COCENSYS, INC.
SERIES D CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of October 13, 1997, by and between COCENSYS,
INC., a Delaware corporation (the "Company"), and ▇▇▇▇▇▇-▇▇▇▇▇▇▇ COMPANY, a
Delaware corporation ("Purchaser").
1. PURCHASE AND SALE
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties and agreements contained herein, the Company hereby
agrees to issue and sell to Purchaser, and Purchaser hereby agrees to purchase
from the Company, the aggregate number of shares of the Company's Series D
Convertible Preferred Stock (the "Preferred Stock") set forth in Subsections 1.1
and 1.4 hereof (the "Shares"). The terms of the Preferred Stock are set forth
in the Certificate of Designation annexed hereto as Exhibit A (the "Certificate
of Designation").
1.1 INITIAL SHARES. On the First Closing Date (as defined below),
the Company shall issue and sell to Purchaser, and Purchaser shall purchase
from the Company for $1,000,000 (the "Initial Purchase Price"), 14,286 shares
of Preferred Stock (the "Initial Shares").
1.2 FIRST CLOSING DATE. The closing of the sale and purchase of
the Initial Shares (the "First Closing") shall take place on October 14, 1997
(the "First Closing Date").
1.3 DELIVERY. At the First Closing, the Company will deliver to
Purchaser a certificate or certificates, in such denominations and registered
in such names as Purchaser may designate by notice to the Company,
representing the Initial Shares to be purchased by Purchaser from the
Company, dated the First Closing Date, against payment of the Initial
Purchase Price by wire transfer, a check made payable to the order of the
Company, or any combination thereof.
1.4 ADDITIONAL SHARES.
(a) On the Second Closing Date (as defined below), the
Company shall issue and sell to Purchaser, and Purchaser shall purchase from
the Company for $6,000,000 (the "Additional Purchase Price"), 85,714 shares
of Preferred Stock (the "Additional Shares").
1.5 SECOND CLOSING DATE. The closing of the sale and purchase of
the Additional Shares (the "Second Closing") shall take place on January 9,
1998 (the "Second Closing Date").
1.6 DELIVERY. At the Second Closing, the Company will deliver to
Purchaser a certificate or certificates, in such denominations and registered
in such name as Purchaser may designate by notice to the Company,
representing the Additional Shares to be purchased by Purchaser from the
Company, dated the Second Closing Date, against payment of the Additional
Purchase Price by wire transfer, a check made payable to the order of the
Company, or any combination of the above.
2. REGISTRATION RIGHTS.
The Company hereby grants to Purchaser the registration rights set
forth in this Section 2, with respect to the Registrable Securities (as
hereinafter defined) owned by Purchaser.
2.1 DEFINITIONS. As used in this Section 2:
(a) The term "Holder" or "Holders" shall mean (i) Purchaser
and (ii) any other person holding or having the right to acquire Registrable
Securities to whom these registration rights have been transferred pursuant
to Subsection 2.7 hereof.
(b) The terms "register," "registered," and "registration"
refer to a registration effected by filing with the Securities and Exchange
Commission (the "SEC") a registration statement (the "Registration
Statement") in compliance with the Securities Act of 1933, as amended (the
"1933 Act") and the declaration or ordering by the SEC of the effectiveness
of such Registration Statement.
(c) The term "Registrable Securities" means (i) the shares of
Common Stock of the Company issued upon conversion of the Shares (the
"Conversion Shares") in accordance with the Certificate of Designation and
(ii) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right, or other security that is
issued as) a dividend or other distribution with respect to, or in exchange
or in replacement of, the Conversion Shares; PROVIDED, HOWEVER, that
Registrable Securities shall cease to be Registrable Securities when they may
be sold pursuant to Rule 144 under the 1933 Act. In the event of any
recapitalization by the Company, whether by stock split, reverse stock split,
stock dividend or the like, the number of shares of Registrable Securities
shall be proportionately increased or decreased.
