver during the Delivery Period shares of Common Stock to a holder upon a conversion of shares of New Preferred Stock and (ii) thereafter, such holder purchases (in an open market transaction or otherwise) shares of Common Stock (the “ Cover Shares ”) to make delivery in satisfaction of a sale by such holder of the shares of Common Stock (the “ Sold Shares ”) that such holder anticipated receiving upon such conversion (a “ Buy-In ”), at the election of the holder as a redemption to the fullest extent permitted by law, the Corporation shall pay such holder (in addition to any other remedies available to the holder) the amount equal to such holder’s total purchase price (including brokerage commissions, if any) for the Cover Shares and, upon making such payment, the Corporation’s conversion obligations shall be deemed satisfied and the New Preferred Stock that was tendered pursuant to the Notice of Conversion shall thereupon be cancelled and the holder shall not have any further right or remedy against the Corporation with respect to such shares of New Preferred Stock that were tendered pursuant to the Notice of Conversion. A holder shall provide the Corporation written notification and supporting documentation indicating any amounts payable to such holder pursuant to this Article VI.B. The Corporation shall make any payments required pursuant to this Article VI.B in accordance with and subject to the provisions of Article XIII.E.
VII. SERIES C PREFERRED STOCK REDEMPTION RIGHTS
A. Redemption Events . In the event (each of the events described below after expiration of the applicable cure period (if any) being a “ Redemption Event ”) that any of the following occur without the prior approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders, but only if such approval expressly specifies that the Requisite Holders signing the consent are consenting for purposes of this Article VII:
(i) the Corporation shall fail to observe or perform any covenant, condition or agreement contained in this Certificate of Designations or any of the Transaction Documents (as defined in the Securities Purchase Agreement) (including, without limitation, the failure to obtain approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders under Article XII, but excluding those covenants referred to below in paragraphs (iii) and (iv)), which failure is not cured within eight Trading Days after receiving notice of such default sent by a holder of New Preferred Stock;
(ii) the failure of the Common Stock to be listed on a Trading Market for a period of 20 consecutive Trading Days;
(iii) the Corporation provides written notice (or otherwise indicates in writing) to any holder of New Preferred Stock, or states by way of public announcement distributed via a press release, at any time, of its intention not to issue shares of Common Stock to any holder of New Preferred Stock upon conversion in accordance with the terms of this Certificate of Designations (other than due to the circumstances contemplated by Article V, for which the holders shall have the remedies set forth in such Article), which notice or announcement is not rescinded within five Trading Days and provided that the Requisite Holders elect in writing to designate such event as a Redemption Event;
(iv) the Corporation shall fail to timely deliver the shares of Common Stock as and when required herein for any reason (not including because of the limitations set forth in Article IV.C.), which failure is not cured within ten Trading Days and provided that the Requisite Holders elect in writing to designate such event as a Redemption Event;
(v) any material representation or warranty made by the Corporation or any of its subsidiaries in the Securities Purchase Agreement shall prove to have been materially false or incorrect or breached in a material respect, in each case as of the date made, provided that the Corporation receives written notice of the breach or alleged falsity from any holder of Series C Preferred Stock within one year from the consummation of a Strategic Transaction and such breach or alleged falsity is not cured within five Trading Days of the receipt of such written notice;
(vi) the Corporation or any of its subsidiaries shall: (a) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (b) make a general assignment for the benefit of its creditors; (c) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (d) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally; (e) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (f) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same; or (g) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
(vii) a proceeding or case shall be commenced in respect of the Corporation or any of its subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Corporation or any of its subsidiaries; or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 30 days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Corporation or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Corporation and shall continue undismissed, or unstayed and in effect for a period of 60 days;
(viii) the Corporation consummates a “going private” transaction and as a result the Common Stock is no longer registered under Sections 12(b) or 12(g) of the Exchange Act;
(ix) there shall be any SEC or judicial stop trade order or trading suspension stop-order or any restriction in place with the transfer agent for the Common Stock restricting the trading of such Common Stock for a period of 20 consecutive Trading Days;
(x) there shall be a determination by the SEC or the Corporation such that the Corporation’s representations, warranties or covenants set forth in Section 2.1(hh) of the Securities Purchase Agreement are breached or inaccurate, which breach or inaccuracy is not cured within five Trading Days of such determination; or
(xi) the Corporation consummates a Change of Control;
then, upon (i) the occurrence of any such Redemption Event, and (ii) the affirmative election delivered to the Corporation by the Requisite Holders to permit a redemption in accordance with this paragraph (the “ Redemption Trigger Notice ”), each holder of shares of Series C Preferred Stock shall thereafter have the option by delivery of a notice (the “ Redemption Event Notice ”) to the Corporation prior to the Redemption Date (defined below) to require the Corporation to redeem for cash, to the fullest extent permitted by law, all of the then outstanding shares of Series C Preferred Stock held of record by such holder for an amount per share equal to the Redemption Event Amount in effect at the time of the redemption hereunder. Upon the Corporation’s receipt of any Redemption Trigger Notice hereunder, the Corporation shall immediately (and in any event within one Trading Day following such receipt) deliver a written notice (a “ Redemption Announcement ”) to all holders of Series C Preferred Stock stating the date upon which the Corporation received such Redemption Trigger Notice. The Corporation shall not redeem any shares of Series C Preferred Stock during the three Trading Day period following the delivery of a required Redemption Announcement hereunder. At any time and from time to time during such three Trading Day period, each holder of Series C Preferred Stock may request (either orally or in writing) information from the Corporation with respect to the instant redemption (including, but not limited to, the aggregate number of shares of Series C Preferred Stock covered by Redemption Event Notices received by the Corporation) and the Corporation shall furnish (either orally or in writing) as soon as practicable such requested information to such requesting holder. On the fifth Trading Day following the date of the delivery of the Redemption Trigger Notice (the “ Redemption Date ”), the Corporation shall, to the fullest extent permitted by law, redeem all shares of Series C Preferred Stock subject to all Redemption Event Notices received by the Corporation prior to such date. For the avoidance of doubt, the occurrence of a Redemption Event shall not preclude the occurrence of one or more subsequent Redemption Events.
B. Definition of Redemption Event Amount . The “ Redemption Event Amount ” with respect to a share of Series C Preferred Stock means an amount equal to the greater of (i) the Face Amount plus all accrued and unpaid dividends on such share of Series C Preferred Stock and (ii) an amount determined by the following formula:
( V / CP) x M
where:
“ V ” means the Face Amount plus all accrued and unpaid dividends on such share of Series C Preferred Stock;
“ CP ” means the Conversion Price in effect on the date on which the Corporation receives the Redemption Event Notice; and
“ M ” means the Closing Sales Price on the date on which the Corporation receives the Redemption Trigger Notice.
C. Twelve Month Redemption . On, and only on, the date that is one (1) year following the Closing (as defined in the Asset Purchase Agreement) (the “ 12-Month Anniversary ”), 2,900 shares of the Corporation’s Series C-1 2 Preferred Stock (or the total number of shares of Series C-1 2 Preferred Stock then issued and outstanding, if less than 2,900 shares, such amount being the “ Redemption Shares ”) will be redeemable, to the fullest extent permitted by law, for a cash amount equal to their aggregate Face Amount (the “ 12-Month Redemption ”), but only upon the affirmative election delivered to the Corporation by the Requisite Holders no later than five Trading Days prior to the 12-Month Anniversary (the “ 12-Month Redemption Notice ”). If the 12-Month Redemption Notice is received by the Corporation, then the Corporation shall redeem the Redemption Shares on a pro rata basis among all holders of the Redemption Shares. Such redemption shall occur on the 12-Month Anniversary, provided that, if the 12-Month Anniversary is not a Trading Day, the redemption will be effected on the first Trading Day after the 12-Month Anniversary.
