WARRANT AGREEMENT To Purchase Shares of Common Stock of Cempra, Inc. Dated as of May 31, 2013 (the “Effective Date”)
Exhibit 4.9
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
To Purchase Shares of Common Stock of
Dated as of May 31, 2013 (the “Effective Date”)
WHEREAS, Cempra, Inc., a Delaware corporation, has entered into a Loan and Security Agreement dated as of December 20, 2011, as amended, supplemented or otherwise modified (the “Loan Agreement”) with Hercules Technology Growth Capital, Inc., a Maryland corporation (the “Warrantholder”), and Hercules Capital Funding Trust 2012-1;
WHEREAS, the Company (as defined below) desires to grant to Warrantholder, in consideration for, among other things, the financial accommodations provided for in the Loan Agreement, the right to purchase shares of Common Stock (as defined below) pursuant to this Warrant Agreement (the “Agreement”);
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering the Loan Agreement and providing the financial accommodations contemplated therein, and in consideration of the mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:
SECTION 1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from the Company, an aggregate number of fully paid and non-assessable shares of the Common Stock equal to the quotient derived by dividing (a) $609,533 by (b) the Exercise Price (defined below). As used herein, the following terms shall have the following meanings:
“Act” means the Securities Act of 1933, as amended.
“Company” means Cempra, Inc., a Delaware corporation, and any successor or surviving entity that assumes the obligations of the Company under this Agreement pursuant to Section 8(a).
“Charter” means the Company’s Certificate of Incorporation or other constitutional document, as may be amended from time to time.
“Common Stock” means the Company’s common stock, $0.001 par value per share.
“Exercise Price” means the lower of (a) $6.11 and (b) the effective price per share of Common Stock issued or issuable (whether upon conversion, exercise or otherwise) in any Financing, in each case subject to adjustment pursuant to Section 8.
“Financing” means any offering of equity or equity-linked securities by the Company, occurring within three months before, or within twelve months after, the Effective Date, which offering was effected principally for equity or debt financing purposes.
“Merger Event” means any sale, lease or other transfer of all or substantially all assets of the Company or any merger or consolidation involving the Company in which the Company is not the surviving entity, or in which the outstanding shares of the Company’s capital stock are otherwise converted into or exchanged for shares of capital stock, other securities or property of another entity;
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“Registration Statement” means any registration statement filed by the Company with the SEC that (a) covers the public resale by the Warrantholder of the shares of Common Stock issuable upon exercise of the purchase rights under this Warrant on a continuous or delayed basis pursuant to Rule 415 (or any similar or successor rule), if available, under the Act, and (b) contains a prospectus relating to the shares of Common Stock issuable upon exercise of the purchase rights under this Agreement in form and substance (including, without limitation, any sections describing the plan of distribution) satisfactory to the Warrantholder (a “Prospectus”, which term shall include any prospectus supplement thereto).
“Purchase Price” means, with respect to any exercise of this Agreement, an amount equal to the Exercise Price as of the relevant time multiplied by the number of shares of Common Stock requested to be exercised under this Agreement pursuant to such exercise.
“SEC” means the Securities and Exchange Commission.
SECTION 2. TERM OF THE AGREEMENT.
Except as otherwise provided for herein, the term of this Agreement and the right to purchase Common Stock as granted herein (the “Warrant”) shall commence on the Effective Date and shall be exercisable for a period ending upon: (a) the date that is ten (10) years from the Effective Date, or (b) the consummation of a Merger Event in which the holders of Common Stock receive cash or cash equivalents in such transaction with an aggregate value per share of Common Stock that is greater than two times the Exercise Price.
SECTION 3. EXERCISE OF THE PURCHASE RIGHTS.