2.2 REGISTRATION.
(a) REGISTRATION. If at any time or from time to time the
Company shall determine to register any of its securities for its own
account, other than a registration relating solely to employee benefit plans
or a registration on Form S-4 relating solely to an SEC Rule 145 transaction,
the Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 calendar days after receipt of
such written notice from the Company, by any Holder or Holders, except as set
forth in Subsection 2.2(b) below.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part of the written notice given
pursuant to Subsection 2.2(a)(i). In such event the right of any Holder to
registration pursuant to this Section 2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall, together with the Company and any other parties
distributing their securities through such underwriting, enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Subsection 2.2, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities
to be included in the registration and underwriting, or may exclude
Registrable Securities entirely from such registration and underwriting
subject to the terms of this paragraph. The Company shall so advise all
holders of the Company's securities that would otherwise be registered and
underwritten pursuant hereto, and the number of shares of such securities,
including Registrable Securities, that may be included in the registration
and underwriting shall be allocated in the following manner: shares, other
than Registrable Securities and other securities carrying registration
rights, requested to be included in such registration by stockholders shall
be excluded and if a limitation on the number of shares is still required,
the number of securities that may be included shall first be allocated among
the holders of piggyback registration rights having priority over those set
forth herein, if any, in proportion, as nearly as practicable, to the
respective amounts of such securities held by such holders and then shall be
allocated among the Holders and holders of securities having PARI PASSU
registration rights, if any, in proportion, as nearly as possible, to the
respective amounts of such securities held by each such holder, in each case
at the time of filing the Registration Statement. In the event of any
underwriter cutback, if any selling stockholder which is a Holder of
Registrable Securities is a partnership or corporation, the partners, retired
partners and stockholders of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a single "selling Holder",
and any pro rata reduction with respect to such "selling Holder" shall be
based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "selling Holder", as defined
in this sentence. No securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such
registration. If any Holder disapproves of the terms of the underwriting, it
may elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration.
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2.3 EXPENSES OF REGISTRATION. All expenses incurred in connection
with a registration effected pursuant to Subsection 2.2, including without
limitation all registration, filing, and qualification fees (including blue
sky fees and expenses), printing expenses, escrow fees, fees and
disbursements of counsel for the Company and, if there are more than two (2)
participating Holders, of one special counsel for the participating Holders,
and expenses of any special audits incidental to or required by such
registration (collectively, "Registration Expenses"), shall be borne by the
Company; PROVIDED, HOWEVER, that the term Registration Expenses shall not
include, and in no event will the Company be obligated to pay, stock transfer
taxes or underwriters' discounts or commissions relating to Registrable
Securities.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its diligent best efforts
to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days or until the Holder or Holders have completed the distribution relating
thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
is required to be delivered
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under the 1933 Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 2, if such
securities are being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i)
an opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the
independent accountants of the Company, in form and substance as is
customarily given by independent accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
2.5 INDEMNIFICATION.
(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Holder of Registrable Securities, each of such
Holder's officers, directors, partners and agents, and each person
controlling such Holder, with respect to any registration, qualification, or
compliance effected pursuant to this Section 2, and each underwriter, if any,
and each person who controls any underwriter, of the Registrable Securities
held by or issuable to such Holder, against all claims, losses, damages, and
liabilities (or actions in respect thereto) to which they may become subject
under the 1933 Act, the Securities Exchange Act of 1934, as amended, (the
"1934 Act"), or other federal or state law (including common law) arising out
of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or other
similar document (including any related Registration Statement, notification,
or the like) incident to any such registration, qualification, or compliance,
or based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any violation or alleged violation by the
Company of any federal, state or common law rule or regulation applicable to
the Company in connection with any such registration, qualification, or
compliance, and will reimburse, as incurred, each such Holder, each such
underwriter, and each such director, officer, partner, agent and controlling
person, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action; provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or
expense, arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an
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instrument duly executed by such Holder or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification, or
compliance, indemnify the Company, each of its directors, and each officer
who signs a Registration Statement in connection therewith, and each person
controlling the Company, each underwriter, if any, and each person who
controls any underwriter, of the Company's securities covered by such a
Registration Statement, and each other Holder, each of such other Holder's
officers, partners, directors and agents and each person controlling such
other Holder, against all claims, losses, damages, and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
Registration Statement, prospectus, offering circular, or other document, or
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, the Company, each such
underwriter, each such other Holder, and each such director, officer,
partner, and controlling person, for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) was made in such Registration Statement,
prospectus, offering circular, or other document, in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
In no event will any Holder be required to enter into any agreement or
undertaking in connection with any registration under this Section 2
providing for any indemnification or contribution obligations on the part of
such Holder greater than such Holder's obligations under this Subsection 2.5.