D. Redemption Defaults . If the Corporation fails to pay any holder the Redemption Event Amount or any other redemption amount owed to such holder pursuant to this Certificate of Designations (including without limitation the amounts owed as a result of the 12-Month Redemption) with respect to any share of Series C Preferred Stock within five Trading Days after its receipt of a Redemption Event Notice or 12-Month Redemption Notice, then the holder of Series C Preferred Stock entitled to redemption shall be entitled to an additional amount of cash equal to interest on the applicable Redemption Event Amount or other redemption amount (excluding the interest payable pursuant to this paragraph) at a per annum rate equal to the lower of 18% and the highest interest rate permitted by applicable law from the date on which the Corporation receives the Redemption Event Notice (or, in the case of the 12-Month Redemption, from the date that is one (1) year following the Closing) until the date of payment of the applicable Redemption Event Amount or other redemption amount hereunder. Such interest shall be deemed a cash payment to be made, to the fullest extent permitted by law, upon redemption of the Series C Preferred Stock. In the event the Corporation is not permitted by applicable law to redeem all of the shares of Series C Preferred Stock submitted for redemption, the Corporation shall use all funds legally available to redeem shares of Series C Preferred Stock from each
holder pro rata, based on the total number of shares of Series C Preferred Stock outstanding at the time of redemption included by such holder in the Redemption Event Notice or the 12-Month Redemption Notice delivered prior to the date upon which such redemption is to be effected relative to the total number of shares of Series C Preferred Stock outstanding at the time of redemption included in all of the Redemption Event Notices or the 12-Month Redemption Notice delivered prior to the date upon which such redemption is to be effected, and shall redeem all the remaining shares to have been redeemed as soon as practicable after the Corporation is permitted to effect such redemption by applicable law. The Corporation shall use its best efforts to create sufficient liquidity and to perform its obligation to pay all amounts owed as redemption to holders of Series C Preferred Stock on the date on which redemption is to occur, or, if the Corporation is prohibited by applicable law from paying the redemption on such date, as soon as possible after such scheduled date of redemption, and shall, to the extent required to enable it to satisfy such obligation, take such actions, including but not limited to the following actions, as shall be required to enable it to satisfy such obligation (but subject to the consent rights set forth in Article XI, Article XII, Article XIII and the other provisions of this Certificate of Designations): (A) the issuance and sale of any notes, bonds or other debt securities; (B) the issuance and sale of (I) any notes or debt securities containing equity features (including any notes or debt securities convertible into or exchangeable for equity securities of the Corporation) or (II) any equity securities of the Corporation (or any securities convertible into or exchangeable for any equity securities of the Corporation) or rights to acquire any equity securities of the Corporation; (C) the sale of any or all assets of the Corporation; (D) the merger or consolidation of the Corporation with any other entity; or (E) the liquidation of the Corporation and the winding up of its business and affairs. The Corporation hereby further agrees that, unless prohibited by law, in determining whether the Corporation can pay the amounts owed as a redemption pursuant to this Certificate of Designations and in accordance with applicable law, the Corporation’s assets will be valued at the highest possible value, without regard to the impact of such redemption on the Corporation’s business, including its ability to continue as a going concern.
E. Redemption Right Waivers .
(i) Any and all Redemption Events that may have occurred prior to the consummation of a Strategic Transaction and for which a Redemption Trigger Notice has not been delivered to the Corporation shall be deemed irrevocably waived if the Requisite Holders approve a Strategic Transaction.
(ii) Unless the Corporation and the Requisite Holders agree in writing to a longer period of time, if a Redemption Event Notice is not tendered to the Corporation within two years from the date of the occurrence of a particular Redemption Event, then the resulting redemption rights under this Article VII, solely with respect to that particular Redemption Event, shall be irrevocably waived.
(iii) Any redemption rights arising under this Article VII that are waived either by operation of Article VII.D or upon the written approval of the Requisite Holders shall be binding on all holders of Series C Preferred Stock.
VIII. RANK
All shares of the New Preferred Stock shall rank (i) senior to (a) the Corporation’s Common Stock; (b) the Common Stock Equivalents (other than Senior Securities) in existence as of the Closing Date; and (c) any Common Stock Equivalents (other than Senior Securities) and any Other Stock (other than Senior Securities) issued after the Closing Date (unless, with the consent of the Requisite Holders obtained in accordance with Article XII hereof, such Common Stock Equivalents or Other Stock specifically, by their terms, rank senior to or pari passu with the New Preferred Stock) (collectively with the Common Stock and the Common Stock Equivalents in existence as of the Closing Date, “ Junior Securities ”); (ii) pari passu with any Common Stock Equivalents (other than Senior Securities) and Other Stock (other than Senior Securities) issued after the Closing Date (with the written consent of the Requisite Holders obtained in accordance with Article XII hereof) specifically ranking, by their terms, on parity with the New Preferred Stock (the “ Pari Passu Securities ”); and (iii) junior to any Common Stock Equivalents or Other Stock issued after the Closing Date (with the written consent of the Requisite Holders obtained in accordance with Article XII hereof) specifically ranking, by their terms, senior to the New Preferred Stock (collectively, the “ Senior Securities ”), in each case as to dividends or distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. Each share of New Preferred Stock shall rank pari passu with each other share of New Preferred Stock as to dividends and distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.
IX. LIQUIDATION PREFERENCE
A. If (i) the Corporation shall: (1) commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law; (2) consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property; or (3) make an assignment for the benefit of its creditors; (ii) a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of 60 consecutive days; or (iii) the Corporation sells or transfers all or substantially all of its assets in one transaction or in a series of related transactions and, on account of any such event as set forth in clauses (i), (ii) or (iii), the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up (a “ Liquidation Event ”), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities pursuant to the rights, preferences and privileges thereof) upon liquidation, dissolution or winding up unless prior thereto the holders of shares of New Preferred Stock shall have received the Liquidation Preference with respect to each share then outstanding. If, upon the occurrence of a Liquidation Event, the assets and funds legally available for distribution among the holders of the New Preferred Stock and holders of Pari Passu Securities, if any, shall be insufficient to permit the payment to such holders of the preferential amounts payable
thereon, then the entire assets and funds of the Corporation legally available for distribution to the New Preferred Stock and the Pari Passu Securities, if any, shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares.
B. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of less than substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation.
C. The “ Liquidation Preference ” with respect to a share of New Preferred Stock means an amount equal to the Face Amount thereof plus all accrued and unpaid dividends on the New Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares). The Liquidation Preference with respect to any Pari Passu Securities, if any, shall be as set forth in the Certificate of Designations filed in respect thereof.
X. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the Closing Date, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, combination, reclassification or other similar event (in each case, whether by merger or otherwise), then, after the date of record for such event, the Conversion Price shall be proportionately reduced. If the number of outstanding shares of Common Stock is decreased by a reverse stock split, combination or reclassification of shares, or other similar event (in each case, whether by merger or otherwise), then, after the date of record for such event, the Conversion Price shall be proportionately increased. In any such event described in this paragraph, the Corporation shall notify the Corporation’s transfer agent of such change on or before the effective date thereof.
B. Adjustment Due to Merger, Consolidation, Etc. With respect to each share of New Preferred Stock, if, at any time after the Closing Date, there shall be (i) any recapitalization, reclassification or change of the outstanding shares of Common Stock (but not of such share of New Preferred Stock), other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a transaction causing an adjustment pursuant to Article X.A.; (ii) any Change of Control or any merger, conversion, consolidation or other business combination, in each case pursuant to which the Common Stock (but not such share of New Preferred Stock) is converted into or exchanged for capital stock or other securities of the Corporation or any subsidiary of the Corporation or any other person (or the right to receive any such stock or securities) or into any property (including, without limitation, cash and the right to receive cash or other property) or any combination of the foregoing; or (iii) any share exchange pursuant to which all of the outstanding shares of Common Stock (but not such share of New Preferred Stock) are converted into or exchanged for capital stock or other securities of the
Corporation or any subsidiary of the Corporation or any other person (or the right to receive any such securities) or into any property (including, without limitation, cash and the right to receive cash or other property) or into any combination of the foregoing (each of (i) — (iii) above being a “ Corporate Change ”), then the holder of such share of New Preferred Stock shall thereafter have the right to receive upon conversion, in lieu of the shares of Common Stock otherwise issuable, such shares of stock, securities and/or other property as would have been issued or payable in such Corporate Change if such share of New Preferred Stock had been converted into Common Stock immediately prior to such Corporate Change without taking into account the limitations on conversion set forth in Article IV. The Corporation shall not effect any Corporate Change unless: (i) each holder of New Preferred Stock has received written notice of such transaction at least 20 days prior thereto, but in no event later than 10 days prior to the record date for the determination of stockholders entitled to vote with respect thereto; (ii) the Requisite Holders approve (by vote or written consent, as provided by the DGCL) such transaction in writing or at a meeting; and (iii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument (in form and substance reasonable satisfactory to the Requisite Holders) the obligations of this Certificate of Designations. The above provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of New Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive recapitalizations, changes, conversions, combinations, reclassifications, consolidations, mergers, sales, transfers or share exchanges.
C. Adjustment Due to Distribution . If, at any time after the Closing Date, the Corporation shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock other than a dividend for which an adjustment is provided under Section A. or Section D. of this Article X.), by way of return of capital or otherwise (including, without limitation, any dividend or distribution to the Corporation’s stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary ( i.e., a spin-off)) (a “ Distribution ”), then the holders of New Preferred Stock shall be entitled, upon any conversion of shares of New Preferred Stock after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the holder with respect to the shares of Common Stock issuable upon such conversion had such holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution. If the Distribution involves rights, warrants, or options and the right to exercise or convert such right, warrant or option would expire in accordance with its terms prior to the conversion of the New Preferred Stock, then the terms of such right, warrant or option shall provide that such exercise or convertibility right shall remain in effect until 10 days after the date the holder of New Preferred Stock receives such right, warrant or option pursuant to the conversion thereof.