(a) Exercise. The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the Purchase Price in accordance with the terms set forth below, and in no event later than three (3) days thereafter, the Company shall issue to the Warrantholder the number of shares of Common Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases, if any. Any shares issued upon exercise of this Warrant shall be delivered electronically by credit to the Warrantholder’s or its designee’s balance account with The Depository Trust Company through its the Deposit Withdrawal Agent Commission (DWAC) system unless a registration statement covering the resale of such shares and naming the Warrantholder as a selling stockholder thereunder is not then effective and such shares are not then otherwise freely transferable without restriction under Rule 144, in which case the Warrantholder shall receive a certificate for the Warrant Shares issuable upon such exercise with appropriate restrictive legends.
The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant for shares of Common Stock to be exercised under this Agreement and, if applicable, an amended Agreement representing the remaining number of shares purchasable hereunder, as determined below (“Net Issuance”). If the Warrantholder elects the Net Issuance method, the Company will issue Common Stock in accordance with the following formula:
| X | = | Y(A-B) | ||
| A |
| Where: | X = | the number of shares of Common Stock to be issued to the Warrantholder. | ||
| Y = | the number of shares of Common Stock requested to be exercised under this Agreement. | |||
| A = | the fair market value of one (1) share of Common Stock at the time of issuance of such shares of Common Stock. | |||
| B = | the Exercise Price. | |||
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For purposes of the above calculation, the fair market value of Common Stock shall mean with respect to each share of Common Stock:
(i) if the Common Stock is traded on a United States securities exchange, the fair market value shall be deemed to be the average of the closing prices over a five (5) day period ending three (3) days before the day the current fair market value of the Common Stock is being determined; or
(ii) if the Common Stock is not traded on a United States securities exchange but is quoted on an established over-the-counter market in the United States, the fair market value shall be deemed to be the average of the closing bid and asked prices as quoted on such market over the five (5) day period ending three (3) days before the day the fair market value of the Common Stock is being determined;
(iii) if at any time the Common Stock is not listed on any United States securities exchange or quoted on an established automated over-the-counter market in the United States, the fair market value of Common Stock shall be the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors, unless the Company shall become subject to a Merger Event, in which case the fair market value of Common Stock shall be deemed to be the per share value received by the holders of the Common Stock pursuant to such Merger Event.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.
(b) Exercise Prior to Expiration. To the extent this Agreement is not previously exercised as to all Common Stock subject hereto, and if the fair market value of one share of the Common Stock is greater than the Exercise Price then in effect, this Agreement shall be deemed automatically exercised on a Net Issuance basis pursuant to Section 3(a) (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of the Common Stock upon such expiration shall be determined pursuant to Section 3(a). To the extent this Agreement or any portion thereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of shares of Common Stock, if any, the Warrantholder is to receive by reason of such automatic exercise.
SECTION 4. RESERVATION OF SHARES.
During the term of this Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase Common Stock as provided for herein.
SECTION 5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.
SECTION 6. NO RIGHTS AS STOCKHOLDER.
This Agreement does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company prior to the exercise of this Agreement.
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SECTION 7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the registered holder of this Agreement. Warrantholder’s initial address, for purposes of such registry, is set forth below Warrantholder’s signature on this Agreement. Warrantholder may change such address by giving written notice of such changed address to the Company.
SECTION 8. ADJUSTMENT RIGHTS.
The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger Event. Except as provided in Section 2, if at any time there shall be a Merger Event, then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of this Agreement, the number of shares of capital stock or other securities or property (collectively, “Reference Property”) that the Warrantholder would have received in connection with such Merger Event if Warrantholder had exercised this Agreement immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Agreement with respect to the rights and interests of the Warrantholder after the Merger Event to the end that the provisions of this Agreement (including adjustments of the Exercise Price and number of shares of Common Stock purchasable and adjustments to ensure that the provisions of this Section 8 shall thereafter be applicable, as nearly as possible, to the purchase rights under this Agreement in relation to any Reference Property thereafter acquirable upon exercise of such purchase rights) shall continue to be applicable in their entirety, and to the greatest extent possible. Without limiting the foregoing, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of this Agreement. In connection with a Merger Event and upon Warrantholder’s written election to the Company, the Company shall cause this Warrant Agreement to be exchanged for the consideration that Warrantholder would have received if Warrantholder chose to exercise its right to have shares issued pursuant to the Net Issuance provisions of this Warrant Agreement without actually exercising such right, acquiring such shares and exchanging such shares for such consideration. The provisions of this Section 8(a) shall similarly apply to successive Merger Events.