(c) Each party entitled to indemnification under this
Subsection 2.5 (the "Indemnified Party") shall give notice to the party
required to provide such indemnification (the "Indemnifying Party") of any
claim as to which indemnification may be sought promptly after such
Indemnified Party has actual knowledge thereof, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be subject to
approval by the Indemnified Party (whose approval shall not be reasonably
withheld) and the Indemnified Party may participate in such defense at the
Indemnifying Party's expense if representation of such Indemnified Party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding; and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 2, except to the extent that such
failure to give notice shall materially adversely affect the Indemnifying
Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent
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of each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff therein, to such Indemnified Party, of a release
from all liability in respect to such claim or litigation.
2.6 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and
as shall be required in connection with any registration, qualification, or
compliance referred to in this Section 2.
2.7 TRANSFER OF REGISTRATION RIGHTS. The rights contained in this
Section 2 to cause the Company to register the Registrable Securities, may be
assigned or otherwise conveyed to any affiliate (as such term is defined in
Rule 405 under the ▇▇▇▇ ▇▇▇) of Purchaser who is a transferee or assignee of
Registrable Securities, who shall be considered a "Holder" for purposes of
this Section 2, provided that the Company is given written notice by
Purchaser, at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee and identifying
the securities with respect to which such registration rights are being
assigned.
2.8 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 2.
2.9 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to
use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the 1933 Act ("Rule 144")
or any similar or analogous rule promulgated under the 1933 Act, as long as
Registrable Securities are outstanding;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the 1933 Act and 1934 Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 and
of the 1934 Act; a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it
to sell any such securities without registration or pursuant to a
registration on Form S-3.
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(d) Take all such action (including without limitation the
furnishing of the information described in Rule 144(d)(4)) as may be
necessary or helpful to facilitate a sale of Registrable Securities by a
Holder to a "qualified institutional buyer," as such term is defined in Rule
144A of the ▇▇▇▇ ▇▇▇.
2.10 "MARKET STAND-OFF" AGREEMENT. Purchaser hereby agrees that
during the ninety (90)-day period following the effective date of a
registration statement of the Company filed under the 1933 Act, it shall not,
to the extent requested by the Company or any underwriter, sell or otherwise
transfer or dispose of any Common Stock of the Company held by it at any time
during such period (except Common Stock included in such registration);
PROVIDED, HOWEVER, that:
(a) Such agreement shall be applicable only to registration
statements of the Company which cover Common Stock (or other securities) to
be sold on its behalf to the public;
(b) Such Agreement shall be applicable only if Purchaser
holds at least one percent (1%) of the Common Stock of the Company then
outstanding; and
(c) All officers and directors of the Company enter into
similar agreements.
The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restriction until the end of such period.