D. Purchase Rights . If, at any time after the Closing Date, the Corporation issues any securities (“ Purchase Rights ”) that are convertible into or exercisable or exchangeable for or impart a right to purchase securities other than Common Stock or Common Stock Equivalents (whether of the Corporation or any subsidiary of the Corporation) pro rata to the record holders of any class of Common Stock, then the holders of New Preferred Stock will be entitled to acquire (at the same time the holders of Common Stock receive such Purchase Rights), upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the New Preferred Stock (without giving effect to the limitations contained in Article IV) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
E. Adjustment Due to Dilutive Issuances .
(i) Dilutive Issuance . Except as otherwise provided in Paragraphs A, B and F of this Article X, if and whenever the Corporation issues or sells, or in accordance with Article X.E.(ii) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Conversion Price on the Measurement Date for such shares of Common Stock (a “Dilutive Issuance” ), then effective immediately upon the such Dilutive Issuance, the Conversion Price will be adjusted to equal the per share price at which such shares were issued, sold or deemed to have been issued or sold in such Dilutive Issuance, provided that such adjustment may be reversed as set forth below.
(ii) Effect on Conversion Price of Certain Events . For purposes of determining the adjusted Conversion Price under subparagraph (i), the following will be applicable:
(a) Issuance of Options . If the Corporation in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or Common Stock Equivalents (such warrants, rights and options to purchase Common Stock or Common Stock Equivalents are hereinafter referred to as “ Options ”) and the price per share for which Common Stock is issuable upon the exercise of such Options (and the price of any conversion of Common Stock Equivalents, if applicable) is less than the Conversion Price (in effect on the Measurement Date of such Options) (“ Below Conversion Price Options ”), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Conversion Price Options (assuming full exercise, conversion or exchange of Common Stock Equivalents, if applicable) will, as of the date of the issuance or grant of such Below Conversion Price Options, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Below Conversion Price Options” is determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the issuance or granting of all such Below Conversion Price Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise of all such Below Conversion Price Options, plus, in the case of Common Stock Equivalents issuable upon the exercise of such Below Conversion Price Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Common Stock Equivalents first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Conversion Price Options (assuming full conversion of Common Stock Equivalents, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Below Conversion Price Options or upon the exercise, conversion or exchange of Common Stock Equivalents issuable upon exercise of such Below Conversion Price Options although the forfeiture or expiration of any such Below Conversion Price Options may result in a subsequent increase in the Conversion Price as set forth below.
(b) Issuance of Common Stock Equivalents . If the Corporation in any manner issues or sells any Common Stock Equivalents, whether or not immediately exercisable, convertible or exchangeable (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such exercise, conversion or exchange of such Common Stock Equivalents is less than the Conversion Price (in effect on the Measurement Date for such Common Stock Equivalents), then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents will, as of the date of the issuance of such Common Stock Equivalents, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such exercise, conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the issuance or sale of all such Common Stock Equivalents, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the exercise, conversion or exchange thereof at the time such Common Stock Equivalents first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon exercise, conversion or exchange of such Common Stock Equivalents, although the forfeiture or expiration of any such Common Stock Equivalent may result in a subsequent increase in the Conversion Price as set forth below.
(c) Expiration of Options or Common Stock Equivalents . If any Dilutive Issuance is deemed to have occurred as a result of the issuance of Below Conversion Price Options or the issuance of Common Stock Equivalents at a price per share below the Conversion Price (each, a “ Dilutive Instrument ”), and if the Dilutive Instrument expires, terminates or is otherwise forfeited without having been exercised, converted or exchanged in any manner whatsoever that has resulted in the issuance of any shares of Common Stock or Common Stock Equivalents, then in each case, the adjustment to the Conversion Price made upon the issuance of such Dilutive Instrument shall be reversed; provided, however , that any such reversal shall not impact any Conversion Price adjustment made as a result of any other Dilutive Issuance; and provided further, however , such reversal shall not impact the Conversion Price for any conversion of New Preferred Stock with respect to which conversion the Conversion Date is prior to such reversal.
(iii) Change in Option Price or Conversion Rate . If there is a change at any time in: (a) the amount of consideration payable to the Corporation upon the exercise of any Options; (b) the amount of consideration, if any, payable to the Corporation upon the exercise, conversion or exchange of any Common Stock Equivalents; or (c) the rate at which any Common Stock Equivalents are convertible into or exchangeable for Common Stock, such change shall be deemed to be a new issuance of such Option or Common Stock Equivalent as of the date of such change for purposes of this Article X.E., and the Conversion Price in effect at the time of such change will be readjusted in accordance with Paragraphs (i), (ii) or (iii) of this Article X.E., as applicable.
(iv) Calculation of Consideration Received . If any Common Stock, Options or Common Stock Equivalents are issued, granted or sold for cash, the consideration received therefor will be the amount received by the Corporation therefor, after deduction of all underwriting discounts or allowances in connection with such issuance, grant or sale. In case any Common Stock, Options or Common Stock Equivalents are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Corporation will be the fair market value of such consideration as determined by a majority of the Board of Directors and the Requisite Holders, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation will be the market price thereof as of the date of receipt; in the event that the Board of Directors and the Requisite Holders cannot agree on the value of such consideration, then the matter shall be promptly submitted to an independent accountant mutually agreed upon by the Board of Directors and the Requisite Holders, whose determination shall be binding, absent manifest error. In case any Common Stock, Options or Common Stock Equivalents are issued in connection with any merger or consolidation in which the Corporation is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Common Stock Equivalents, as the case may be. Notwithstanding anything else herein to the contrary, if Common Stock, Options or Common Stock Equivalents are issued, granted or sold in conjunction with each other as part of a single transaction or in a series of related transactions, no deduction shall be made to the issuance price of any such securities to account for the fair value of any of the other securities issued, granted or sold in conjunction therewith or as part of the same transaction or series of related transactions. An adjustment pursuant to this Article X shall be made, if applicable, for each separate security issued, granted or sold as if such security was not issued, granted or sold in conjunction with any other security as part of a single transaction or in a series of related transactions.
(v) No adjustment shall be made pursuant to this Paragraph E (other than a reversal pursuant to subparagraph (ii)(c)) if such adjustment would result in an increase in the Conversion Price.
F. Adjustment of Conversion Price Upon Redemption Event . If, at any time on or after the Closing Date, a Redemption Event shall have occurred as a result of any of the events described in subparagraphs (i), (iii), (iv), (v), (x), (xi), (xiii) or (xiv) of Article VII.A., then the Conversion Price shall immediately and automatically be reduced to 10% of the Conversion Price in effect immediately prior to such Redemption Event.
G. Exceptions to Adjustment of Conversion Price . No adjustment to the Conversion Price will be made (i) except in the case of Article X.E.(iii), upon the conversion or exercise of any warrants, options or convertible securities issued and outstanding on the Closing Date that are set forth on Schedule 2.1(c) of the Securities Purchase Agreement in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options to employees, directors or consultants of the Corporation which may hereafter be granted to or
exercised by any employee, director or consultant under any stock option, employee stock purchase or similar benefit plan of the Corporation now existing or to be implemented in the future, so long as the issuance of such stock or options is approved (by vote or written consent, as provided by the DGCL) by a majority of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon issuance or conversion of the New Preferred Stock or exercise of the Warrants, or (iv) upon the issuance of securities approved (by vote or written consent, as provided by the DGCL) by the Requisite Holders, which approval specifies that the issuance is intended to be exempt hereunder.
H. Notice of Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article X amounting to a more than 5% change in such Conversion Price, the Corporation, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each holder of New Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of New Preferred Stock, furnish to such holder a like certificate setting forth: (i) such adjustment or readjustment; (ii) the Conversion Price at the time in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of a share of New Preferred Stock.
I. Adjustment Following Reverse Stock Split . If, on the Conversion Price Adjustment Date (as defined below), the VWCP (as adjusted to reflect any stock splits, anti-dilution adjustments, stock dividends or similar recapitalizations occurring on or before the Conversion Price Adjustment Date) for the three (3) consecutive Trading Day period ending on the last Trading Day prior to the Conversion Price Adjustment Date (the “3-Day VWCP”) is less than the product of the Conversion Price then in effect multiplied by 10, as adjusted to reflect any stock splits, anti-dilution adjustments, stock dividends or similar recapitalizations occurring on or before the Conversion Price Adjustment Date, then, effective as of the Conversion Price Adjustment Date, the Conversion Price shall be reduced to a price equal to ten percent (10%) of the 3-Day VWCP. The “ Conversion Price Adjustment Date ” shall mean the Saturday that is two (2) calendar weeks following the Saturday of the week the Reverse Split (defined below) is effected. The Company hereby agrees that it will not issue any press releases or file any periodic reports on Form 8-K under the Exchange Act, except where required by law, during the period beginning on the day after the effective date of the Reverse Split and ending on the Conversion Price Adjustment Date. The “ Reverse Split ” means a reverse stock split of the Corporation’s outstanding Common Stock at an exchange ratio of 1-for-100, and effected between two (2) and eight (8) weeks from the Closing (as defined in the Asset Purchase Agreement).