(b) Reclassification of Shares. Except for Merger Events subject to Section 8(a), if the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Agreement exist into the same or a different number of securities of any other class or classes, this Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. The provisions of this Section 8(b) shall similarly apply to successive combinations, reclassifications, exchanges, subdivisions or other changes.
(c) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide the Common Stock, (i) in the case of a subdivision, the Exercise Price shall be proportionately decreased, and the number of shares of Common Stock issuable upon exercise of this Agreement shall be proportionately increased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased, and the number of shares of Common Stock issuable upon exercise of this Agreement shall be proportionately decreased.
(d) Stock Dividends. If the Company at any time while this Agreement is outstanding and unexpired shall:
(i) pay a dividend with respect to the Common Stock payable in shares of Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such
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date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution; or
(ii) make any other distribution with respect to Common Stock, except any distribution specifically provided for in any other clause of this Section 8, then, in each such case, provision shall be made by the Company such that the Warrantholder shall receive upon exercise or conversion of this Warrant a proportionate share of any such distribution as though it were the holder of the Common Stock as of the record date fixed for the determination of the stockholders of the Company entitled to receive such distribution.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in stock, cash, property or other securities; (ii) the Company shall offer for subscription prorata to the holders of its Common Stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; (iv) the Company shall sell, lease, license or otherwise transfer all or substantially all of its assets; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least ten (10) days’ prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; and (B) in the case of any such Merger Event, sale, lease, license or other transfer of all or substantially all assets, dissolution, liquidation or winding up, at least ten (10) days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the notice, and (ii) if any adjustment is required to be made, (A) the amount of such adjustment, (B) the method by which such adjustment was calculated, (C) the adjusted Exercise Price (if the Exercise Price has been adjusted), and (D) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, or by reputable overnight courier with all charges prepaid, addressed to the Warrantholder at the address for Warrantholder set forth in the registry referred to in Section 7.
(f) Timely Notice. Failure to timely provide such notice required by subsection (e) above shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Warrantholder. For purposes of this subsection (f), and notwithstanding anything to the contrary in Section 12(f), the notice period shall begin on the date Warrantholder actually receives a written notice containing all the information required to be provided in such subsection (e).
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Common Stock. The Common Stock issuable upon exercise of the Warrantholder’s rights has been duly and validly reserved and, when issued in accordance with the provisions of this Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, that the Common Stock issuable pursuant to this Agreement may be subject to restrictions on transfer under state and/or federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and current bylaws. The delivery of shares of Common Stock upon exercise of this Agreement shall be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Common
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Stock; provided, that the Company shall not be required to pay any tax which may be payable in respect of any transfer and the issuance and delivery of any shares of Common Stock to a designee other than the Warrantholder; provided, further, that the Company shall not be required to pay any income tax obligations of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Common Stock, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement: (1) does not violate the Company’s Charter or current bylaws; (2) does not contravene any law or governmental rule, regulation or order applicable to it; and (3) does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound. This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms.
(c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Agreement, except for the filing of notices pursuant to Regulation D under the Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock or any other outstanding securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws. In addition, as of the date immediately preceding the date of this Agreement:
(i) The authorized capital of the Company consists of (A) 80,000,000 shares of Common Stock, of which 24,903,774 shares are issued and outstanding, and (B) 5,000,000 shares of Preferred Stock, of which no shares are issued and outstanding.