The agreement of the Purchaser set forth in this Section 2.10 shall lapse
three (3) years after the Second Closing provided that Purchaser is not at
such time an affiliate of the Company (as defined in Rule 405 under the 1933
Act), in which case such restrictions shall lapse at such time as Purchaser
ceases to be an affiliate.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as otherwise set forth on the Schedule of Exceptions which
is attached hereto as Exhibit B and which shall contain section numbers
specifically corresponding to the section numbers in this Agreement, the
Company hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has full power and authority to own
and operate its properties and assets and to carry on its business as
presently conducted and as proposed to be conducted. The Company is
qualified as a foreign corporation to do business in each jurisdiction in the
United States in which the ownership of its property or the conduct of its
business requires such qualification, except where any statutory fines or
penalties or any corporate disability imposed for the failure to
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qualify would not materially or adversely affect the Company, its assets,
financial condition or operations.
3.2 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of
all the Company's obligations hereunder and thereunder, and for the
authorization, issuance, sale and delivery of the Shares has been taken or
will be taken prior to each of the First Closing and the Second Closing,
respectively. This Agreement, when executed and delivered, shall constitute
a valid and legally binding obligation of the Company in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors.
3.3 VALIDITY OF SHARES AND CONVERSION SHARES. The sale of the
Shares is not and will not be subject to any preemptive rights or rights of
first refusal that have not been waived and, when issued, sold and delivered
in compliance with the provisions of this Agreement and the Certificate of
Designation, the Shares and the Conversion Shares will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances;
PROVIDED, HOWEVER, that the Shares and the Conversion Shares may be subject
to restrictions on transfer under state and/or federal securities laws and
the Shares may be subject to additional restrictions on transfer, in each
case as set forth herein or as otherwise required by such laws at the time a
transfer is proposed.
3.4 OFFERING. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 4.3 hereof on the date hereof
and on each of the First Closing Date and Second Closing Date, the offer,
issue, and sale of the Initial Shares and the Additional Shares are and will
be exempt from the registration and prospectus delivery requirements of the
1933 Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or
qualification requirements of all applicable state securities laws.
3.5 FULL DISCLOSURE. The Company has furnished to Purchaser the
following documents, and the Company warrants that the information contained
in such documents, as of their respective dates (or if amended, as of the
date of such amendment), did not contain any untrue statement of a material
fact, and did not omit to state any material fact necessary to make any
statement, in light of the circumstances under which such statement was made,
not misleading:
(a) The Company's annual report on Form 10-K as amended by
Form 10-K/A for the fiscal year ended December 31, 1996; the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30,
1997; and the Company's Current Report on Form 8-K dated June 12, 1997.
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(b) All other documents subsequently filed by the Company
with the SEC pursuant to the reporting requirements of the 1934 Act.
3.6 VOTING ARRANGEMENTS. To the best of the Company's knowledge,
there are no outstanding stockholder agreements, voting trusts, proxies or
other arrangements or understandings among the stockholders of the Company
relating to the voting of their respective shares.
3.7 NO CONFLICT; NO VIOLATION. The execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby will not (a) conflict with any provisions of the Amended
and Restated Certificate of Incorporation or Bylaws of the Company, in each
case as amended to date; (b) result in any violation of or default or loss of
a benefit under, or permit the acceleration of any obligation under (in each
case, upon the giving of notice, the passage of time, or both) any mortgage,
indenture, lease, agreement or other instrument, permit, franchise, license,
judgment, order, decree, law, ordinance, rule or regulation applicable to the
Company or its properties.
3.8 CONSENTS AND APPROVALS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations,
declarations, or filings with, any governmental authority, required on the
part of the Company in connection with the valid execution and delivery of
this Agreement, the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby have been obtained,
or will be effective at the First Closing or the Second Closing, as
applicable, except for notices required or permitted to be filed with certain
state and federal securities commissions after the First Closing or the
Second Closing, as the case may be; which notices will be filed on a timely
basis.