J. Adjustment Due to Delayed Reverse Split . If a reverse stock split of the Corporation’s outstanding Common Stock at an exchange ratio of 1-for-100 has not been effected by the date that is eight (8) weeks from the Closing (as defined in the Asset Purchase Agreement) (the “ Reverse Split Deadline ”), then on the next Saturday to occur after the Reverse Split Deadline, the Conversion Price of the New Preferred Stock shall be reduced to $0.0001 per share.
XI. VOTING RIGHTS
The holders of the New Preferred Stock have no voting power whatsoever, except as otherwise required by the DGCL in this Article XI and in Article XII below.
Notwithstanding the above, the Corporation shall provide each holder of New Preferred Stock with prior notification of any meeting of the stockholders (and copies of proxy materials and other information sent to stockholders). If the Corporation takes a record of its stockholders for the purpose of determining stockholders entitled to (a) receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation or recapitalization) any share of any class or any other securities or property, or to receive any other right, or (b) to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Corporation, or any proposed merger, consolidation, liquidation, dissolution or winding up of the Corporation, the Corporation shall mail a notice to each holder, at least 10 days prior to the record date specified therein (or 20 days prior to the consummation of the transaction or event, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), of the date on which any such record is to be taken for the purpose of such vote, dividend, distribution, right or other event, and a brief statement regarding the amount and character of such vote, dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of the New Preferred Stock, voting together as a single class, is required to authorize a given action of the Corporation, the affirmative vote of the Requisite Holders (except as otherwise may be required under the DGCL) shall constitute the approval of such action by such class; provided, however, that if the DGCL requires only the separate vote of any one or more, but not all, of the series of New Preferred Stock, the affirmative vote of at least 80% of the voting power of such one or more series, voting together as a single class, shall constitute the approval of such action by the New Preferred Stock in lieu of the approval of the Requisite Holders. To the extent that under the DGCL holders of the New Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of New Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV.C.(ii)) using the record date for the taking of such vote of stockholders as the date as of which the Conversion Price is calculated. The Corporation shall not (i) combine the outstanding shares of any series of New Preferred Stock into a smaller number of shares of such series (whether by reclassification, merger, stock split or otherwise) or (ii) subdivide the outstanding shares of any series of New Preferred Stock into a greater number of shares of such series (whether by reclassification, merger, stock split, stock dividend or otherwise) without the approval (by vote or written consent, as provided by the DGCL) of the holders of at least 80% of the voting power of such series of New Preferred Stock to be combined or subdivided, voting as a separate class.
XII. PROTECTION PROVISIONS
So long as at least 1,000 shares of New Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares) are outstanding, or after all of the Cash Warrants have been fully exercised, at least 3,000 shares of New Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares) are outstanding, the Corporation shall not, and shall not allow any of its subsidiaries to, take any of the following actions (in each case whether by merger, consolidation, conversion or otherwise) without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the Requisite Holders (and any of the following actions taken without such approval of the Requisite Holders shall be null and void ab initio and of no force and effect):
A. amend, alter, change or repeal the rights, powers, preferences or privileges of the New Preferred Stock so as to affect the New Preferred Stock adversely; provided, however, that if such amendment, alteration, change or repeal would affect adversely the rights, powers, preferences or privileges of any one or more series of New Preferred Stock but shall not so affect each series of New Preferred Stock, this subparagraph A shall require the approval (by vote or written consent, as provided by the DGCL) of the holders of at least 66-2/3% of the voting power of the one or more series of New Preferred Stock adversely affected, voting together as a single class, in lieu of the approval of the Requisite Holders required by this subparagraph A;
B. amend, alter, change or repeal any provision of the Certificate of Incorporation of the Corporation (including, for the avoidance of doubt, any Certificate of Designation or Certificate of Designations (including this Certificate of Designations) filed pursuant to Section 151(g) of the DGCL);
C. redeem, purchase or otherwise acquire, or apply to or set aside any monies for the redemption, purchase or other acquisition of, or permit any subsidiary of the Corporation to redeem, purchase or otherwise acquire, or apply to or set aside any monies for the redemption, purchase or other acquisition of, or declare or pay any dividend or make any Distribution or other distribution on or with respect to, any capital stock, other than (i) under this Certificate of Designations with respect to the New Preferred Stock or (ii) in connection with the redemption of unvested shares of Common Stock issued pursuant to equity compensation plans or arrangements;
D. increase the par value of the Common Stock;
E. enter into a definitive agreement that, if consummated, would represent, or take any other corporate action that would represent, a Strategic Transaction;
F. enter into a definitive agreement that, if consummated, would result in, or take any other corporate action that would result in, a Change of Control, Corporate Change or Liquidation Event;
G. file a registration statement under the Securities Act of 1933, as amended (the “ Act ”), relating to the sale of any securities of the Corporation, other than registration statements filed on Form S-8 and any successor thereto;
H. (i) issue, sell, transfer from the Corporation or distribute any capital stock or other equity security of the Corporation or any subsidiary of the Corporation including, without limitation, Common Stock, Options, Purchase Rights or Common Stock Equivalents, whether for no
consideration or for cash consideration, property, services or other exchange; (ii) issue, sell, transfer from the Corporation or distribute any promissory note or other instrument evidencing indebtedness for borrowed money, whether for no consideration or for cash consideration, property, services or other exchange; or (iii) incur indebtedness for borrowed money by the Corporation or any subsidiary of the Corporation, whether for no consideration or for cash consideration, property, services or other exchange;
I. take any action, including authorizing any expenditure or entering into any contract, to cause the Corporation’s Net Cash to fall below $2,900,000 until the date that is thirteen months from the date of the Asset Purchase Agreement.
Notwithstanding anything to the contrary contained herein, nothing in this Article XII, shall require the consent of the Requisite Holders for (i) issuances of shares of Common Stock or options to employees, officers, directors, or consultants of the Corporation pursuant to any stock option plan duly adopted by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employees directors established for such purpose, duly approved (by vote or written consent, as provided by the DGCL) by the Corporation’s stockholders and described in the Public Filings (as described in the Securities Purchase Agreement), provided that the number of shares of Common Stock authorized for issuance under such plan(s) shall have been (since the inception of such plan) and, from and after the date of such grant, shall be ratably adjusted concurrent with any stock split, reverse stock split or similar adjustment to the outstanding Common Stock of the Corporation; (ii) issuances of securities upon the exercise, exchange of or conversion of any Common Stock Equivalents issued and outstanding on the Closing Date and described in the Public Filings, provided that such securities have not been amended since the Closing Date (other than adjustments due to stock splits or recapitalization events) to increase the number of such securities or to decrease the exercise, exchange or conversion price of any such securities; and (iii) the issuance of any Common Stock or Common Stock Equivalents under the terms of the Securities Purchase Agreement or the Warrants (including in connection with any adjustments to the conversion price of any such securities pursuant to their terms).
XIII. CORPORATE CAPACITY AND POWER
Without the prior written consent of the Requisite Holders, the Corporation shall not have the corporate capacity or power to take any action, including authorizing any expenditure or entering into any contract, to cause the Corporation’s Net Cash to fall below $2,900,000 until the date that is thirteen months from the date of the Asset Purchase Agreement, with any such prohibited action or expenditure being deemed ultra vires under the DGCL, and, if any such action is taken without the prior written consent of the Requisite Holders, then the Corporation and the Corporation’s stockholders shall have, among other rights and remedies arising under the DGCL or other applicable law, all rights and remedies set forth in Section 124(2) of the DGCL.
XIV. MISCELLANEOUS
A. Cancellation of New Preferred Stock . If any shares of New Preferred Stock are converted pursuant to Article IV or redeemed or repurchased by the Corporation, the Corporation shall take all actions necessary to cause the shares so converted or redeemed to be canceled and return to the status of authorized, but unissued preferred stock of no designated series, and such shares shall not be issuable by the Corporation as New Preferred Stock.
B. Lost or Stolen Certificates . Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any stock certificate(s) representing shares of New Preferred Stock (each a “ Preferred Stock Certificate ”) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Corporation shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the holder contemporaneously requests the Corporation to convert in full all shares of New Preferred Stock represented by such Preferred Stock Certificate(s).