3.9 ABSENCE OF CERTAIN DEVELOPMENTS. Since June 30, 1997, the
Company has not (a) incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business, consistent
with past practices; (b) mortgaged, pledged or subjected to lien, charge or
any other encumbrance any of its assets, tangible or intangible; (c) sold,
assigned or transferred any of its assets or canceled any debts or
obligations except in the ordinary course of business, consistent with past
practices; (d) suffered any extraordinary losses, or waived any rights of
substantial value; (e) entered into any material transaction other than in
the ordinary course of business, consistent with past practices; or (f)
otherwise had any material change in its condition, financial or otherwise,
except for changes in the ordinary course of business, consistent with past
practices, none of which individually or in the aggregate has been materially
adverse.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
4.1 LEGAL POWER. It has the requisite legal power to enter into
this Agreement, to purchase the Shares hereunder, and to carry out and
perform its obligations under the terms of this Agreement.
4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by it, and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of it.
4.3 INVESTMENT REPRESENTATIONS.
(a) It is acquiring the Shares, and intends to acquire the
Conversion Shares, for its own account, not as nominee or agent, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the 1933 Act.
(b) It understands that (i) the Shares have not been and,
when issued, the Conversion Shares will not be, registered under the 1933 Act
by reason of a specific exemption therefrom, that they must be held by it
indefinitely, and that it must, therefore, bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is
registered under the 1933 Act or is exempt from such registration; (ii) each
certificate representing the Shares and the Conversion Shares will be
endorsed with the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) PURSUANT TO
SEC RULE 144 OR (B) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 ACT COVERING SUCH SECURITIES OR (C) THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT."
(iii) certificate representing the Shares also will be
endorsed with the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR
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HYPOTHECATED UNLESS THE TRANSFEREE IS AN AFFILIATE OF THE HOLDER
WITHIN THE MEANING OF RULE 144 UNDER THE 1933 ACT;
and (iv) the Company will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legend are satisfied.
Purchaser shall have the right to demand removal of the foregoing
legend with respect to any or all of the Shares if, in the opinion of counsel to
the Company, removal of such legend is permitted by the rules and regulations of
the SEC.
(c) It has been furnished with such materials and has been
given access to such information relating to the Company as it or its
qualified representative has requested and it has been afforded the
opportunity to ask questions regarding the Company and the Shares, all as it
has found necessary to make an informed investment decision.
(d) It is an "accredited investor" within the meaning of
Regulation D under the 1933 Act.
(e) It was not formed for the specific purpose of acquiring
the Shares or the Conversion Shares offered hereunder.
5. CONDITIONS TO FIRST CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to purchase the Initial Shares at the First Closing is subject to
the fulfillment, at or prior to the First Closing, of all of the following
conditions, any of which may be waived by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects on the
date of the First Closing with the same force and effect as if they had been
made on and as of said date; the business and assets of the Company shall not
have been adversely affected in any material way prior to the First Closing;
and the Company shall have performed all obligations and conditions herein
required to be performed by it on or prior to the First Closing.
(b) OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have
received from ▇▇▇▇▇▇ Godward LLP, counsel to the Company, an opinion letter
substantially in the form attached hereto as Exhibit C, addressed to it,
dated the date of the First Closing.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in
12
substance and form to Purchaser and its special counsel, and Purchaser and
its special counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory
body of the United States or of any state that are required in connection
with the lawful sale and issuance of the Initial Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of
the First Closing. No stop order or other order enjoining the sale of the
Initial Shares shall have been issued and no proceedings for such purpose
shall be pending or, to the knowledge of the Company, threatened by the SEC
or any commissioner of corporations or similar officer of any other state
having jurisdiction over this transaction. At the time of the First Closing,
the sale and issuance of the Initial Shares shall be legally permitted by all
laws and regulations to which Purchaser and the Company are subject.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered
to Purchaser a Certificate, executed by the President of the Company, dated
the date of the First Closing, certifying to the fulfillment of the
conditions specified in subparagraphs (a) and (d) of this Subsection 5.1.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Initial Shares at the First Closing is
subject to the fulfillment to the Company's satisfaction, on or prior to the
First Closing, of the following conditions, any of which may be waived by the
Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Purchaser in Section 4 hereof shall be true and
correct at the date of the First Closing, with the same force and effect as
if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by it on or before the First Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory
body of the United States or of any state that are required in connection
with the lawful sale and issuance of the Initial Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of
the First Closing. No stop order or other order enjoining the sale of the
Initial Shares shall have been issued and no proceedings for such purpose
shall be pending or, to the knowledge of the Company, threatened by the SEC
or any commissioner of corporations or similar officer of any state having
jurisdiction over this transaction. At the time of the First Closing, the
sale and issuance of the Initial Shares shall be legally permitted by all
laws and regulations to which Purchaser and the Company are subject.