C. Allocation of Reserved Amount . The Reserved Amount shall be allocated pro rata among the holders of New Preferred Stock based on the number of shares of New Preferred Stock issued to each holder and issuable to each holder upon exercise of all outstanding Warrants then held of record by such holder. Each increase to the Reserved Amount shall be allocated pro rata among the holders of New Preferred Stock based on the number of shares of New Preferred Stock held by each holder at the time of the increase Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any New Preferred Stock or Warrants shall be allocated to the remaining holders of shares of New Preferred Stock and Warrants, pro rata based on the number of shares of New Preferred Stock and the number of shares of New Preferred Stock underlying the Warrants then held of record by such holders.
D. Quarterly Statements of Available Shares . For each calendar quarter beginning in the Closing Date occurs and thereafter so long as any shares of New Preferred Stock are outstanding, the Corporation shall deliver (or cause its transfer agent to deliver) to each holder upon its written request a written report notifying such holder of any occurrence which prohibits the
Corporation from issuing Common Stock upon any such conversion. The report shall also specify: (i) the total number of shares of New Preferred Stock outstanding as of the end of such quarter; (ii) the total number of shares of Common Stock issued upon all conversions of New Preferred Stock prior to the end of such quarter; (iii) the total number of shares of Common Stock which are reserved for issuance upon conversion of the New Preferred Stock as of the end of such quarter; and (iv) the total number of shares of Common Stock which may thereafter be issued by the Corporation upon conversion of the New Preferred Stock before the Corporation would exceed the Reserved Amount. In addition, the Corporation shall provide (or cause its transfer agent to provide), as promptly as practicable delivery to the Corporation of a written request by any holder, any of the information enumerated in clauses (i) — (iv) of this Paragraph D as of the date of such request.
E. Payment of Cash; Defaults . Whenever the Corporation is required to make any cash payment to a holder under this Certificate of Designations (upon redemption or otherwise), such cash payment shall be made to the holder within ten Trading Days after delivery by such holder of a notice specifying that the holder elects to receive such payment in cash and the method ( e.g. , by check, wire transfer) in which such payment should be made and any supporting documentation reasonably requested by the Corporation to substantiate the holder’s claim to such cash payment or the amount thereof. If such payment is not delivered within such ten Trading Day period, such holder shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of 18% and the highest interest rate permitted by applicable law until such amount is paid in full to the holder. Such amount shall be deemed to be paid as a redemption to the fullest extent permitted by law on the shares of New Preferred Stock giving rise to such default.
F. Status as Stockholder . Upon submission of a Notice of Conversion by a holder of New Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the holder’s rights as a holder of such converted shares of New Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such holder because of a failure by the Corporation to comply with the terms of this Certificate of Designations. Notwithstanding the foregoing, if a holder has not received all shares of Common Stock prior to the last Trading Day of the Delivery Period with respect to a conversion of New Preferred Stock for any reason, then (unless the holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Corporation within five Trading Days after the expiration of such Delivery Period) the holder shall regain the rights of a holder of New Preferred Stock with respect to such unconverted shares of New Preferred Stock and the Corporation shall, as soon as practicable, return any certificate representing such unconverted shares to the holder. In all cases, the holder shall retain all of its rights and remedies for the Corporation’s failure to convert New Preferred Stock.
G. Waiver . Notwithstanding any provision in this Certificate of Designations to the contrary, any provision contained herein and any right of the holders of New Preferred Stock granted hereunder may be waived as to all shares of New Preferred Stock (and the holders thereof) upon the written consent of the Requisite Holders, unless a higher percentage is required by applicable law, in which case the written consent of the holders of not less than such higher
percentage shall be required; provided, however, that if a waiver would affect adversely the rights, powers, preferences or privileges of any one or more series of New Preferred Stock but shall not so affect the rights, powers, preferences or privileges of each series of New Preferred Stock, this paragraph shall require the written consent of the holders of at least 66-2/3% of the voting power (or such higher percentage required by applicable law) of such one or more series of New Preferred Stock adversely affected, voting together as a single class, in lieu of the written consent of the Requisite Holders required by this paragraph.
H. Reference to Other Agreements and Documents . When the terms of this Certificate of Designations refers to a specific agreement or other document to determine the meaning or operation of a provision hereof, the secretary of the Corporation shall maintain a copy of such agreement or document at the principal executive offices of the Corporation and a copy thereof shall be provided free of charge to any stockholder who makes a request therefor. Unless otherwise provided in this Certificate of Designations, a reference to any specific agreement or other document shall be deemed a reference to such agreement or document as amended from time to time in accordance with the terms of such agreement or document.
I. Severability. If any term of any series of New Preferred Stock is invalid, unlawful, or incapable of being enforced by reason of any rule of law or public policy, all other terms of such series of New Preferred Stock as set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term of any series of New Preferred Stock will be deemed dependent upon any other such term unless so expressed in this Certificate of Designations.
J. Force Majeure . Notwithstanding any provision herein to the contrary, the failure of any party to timely satisfy obligations hereunder shall be excused to the extent that (i) such failure follows the occurrence of a Force Majeure Event (defined below), and (ii) such Force Majeure Event has materially adversely affected the ability of such party (or its agents, including banks, transfer agents, and clearinghouses) to perform hereunder. A failure to perform shall be excused only for so long as the Force Majeure Event continues to materially adversely affect such person’s ability to perform. For purposes of this Section, “ Force Majeure Event ” shall mean the occurrence of any of the following events: (a) trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the SEC or FINRA; (b) a general banking moratorium shall have been declared by any of federal, New York or California authorities; (c) an act of war, terrorism or hostility shall have occurred, or (d) a strike, fire, flood, earthquake, accident or other calamity or Act of God shall have occurred.
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IN WITNESS WHEREOF , this Certificate of Designations is executed on behalf of the Corporation this day of January, 2012.
| La Jolla Pharmaceutical Company | ||
| By: |
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|
| Name: George Tidmarsh | ||
| Title: Chief Executive Officer and President | ||
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the [Series C-1 2 ] [Series C-2 2 ] [Series D-1 2 ] [Series D-2 2 ] Preferred Stock)
The undersigned hereby irrevocably elects to convert [insert number of shares to nearest 1/1000 th ] shares of [Series C-1 2 ] [Series C-2 2 ] [Series D-1 2 ] [Series D-2 2 ] Preferred Stock (the “ Conversion ”), represented by stock certificate No(s). (the “ Preferred Stock Certificates ”), into shares of common stock (“ Common Stock ”) of La Jolla Pharmaceutical Company (the “ Corporation ”) according to the conditions of the Certificate of Designations, Preferences and Rights of Series C-1 2 Convertible Preferred Stock, Series C-2 2 Convertible Preferred Stock, Series D-1 2 Convertible Preferred Stock and Series D-2 2 Convertible Preferred Stock, as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. Each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof).
The Corporation shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee (which is ) with DTC through its Deposit Withdrawal Agent Commission System (“ DTC Transfer ”).
The undersigned acknowledges that these securities are “restricted securities” under the Securities Act of 1933, as amended (the “ Act ”) and accordingly agrees that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the [Series C-1 2 ] [Series C-2 2 ] [Series D-1 2 ] [Series D-2 2 ] Preferred Stock have been or will be made only pursuant to an effective registration of the transfer of the Common Stock under the Act, or pursuant to an exemption from registration under the Act.
| Date of Conversion: | ||
| Applicable Conversion Price: | ||
| Shares of Common Stock beneficially owned (determined in accordance with Section 13(d) of the Exchange Act): | ||
| Signature: | ||
| Name: | ||
| Address: | ||
Exhibit 10.2
CONFIDENTIAL SEPARATION AGREEMENT
AND GENERAL RELEASE OF ALL CLAIMS
This Confidential Separation Agreement and General Release of All Claims (“Separation Agreement”) is made by and between La Jolla Pharmaceutical Company (“Company”) and Deirdre Y. Gillespie, M.D. (“Executive”) with respect to the following facts:
A. Executive is currently employed by Company as Chief Executive Officer pursuant to an Employment Agreement dated May 24, 2010 (“Employment Agreement”);
B. Executive’s employment with Company will be terminated without cause pursuant to paragraph 3.2 of the Employment Agreement. The termination effective date will be January 19, 2012 (“Separation Date”). Executive will receive Executive’s final paycheck, including any unused and accrued vacation time, on the Separation Date. Company wishes to reach an amicable separation with Executive and assist Executive’s transition to other employment;
C. The parties wish to supersede the severance provisions in paragraph 3.6(a),(b) and (c) of the Employment Agreement and proceed, instead, in accordance with the terms and conditions in this Separation Agreement; and
D. The parties desire to settle all claims and issues that have, or could have been raised, in relation to Executive’s employment with Company and arising out of or in any way related to the acts, transactions or occurrences between Executive and Company to date, including, but not limited to, Executive’s employment with Company or the termination of that employment, on the terms set forth below.
THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth, it is agreed by and between the undersigned as follows:
1. Severance Package . Company agrees to provide Executive with the following payments and benefits (“Severance Package”) to which Executive is not otherwise entitled absent the signing of a release. Executive acknowledges and agrees that this Severance Package constitutes adequate legal consideration for the promises and representations made by Executive in this Separation Agreement.
1.1 Severance Payment . Company agrees to provide Executive with a severance payment of $77,778.00, less all appropriate federal and state income and employment taxes (“Severance Payment”). The Severance Payment will be made in a lump sum cash payment on the Separation Date, by wire transfer to a bank account designated by Executive, provided Executive has signed this Separation Agreement.
1.2 Retention of Company Property . Company agrees to allow Executive to retain the Company-issued iPad, iPhone and laptop computer in Executive’s possession.
1.3 Resignation . Company agrees to characterize Executive’s separation as a voluntary resignation in any public statement or request for reference. Notwithstanding the foregoing, the Company shall be permitted to file this Agreement with the Securities and Exchange Commission to the extent required under the Securities Exchange Act of 1934, as amended.
1.4 No Contest of Unemployment . Company agrees that it will not contest any claims Executive may file for unemployment insurance benefits and will promptly process any paperwork related to same.
2. Express Waiver and Return of Stock Options . By signing this Separation Agreement, Executive expressly waives her right to all Company stock options provided pursuant to the Employment Agreement and relinquishes to the Company all vested and unvested stock options.
3. Board Position . In conjunction with Executive’s separation, Executive hereby resigns her position on the Company’s Board of Directors as of the Separation Date.
4. General Release .
4.1 Executive unconditionally, irrevocably and absolutely releases and discharges Company, and any parent and subsidiary corporations, divisions and affiliated corporations, partnerships or other affiliated entities of Company, past and present, as well as their Executives, officers, directors, agents, successors and assigns (collectively, “Released Parties”), from all claims related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, Executive’s employment with Company, the termination of Executive’s employment, and all other losses, liabilities, claims, charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with Executive’s employment with Company. This release is intended to have the broadest possible application and includes, but is not limited to, any tort, contract, common law, constitutional or other statutory claims, including, but not limited to alleged violations of the California Labor Code or the federal Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964 and the California Fair Employment and Housing Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), and all claims for attorneys’ fees, costs and expenses. However, this general release is not intended to bar any claims that, by law, may not be waived, such as claims for workers’ compensation benefits, unemployment insurance benefits, statutory indemnity, and any challenge to the validity of Executive’s release of claims under the ADEA (“ADEA Claims”), as set forth in this Separation Agreement.
4.2 Executive acknowledges that Executive may discover facts or law different from, or in addition to, the facts or law that Executive knows or believes to be true with respect to the claims released in this Separation Agreement and agrees, nonetheless, that this Separation Agreement and the release contained in it shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of them.
4.3 Executive declares and represents that Executive intends this Separation Agreement to be complete and not subject to any claim of mistake, and that the release herein expresses a full and complete release and Executive intends the release herein to be final and complete. Executive executes this release with the full knowledge that this release covers all possible claims against the Released Parties, to the fullest extent permitted by law.
4.4 Although this Separation Agreement does not prevent Executive from participating in an investigation by the Equal Employment Opportunity Commission or similar state or local administrative agency, Executive expressly waives Executive’s right to recovery of any type, including damages or reinstatement, in any administrative or court action, whether state or federal, and whether brought by Executive or on Executive’s behalf, related in any way to the matters released herein.
5. California Civil Code Section 1542 Waiver . Executive expressly acknowledges and agrees that all rights under Section 1542 of the California Civil Code are expressly waived. That section provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
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6. Representation Concerning Filing of Legal Actions . Executive represents that, as of the date of this Separation Agreement, Executive has not filed any lawsuits, charges, complaints, petitions, claims or other accusatory pleadings against Company or any of the other Released Parties in any court or with any governmental agency.
7. Mutual Nondisparagement . Executive agrees that Executive will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of Company or any of the other Released Parties. Similarly, Company and any Released Parties, through their officers, directors, agents and Preferred Stockholders (if applicable), will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputation, practices or conduct of Executive
8. Confidentiality and Return of Company Property . Executive understands and agrees that as a condition of receiving the Severance Package in paragraph 1, all company property, with the exception of the Company-issued property listed in paragraph 1.2 of this Separation Agreement, must be returned to Company on or before the Separation Date. By signing this Separation Agreement, Executive represents and warrants that Executive will have returned to Company on or before the Separation Date, all Company property, data and information belonging to Company and agrees that Executive will not use or disclose to others any confidential or proprietary information of Company or the Released Parties. In addition, Executive agrees to keep the terms of this Separation Agreement confidential between Executive and Company, except that Executive may tell Executive’s immediate family and attorney or accountant, if any, as needed, but in no event should Executive discuss this Separation Agreement or its terms with any current or prospective Executive of Company.
9. Continuing Obligations . Executive agrees to abide by the terms and conditions of the surviving provisions of the Employment Agreement, which includes but is not limited to the arbitration and confidentiality provisions.
10. No Other Severance . Executive acknowledges and agrees that the Severance Package provided pursuant to this Separation Agreement is in lieu of any other severance benefits to which Executive may be eligible under any other agreement and/or severance plan or practice.
11. No Admissions . By entering into this Separation Agreement, the Released Parties make no admission that they have engaged, or are now engaging, in any unlawful conduct. The parties understand and acknowledge that this Separation Agreement is not an admission of liability and shall not be used or construed as such in any legal or administrative proceeding.
12. Older Workers’ Benefit Protection Act . This Separation Agreement is intended to satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f) (“OWBPA”). Executive is advised to consult with an attorney before executing this Separation Agreement.
12.1 Acknowledgments/Time to Consider . Executive acknowledges and agrees that (a) Executive has read and understands the terms of this Separation Agreement; (b) Executive has been advised in writing to consult with an attorney before executing this Separation Agreement; (c) Executive has obtained and considered such legal counsel as Executive deems necessary; (d) Executive has been given twenty-one (21) days to consider whether or not to enter into this Separation Agreement (although Executive may elect not to use the full 21-day period at Executive’s option); and (e) by signing this Separation Agreement, Executive acknowledges that Executive does so freely, knowingly, and voluntarily.
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12.2 Waiver of Consideration Period . Executive waives the full 21-day period provided in paragraph 12.1 above.
12.3 Revocation/Effective Dates . With respect to all claims released by this Separation Agreement, except the waiver of the ADEA claims , this Separation Agreement shall become effective and enforceable on the day it is signed by Executive. Executive’s waiver of the ADEA Claims will become effective and enforceable on the eighth day after Executive signs this Separation Agreement. In other words, Executive may revoke Executive’s acceptance of this Separation Agreement as to the ADEA Claims within seven (7) days after the date Executive signs it. Executive’s revocation must be in writing and received by the Chairman of the Board by 5:00 p.m. Pacific Time on the seventh day in order to be effective. If Executive timely revokes, Executive’s ADEA Claims will survive the signing of this Separation Agreement, and Executive hereby agrees to immediately return to Company $7,000.00 of the Severance Payment, if the Severance Payment has already been paid.
12.4 Preserved Rights of Executive . This Separation Agreement does not waive or release any rights or claims that Executive may have under the ADEA that arise after the execution of this Separation Agreement. In addition, this Agreement does not prohibit Executive from challenging the validity of this Separation Agreement’s waiver and release of claims under the ADEA.
13. Severability . In the event any provision of this Separation Agreement shall be found unenforceable, the unenforceable provision shall be deemed deleted and the validity and enforceability of the remaining provisions shall not be affected thereby.
14. Full Defense . This Separation Agreement may be pled as a full and complete defense to, and may be used as a basis for an injunction against, any action, suit or other proceeding that may be prosecuted, instituted or attempted by Executive in breach hereof.
15. Applicable Law . The validity, interpretation and performance of this Separation Agreement shall be construed and interpreted according to the laws of the United States of America and the State of California.
16. Successors and Assigns . This Separation Agreement is binding on Executive’s heirs, family members, executors, agents and assigns.
17. Counterparts . This Separation Agreement may be signed in counterparts, and each shall be treated as though signed as one document. An executed signature page of this Separation Agreement delivered by facsimile or PDF transmission shall be as effective as an original executed signature page.
18. Entire Agreement; Modification . This Separation Agreement, including the surviving provisions of the Employment Agreement previously executed by Executive and herein incorporated by reference, is intended to be the entire agreement between the parties and supersedes and cancels any and all other and prior agreements, written or oral, between the parties regarding this subject matter. This Separation Agreement may be amended only by a written instrument executed by all parties hereto.