13
6. CONDITIONS TO SECOND CLOSING.
6.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to purchase the Additional Shares at the Second Closing is subject
to the fulfillment, at or prior to the Second Closing, of all of the
following conditions, any of which may be waived by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects on the
date of the Second Closing with the same force and effect as if they had been
made on and as of said date; the business and assets of the Company shall not
have been adversely affected in any material way prior to the Second Closing;
and the Company shall have performed all obligations and conditions herein
required to be performed by it on or prior to the Second Closing.
(b) OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have
received from ▇▇▇▇▇▇ Godward LLP, counsel to the Company, an opinion letter
substantially in the form attached hereto as Exhibit C, addressed to it,
dated the date of the Second Closing.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Second
Closing hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to
Purchaser and its special counsel, and Purchaser and its special counsel
shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory
body of the United States or of any state that are required in connection
with the lawful sale and issuance of the Additional Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of
the Second Closing. No stop order or other order enjoining the sale of the
Additional Shares shall have been issued and no proceedings for such purpose
shall be pending or, to the knowledge of the Company, threatened by the SEC
or any commissioner of corporations or similar officer of any other state
having jurisdiction over this transaction. At the time of the Second
Closing, the sale and issuance of the Additional Shares shall be legally
permitted by all laws and regulations to which Purchaser and the Company are
subject.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Certificate, executed by the President of the Company, dated the
date of the Second Closing, certifying to the fulfillment of the conditions
specified in subparagraphs (a) and (d) of this Subsection 6.1.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Additional Shares at the Closing is subject
to the fulfillment to the Company's satisfaction, on or prior to the Second
Closing, of the following conditions, any of which may be waived by the
Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Purchaser in Section 4 hereof shall be true and
correct at the date of the Second Closing, with the same force and effect as
if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by it on or before the Second Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory
body of the United States or of any state that are required in connection
with the lawful sale and issuance of the Additional Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of
the Second Closing. No stop order or other order enjoining the sale of the
Additional Shares shall have been issued and no proceedings for such purpose
shall be pending or, to the knowledge of the Company, threatened by the SEC
or any commissioner of corporations or similar officer of any state having
jurisdiction over this transaction. At the time of the Second Closing, the
sale and issuance of the Additional Shares shall be legally permitted by all
laws and regulations to which Purchaser and the Company are subject.
7. COVENANT
Each of the Company and Purchaser agree that, prior to any conversion
of the Preferred Stock in accordance with the Certificate of Designation, it
shall have observed, if applicable, the pre-merger notification and waiting
periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the
State of California.
8.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder as of the date of such certificate or
instrument.
15
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators
of the parties hereto.
8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and no party shall be liable or bound to any other party in any manner
by any representations, warranties, covenants, or agreements except as
specifically set forth herein or therein. Nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the parties
hereto and their respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided herein.
8.5 SEPARABILITY. In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality,
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
8.6 AMENDMENT AND WAIVER. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely),
with the written consent of the Company and the holders of not less than a
majority-in-interest of the aggregate of outstanding Initial Shares and
Additional Shares. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon Purchaser, each future holder of the Initial
Shares and the Additional Shares, and the Company. Upon the effectuation of
each such amendment or waiver, the Company shall promptly give written notice
thereof to the record holders of the Initial Shares and the Additional Shares
who have not previously consented thereto in writing, if any.