[Remainder of Page Intentionally Left Blank]
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THE PARTIES TO THIS SEPARATION AGREEMENT HAVE READ THE FOREGOING SEPARATION AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS SEPARATION AGREEMENT ON THE DATES SHOWN BELOW.
| Dated: January 13, 2012 |
/s/ Deirdre Y. Gillespie, M.D. |
|||||
| Deirdre Y. Gillespie, M.D. | ||||||
| La Jolla Pharmaceutical Company | ||||||
| Dated: January 16, 2012 | By: |
/s/ Robert Fildes, Ph.D. |
||||
| Name: Robert Fildes, Ph.D. | ||||||
| Its: Chairman of the Board | ||||||
Signature Page to Confidential Separation Agreement and General Release of All Claims
Exhibit 10.3
CONFIDENTIAL SEPARATION AGREEMENT
AND GENERAL RELEASE OF ALL CLAIMS
This Confidential Separation Agreement and General Release of All Claims (“Separation Agreement”) is made by and between La Jolla Pharmaceutical Company (“Company”) and Gail A. Sloan (“Executive”) with respect to the following facts:
A. Executive is currently employed by Company as Chief Financial Officer pursuant to an Employment Agreement dated May 24, 2010 (“Employment Agreement”);
B. Executive’s employment with Company will be terminated without cause pursuant to paragraph 3.2 of the Employment Agreement. The termination effective date will be January 19, 2012 (“Separation Date”). Executive will receive Executive’s final paycheck, including any unused and accrued vacation time, on the Separation Date. Company wishes to reach an amicable separation with Executive and assist Executive’s transition to other employment;
C. The parties wish to supersede the severance provisions in paragraph 3.6(a), (b) and (c) of the Employment Agreement and proceed, instead, in accordance with the terms and conditions in this Separation Agreement; and
D. The parties desire to settle all claims and issues that have, or could have been raised, in relation to Executive’s employment with Company and arising out of or in any way related to the acts, transactions or occurrences between Executive and Company to date, including, but not limited to, Executive’s employment with Company or the termination of that employment, on the terms set forth below.
THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth, it is agreed by and between the undersigned as follows:
1. Severance Package . Company agrees to provide Executive with the following payments and benefits (“Severance Package”) to which Executive is not otherwise entitled absent the signing of a release. Executive acknowledges and agrees that this Severance Package constitutes adequate legal consideration for the promises and representations made by Executive in this Separation Agreement.
1.1 Severance Payment . Company agrees to provide Executive with a severance payment of $62,222.00 less all appropriate federal and state income and employment taxes (“Severance Payment”). The Severance Payment will be made in a lump sum cash payment on the Separation Date, by wire transfer to a bank account designated by Executive, provided Executive has signed this Separation Agreement.
1.2 Retention of Company Property . Company agrees to allow Executive to retain the Company-issued iPad, iPhone and laptop computer in Executive’s possession.
1.3 Resignation . Company agrees to characterize Executive’s separation as a voluntary resignation in any public statement or request for reference. Notwithstanding the foregoing, the Company shall be permitted to file this Agreement with the Securities and Exchange Commission to the extent required under the Securities Exchange Act of 1934, as amended.
1.4 No Contest of Unemployment . Company agrees that it will not contest any claims Executive may file for unemployment insurance benefits and will promptly process any paperwork related to same.
2. Express Waiver and Return of Stock Options . By signing this Separation Agreement, Executive expressly waives her right to all Company stock options provided pursuant to the Employment Agreement and relinquishes to the Company all vested and unvested stock options.
3. General Release .
3.1 Executive unconditionally, irrevocably and absolutely releases and discharges Company, and any parent and subsidiary corporations, divisions and affiliated corporations, partnerships or other affiliated entities of Company, past and present, as well as their Executives, officers, directors, agents, successors and assigns (collectively, “Released Parties”), from all claims related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, Executive’s employment with Company, the termination of Executive’s employment, and all other losses, liabilities, claims, charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with Executive’s employment with Company. This release is intended to have the broadest possible application and includes, but is not limited to, any tort, contract, common law, constitutional or other statutory claims, including, but not limited to alleged violations of the California Labor Code or the federal Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964 and the California Fair Employment and Housing Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), and all claims for attorneys’ fees, costs and expenses. However, this general release is not intended to bar any claims that, by law, may not be waived, such as claims for workers’ compensation benefits, unemployment insurance benefits, statutory indemnity, and any challenge to the validity of Executive’s release of claims under the ADEA (“ADEA Claims”), as set forth in this Separation Agreement.
3.2 Executive acknowledges that Executive may discover facts or law different from, or in addition to, the facts or law that Executive knows or believes to be true with respect to the claims released in this Separation Agreement and agrees, nonetheless, that this Separation Agreement and the release contained in it shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of them.
3.3 Executive declares and represents that Executive intends this Separation Agreement to be complete and not subject to any claim of mistake, and that the release herein expresses a full and complete release and Executive intends the release herein to be final and complete. Executive executes this release with the full knowledge that this release covers all possible claims against the Released Parties, to the fullest extent permitted by law.
3.4 Although this Separation Agreement does not prevent Executive from participating in an investigation by the Equal Employment Opportunity Commission or similar state or local administrative agency, Executive expressly waives Executive’s right to recovery of any type, including damages or reinstatement, in any administrative or court action, whether state or federal, and whether brought by Executive or on Executive’s behalf, related in any way to the matters released herein.
4. California Civil Code Section 1542 Waiver . Executive expressly acknowledges and agrees that all rights under Section 1542 of the California Civil Code are expressly waived. That section provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
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5. Representation Concerning Filing of Legal Actions . Executive represents that, as of the date of this Separation Agreement, Executive has not filed any lawsuits, charges, complaints, petitions, claims or other accusatory pleadings against Company or any of the other Released Parties in any court or with any governmental agency.
6. Mutual Nondisparagement . Executive agrees that Executive will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of Company or any of the other Released Parties. Similarly, Company and any Released Parties, through their officers, directors, agents and Preferred Stockholders (if applicable), will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputation, practices or conduct of Executive.
7. Confidentiality and Return of Company Property . Executive understands and agrees that as a condition of receiving the Severance Package in paragraph 1, all company property, with the exception of the Company-issued property listed in paragraph 1.2 of this Separation Agreement, must be returned to Company on or before the Separation Date. By signing this Separation Agreement, Executive represents and warrants that Executive will have returned to Company on or before the Separation Date, all Company property, data and information belonging to Company and agrees that Executive will not use or disclose to others any confidential or proprietary information of Company or the Released Parties. In addition, Executive agrees to keep the terms of this Separation Agreement confidential between Executive and Company, except that Executive may tell Executive’s immediate family and attorney or accountant, if any, as needed, but in no event should Executive discuss this Separation Agreement or its terms with any current or prospective Executive of Company.
8. Continuing Obligations . Executive agrees to abide by the terms and conditions of the surviving provisions of the Employment Agreement, which includes but is not limited to the arbitration and confidentiality provisions.
9. No Other Severance . Executive acknowledges and agrees that the Severance Package provided pursuant to this Separation Agreement is in lieu of any other severance benefits to which Executive may be eligible under any other agreement and/or severance plan or practice.
10. No Admissions . By entering into this Separation Agreement, the Released Parties make no admission that they have engaged, or are now engaging, in any unlawful conduct. The parties understand and acknowledge that this Separation Agreement is not an admission of liability and shall not be used or construed as such in any legal or administrative proceeding.
11. Older Workers’ Benefit Protection Act . This Separation Agreement is intended to satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f) (“OWBPA”). Executive is advised to consult with an attorney before executing this Separation Agreement.
11.1 Acknowledgments/Time to Consider . Executive acknowledges and agrees that (a) Executive has read and understands the terms of this Separation Agreement; (b) Executive has been advised in writing to consult with an attorney before executing this Separation Agreement; (c) Executive has obtained and considered such legal counsel as Executive deems necessary; (d) Executive has been given twenty-one (21) days to consider whether or not to enter into this Separation Agreement (although Executive may elect not to use the full 21-day period at Executive’s option); and (e) by signing this Separation Agreement, Executive acknowledges that Executive does so freely, knowingly, and voluntarily.
11.2 Waiver of Consideration Period . Executive waives the full 21-day period provided in paragraph 11.1 above.
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11.3 Revocation/Effective Dates . With respect to all claims released by this Separation Agreement, except the waiver of the ADEA Claims , this Separation Agreement shall become effective and enforceable on the day it is signed by Executive. Executive’s waiver of the ADEA Claims will become effective and enforceable on the eighth day after Executive signs this Separation Agreement. In other words, Executive may revoke Executive’s acceptance of this Separation Agreement as to the ADEA Claims within seven (7) days after the date Executive signs it. Executive’s revocation must be in writing and received by the Chairman of the Board by 5:00 p.m. Pacific Time on the seventh day in order to be effective. If Executive timely revokes, Executive’s ADEA Claims will survive the signing of this Separation, and Executive hereby agrees to immediately return to Company $6,000.00 of the Severance Payment, if the Severance Payment has already been made.
11.4 Preserved Rights of Executive . This Separation Agreement does not waive or release any rights or claims that Executive may have under the ADEA that arise after the execution of this Separation Agreement. In addition, this Agreement does not prohibit Executive from challenging the validity of this Separation Agreement’s waiver and release of claims under the ADEA.
12. Severability . In the event any provision of this Separation Agreement shall be found unenforceable, the unenforceable provision shall be deemed deleted and the validity and enforceability of the remaining provisions shall not be affected thereby.
13. Full Defense . This Separation Agreement may be pled as a full and complete defense to, and may be used as a basis for an injunction against, any action, suit or other proceeding that may be prosecuted, instituted or attempted by Executive in breach hereof.
14. Applicable Law . The validity, interpretation and performance of this Separation Agreement shall be construed and interpreted according to the laws of the United States of America and the State of California.
15. Successors and Assigns . This Separation Agreement is binding on Executive’s heirs, family members, executors, agents and assigns.
16. Counterparts . This Separation Agreement may be signed in counterparts, and each shall be treated as though signed as one document. An executed signature page of this Separation Agreement delivered by facsimile or PDF transmission shall be as effective as an original executed signature page.
17. Entire Agreement; Modification . This Separation Agreement, including the surviving provisions of the Employment Agreement previously executed by Executive and herein incorporated by reference, is intended to be the entire agreement between the parties and supersedes and cancels any and all other and prior agreements, written or oral, between the parties regarding this subject matter. This Separation Agreement may be amended only by a written instrument executed by all parties hereto.
[Remainder of Page Intentionally Left Blank]
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THE PARTIES TO THIS SEPARATION AGREEMENT HAVE READ THE FOREGOING SEPARATION AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS SEPARATION AGREEMENT ON THE DATES SHOWN BELOW.
| Dated: January 13, 2012 |
/s/ Gail A. Sloan |
|||||
| Gail A. Sloan | ||||||
| La Jolla Pharmaceutical Company | ||||||
| Dated: January 16, 2012 | By: |
/s/ Robert Fildes, Ph.D. |
||||
| Name: Robert Fildes, Ph.D. | ||||||
| Its: Chairman of the Board | ||||||
Signature Page to Confidential Separation Agreement and General Release of All Claims
Exhibit 10.4
LA JOLLA PHARMACEUTICAL COMPANY
January 19, 2012
George Tidmarsh, M.D., Ph.D.
Re: Offer of Employment
Dear George:
La Jolla Pharmaceutical Company (the “Company”) is pleased to offer you the full-time position of Chief Executive Officer and President. In conjunction with your employment, you will also serve as a member of the Board of Directors of the Company (the “Board”). Your anticipated starting date will be January 19, 2012, effective upon the Closing (as defined in the Asset Purchase Agreement by and between the Company and Solana Therapeutics, Inc., dated January 19, 2012) . This offer and your employment relationship will be subject to the terms and conditions of this letter.
If you decide to join us, your initial annual base salary will be $240,000, less applicable withholdings and deductions, paid in accordance with the Company’s normal payroll practices. Your annual base salary will be increased to $420,000 on the one-year anniversary of the date your employment commences (the “Employment Start Date”). Thereafter, you will be considered for annual increases in base salary in accordance with Company policy and subject to review and approval by the Compensation Committee of the Board.
In addition, on the date that is four weeks following the Conversion Price Adjustment Date (as defined in the Consent and Amendment Agreement by and among the Company and the Holders (as defined therein) and dated as of January 19, 2012) you will be granted an option to purchase a number of shares of common stock of the Company equal to 7.5% of the Company’s fully diluted shares (on an as-converted to common stock basis) outstanding on such date (the “First Option”) subject to the terms and conditions set forth in the La Jolla Pharmaceutical Company 2010 Equity Plan (the “Equity Plan”) and any applicable award agreements and other restrictions and limitations generally applicable to common stock of the Company or equity awards held by Company executives or otherwise imposed by law. Subject to applicable terms and conditions, the First Option shall vest with respect to 25% of the underlying shares on the one-year anniversary of the Employment Start Date and shall vest with respect to the remaining 75% of the underlying shares, monthly, in equal monthly installments, over the three years following the one-year anniversary of the Employment Start Date. The First Option will be exercisable at a price equal to the fair market value of a share of common stock of the Company on the date of the grant of the First Option.
On the two-year anniversary of the Employment Start Date, you will be granted an additional option to purchase a number of shares of common stock of the Company equal to 7.5% of the Company’s fully diluted shares (on an as-converted to common stock basis) outstanding on such date less the number of shares underlying the First Option on the First Option grant date (as adjusted for stock splits, stock dividends, combinations, recapitalizations, reclassifications or the like) (the “Second Option”), subject to the terms and conditions set forth in the Equity Plan and any applicable award agreement and other restrictions and limitations generally applicable to common stock of the Company or equity awards held by Company executives or otherwise imposed by law. Subject to applicable terms and conditions, the Second Option shall vest with respect to 50% of the underlying
shares, immediately on the date of the grant and shall vest with respect to the remaining 50% of the underlying shares, monthly, in equal monthly installments, over the two years thereafter. The Second Option will be exercisable at a price equal to the fair market value of a share of common stock of the Company on the date of the grant of the Second Option.
For clarity, during the time you are a member of the Board and also serving as the Company’s Chief Executive Officer and President, you will not be entitled to additional cash or equity compensation for Board-related services.
During your employment, you will be eligible to participate in any and all employee benefit plans made available by the Company from time to time to its executives generally, subject to plan terms and generally applicable Company policies. In addition to holidays observed by the Company, you will be eligible to earn and use vacation in accordance with the policies of the Company, as in effect from time to time. Your initial vacation accrual will be at the rate of four weeks per year. The Company reserves the right to change or eliminate its benefits on a prospective basis at any time.
You will be expected to devote your full business time and your best professional efforts, judgment, knowledge and skill exclusively to the performance of your duties and responsibilities for the Company and its affiliates, and to abide by all Company policies and codes of conduct, as in effect from time to time, provided, however, that you may engage in business activities with Anavex Therapeutics and Citizen’s Oncology Foundation, so long as you do not spend more than twenty (20) hours per month on activities relating to such entities and so long as your activities for such entities do not breach any terms of your employment or any policies of the Company. As Chief Executive Officer and President, you will be expected to perform the duties of your position and such other duties as may be assigned to you from time to time.
If you accept our offer, your employment with Company will be “at-will.” This means your employment is not for any specific period of time and can be terminated by you at any time for any reason. Likewise, the Company may terminate the employment relationship at any time, with or without cause or advance notice. In addition, the Company reserves the right to modify your position, duties or reporting relationship to meet business needs, and to use its managerial discretion in deciding on appropriate discipline when it deems circumstances so warrant. Any change to the at-will employment relationship must be by a specific, written agreement signed by you and Company’s Chairman of the Board.
This offer is contingent upon the following:
| • |
You signing and abiding by Company’s Proprietary Information, Nondisclosure, and Assignment Agreement (see enclosed); |
| • |
You signing the Company’s Mutual Agreement to Arbitrate (see enclosed); |
| • |
Your compliance with federal I-9 requirements (although you have three days to complete this process, please provide suitable documentation on your first day of work verifying your identity and legal authorization to work in the United States). |
This letter, including the enclosed Proprietary Information, Nondisclosure, and Assignment Agreement and Mutual Agreement to Arbitrate, constitutes the entire agreement between you and Company relating to this subject matter, and supersedes all prior or contemporaneous agreements, understandings, negotiations and representations, whether oral or written, express or implied, on this subject. This letter may not be modified or amended, and no breach is to be regarded as waived, unless agreed to in a specific, written agreement signed by you and Company’s Board. This letter shall be governed and construed in accordance with the laws of the State of California, without regard to the conflict of laws principles thereof.
To indicate your acceptance of Company’s offer on the terms and conditions set forth in this letter, please sign and date this letter in the space provided below and return it to our offices at 4370 La Jolla Village Drive, Suite 400, San Diego, CA 92122 or by email to gail.sloan@ljpc.com. If you do accept as provided, this letter will take effect as a binding agreement between you and the Company on the date it is received, provided that you sign, date and return the Company’s Proprietary Information, Nondisclosure, and Assignment Agreement and Mutual Agreement to Arbitrate and satisfy the other conditions set forth above in a timely manner.
We hope your employment with Company will prove mutually rewarding, and we look forward to having you join us. If you have any questions, please feel free to call me at (858) 646-6644.
Sincerely,
| /s/ Saiid Zarrabian |
| Saiid Zarrabian |
| Director |
* * *
Accepted and agreed:
| Dated January 19, 2012 | /s/ George Tidmarsh | |||||
| George Tidmarsh | ||||||