8.7 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power, or remedy accruing to Purchaser or any subsequent holder of any
Initial Shares or Additional Shares upon any breach, default or noncompliance
of the Company under this Agreement, shall impair any such right, power, or
remedy, nor shall it be construed to be a waiver of any such breach, default
or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on Purchaser's
part of any breach, default or noncompliance under this Agreement or any
waiver on Purchaser's part of any provisions or conditions of this Agreement
must be in writing and shall be effective only to the extent specifically set
forth in such writing, and that all remedies, either under this Agreement, by
law, or otherwise afforded to Purchaser, shall be cumulative and not
alternative.
16
8.8 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed effectively
given (a) upon personal delivery, (b) on report of successful transmission by
facsimile machine that automatically generates a printed diagnostic report,
indicating whether transmission was completed successfully, at the conclusion
of each transmission, (c) on the first business day after receipted delivery
to a courier service which guarantees next business-day delivery, under
circumstances in which such guaranty is applicable, or (d) on the earlier of
delivery or five (5) business days after mailing by United States certified
by mail, postage and fees prepaid, to the appropriate party at the address
set forth below or to such other address as the part so notifies the other in
writing:
(a) if to the Company, to:
COCENSYS, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
with a copy to:
▇▇▇▇▇▇ GODWARD LLP
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(b) if to Purchaser, to:
▇▇▇▇▇▇-▇▇▇▇▇▇▇ COMPANY
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Vice President and General Counsel
Notwithstanding the foregoing, all notices and other communications
to an address outside of the United States shall be sent by telecopy and
confirmed in writing to be sent by first class mail.
8.9 FINDER'S FEES.
(a) The Company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated
by this Agreement and (ii) hereby agrees to indemnify and to hold Purchaser
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm
17
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its employees or representatives
is responsible.
(b) Purchaser (iii) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated
by this Agreement, and (iv) hereby agrees to indemnify and to hold the
Company harmless of and from any liability for any commission or compensation
in the nature of a finder's fee to any broker or other person or firm (and
the costs and expenses of defending against such liability or asserted
liability) for which Purchaser or any of its employees or representatives are
responsible.
8.10 FEES AND EXPENSES. The Company agrees to pay all fees, costs
and expenses relating to this Agreement and the transactions contemplated
hereby. If legal action is brought by, or on behalf of, Purchaser to enforce
or interpret this Agreement, the prevailing party shall be entitled to
recover its attorneys' fees and legal costs in connection therewith.
8.11 INFORMATION CONFIDENTIAL. Purchaser acknowledges that the
information received by it pursuant hereto is confidential and for
Purchaser's use only, and it will refrain from using such information or
reproducing, disclosing, or disseminating such information to any other
person (other than its employees, affiliates, agents, or partners having a
need to know the contents of such information and its attorneys, in each case
who agree to be bound by this Section 7.11), except in connection with the
exercise of rights under this Agreement, unless such information is available
to the public generally or it is required by a governmental body to disclose
such information.
8.12 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
The foregoing Agreement is hereby executed as of the date
first above written.
COCENSYS, INC. ▇▇▇▇▇▇-▇▇▇▇▇▇▇ COMPANY
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ By: /s/
-------------------------------- -------------------------------------
F. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ph.D. Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
President and Chief Title: Vice President and Chairman,
Executive Officer ▇▇▇▇▇-▇▇▇▇▇ Pharmaceutical Research
Division, ▇▇▇▇▇▇-▇▇▇▇▇▇▇ Company
18
EXHIBIT A
CERTIFICATE OF DESIGNATION
[filed separately]
EXHIBIT B
SCHEDULE OF EXCEPTIONS
3.9 On October 9, 1997, the Company sold its Pharmaceutical Sales and
Marketing Division to ▇▇▇▇▇▇ Laboratories, Inc., a wholly owned subsidiary of
▇▇▇▇▇▇ Pharmaceuticals, Inc. The Company received $6 million upon the
closing of the transaction, and may receive up to an additional $3 million,
contingent upon the occurrence of certain events.
EXHIBIT C
FORM OF OPINION
October __, ▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇▇▇▇ Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: SALE AND PURCHASE OF COCENSYS, INC. SERIES D CONVERTIBLE PREFERRED STOCK
Gentlemen:
We have acted as counsel for CoCensys, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale of ____________ shares
of the Company's Series D Convertible Preferred Stock to ▇▇▇▇▇▇-▇▇▇▇▇▇▇
Company, a Delaware corporation ("Purchaser"), pursuant to the terms of that
certain Series D Convertible Preferred Stock Purchase Agreement, dated
October __, 1997, by and between the Company and Purchaser (the "Agreement").
The shares of Series D Convertible Preferred Stock issued to Purchaser at
the closing (the "Closing") are referred to herein as the "Shares". We are
rendering this opinion pursuant to Section [5][6].1(b) of the Agreement.
Except as otherwise defined herein, capitalized terms used but not defined
herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the parties thereto and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we
render an opinion "to the best of our knowledge" or concerning an item "known
to us" or our opinion otherwise refers to our knowledge, it is based solely
upon (i) an inquiry of attorneys within this firm who perform legal services
for the Company, (ii) receipt of a certificate executed by an officer of the
Company covering such matters, and (iii) such other investigation, if any,
that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity
of all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents where authorization, execution and delivery are
prerequisites to the effectiveness of such documents (except the due
authorization, execution and delivery of the Agreement by the Company). We
have also assumed: that all individuals executing and delivering documents
had the legal capacity to so execute and deliver; that you have received all
documents you were to receive under the Agreement; that the Agreement is an
obligation binding upon you; if you are a corporation or other entity, that
you have filed any required California franchise or income tax returns and
have paid any required California franchise or income taxes; and that there
are no extrinsic agreements or understandings
among the parties to the Agreement that would modify or interpret the terms
of the Agreement or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to
whether the laws of any particular jurisdiction apply, and no opinion to the
extent that the laws of any jurisdiction other than those identified above
are applicable to the subject matter hereof. We are not rendering any
opinion as to compliance with (a) any antifraud law, rule or regulation
relating to securities, or to the sale or issuance thereof or (b) federal
antitrust laws.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own or lease
its property and assets and to conduct its business as it is currently being
conducted and, to the best of our knowledge, is qualified as a foreign
corporation to do business in each jurisdiction in the United States in which
the ownership of its property or the conduct of its business requires such
qualification and where any statutory fines or penalties or any corporate
disability imposed for the failure to qualify would materially or adversely
affect the Company, its assets, financial condition or operations.
3. The Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
except as rights to indemnity under Section 3.5 of the Agreement may be
limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
4. The Shares have been duly authorized and, upon issuance and
delivery in accordance with the terms of the Agreement, will be validly
issued, fully paid and nonassessable.
5. The issuance and sale of the Shares as contemplated by the
Agreement does not violate any provision of the Company's Amended and
Restated Certificate of Incorporation or Bylaws and does not violate or
contravene (a) any governmental statute, rule or regulation applicable to the
Company or (b) any order, writ, judgment, injunction, decree, determination
or award which has been entered against the Company and of which we are
aware, the violation or contravention of which would materially and adversely
affect the Company, its assets, financial condition or operations.
6. All consents, approvals, authorizations, or orders of, and
filings, registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the issuance and sale of
the Shares as contemplated by the Agreement, have been made or obtained.
7. The issuance and sale of the Shares as contemplated by the
Agreement is exempt from the registration requirements of the Securities Act
of 1933, as amended.
This opinion is intended solely for your benefit and is not to be made
available to or be relied upon by any other person, firm, or entity without
our prior written consent.
Very truly yours,
▇▇▇▇▇▇ GODWARD LLP
By
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