(ii) The Company has reserved 3,131,579 shares of Common Stock for issuance under its 2011 Equity Incentive Plan, under which 1,127,298 are outstanding. The Company has reserved 758,819 shares of Common Stock for issuance under its 2006 Stock Plan, as amended, under which 702,185 options are outstanding. Except for the warrants issued pursuant to the August 2011 Bridge Financing and the warrant issued to the Warrantholder pursuant to that certain Amended and Restated Warrant Agreement dated as of the date hereof, there are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company’s capital stock or other securities of the Company. The Company has no outstanding loans to any employee, officer or director of the Company, and the Company agrees not to enter into any such loan or otherwise guarantee the payment of any loan made to an employee, officer or director by a third party.
(iii) Except as set forth in the Charter, no stockholder of the Company has preemptive rights to purchase new issuances of the Company’s capital stock.
(e) Insurance. The Company has in full force and effect insurance policies, with extended coverage, insuring the Company and its property and business against such losses and risks, and in such amounts, as are customary for corporations engaged in a similar business and similarly situated and as otherwise may be required pursuant to the terms of any other contract or agreement.
(f) Other Commitments to Register Securities. Except as set forth in this Agreement and in that certain Registration Rights Agreement, the form of which is Exhibit 4.8 to Form 8-K/A, filed with the SEC on October 24, 2012, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the Act any of its presently outstanding securities or any of its securities which may hereafter be issued.
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(g) Exempt Transaction. Subject to the accuracy of the Warrantholder’s representations in Section 10, the issuance of the Common Stock upon exercise of this Agreement will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.
(h) Compliance with Rule 144. If the Warrantholder proposes to sell Common Stock issuable upon the exercise of this Agreement in compliance with Rule 144 promulgated by the SEC, then, upon Warrantholder’s written request to the Company, the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the SEC as set forth in such Rule, as such Rule may be amended from time to time.
(i) Information Rights. During the term of this Warrant and to the extent such information is not otherwise publicly available, Warrantholder shall be entitled to the information rights contained in Section 7.1(b) and 7.1(c) of the Loan Agreement, and Section 7.1(b) and 7.1(c) of the Loan Agreement is hereby incorporated into this Agreement by this reference as though fully set forth herein, provided, however, that the Company shall not be required to deliver a Compliance Certificate once all Indebtedness (as defined in the Loan Agreement) owed by the Company to Warrantholder has been repaid.
(j) Registration Rights.
(i) The Company shall (A) promptly and in any event within 120 days of the Effective Date file a Registration Statement on Form S-3 (or any successor form) covering the public resale by the Warrantholder of the shares of Common Stock issuable upon exercise of the purchase rights under this Warrant; provided that to the extent the Company is not eligible to register the full number of such shares on a Form S-3 (as a result of Instruction I.B.6 to such form or otherwise), such Registration Statement shall cover the maximum amount then registrable on a Form S-3 (or such successor form) and the Company shall promptly amend such Registration Statement, or file such additional Registration Statements on Form S-3 (or any successor form), to register any shares of Common Stock then issuable upon exercise of the purchase rights under this Warrant and not covered by an effective Registration Statement, as and to the extent permitted by Form S-3 (or any successor form), and (B) use commercially reasonable efforts to cause such Registration Statement(s) to be declared effective as soon as practicable.
(ii) From the effectiveness of a Registration Statement until all shares of Common Stock registered thereunder have been sold by the Warrantholder or have become eligible for resale under Rule 144, the Company shall, at the request of the Warrantholder, make available to the Warrantholder a printed Prospectus relating to the registered securities in form and substance (including, without limitation, any sections describing the plan of distribution) satisfactory to the Warrantholder in such quantities as the Warrantholder shall reasonably request.
(iii) The Company will use its reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of any Registration Statement or of any order preventing or suspending the use of any Prospectus and, if any such order is issued, to obtain the lifting thereof as soon thereafter as is possible. If a Registration Statement, the Prospectus or any document incorporated therein by reference contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading, the Company shall as promptly as practicable file any required document and prepare and furnish to the Warrantholder (and any affiliate, underwriter, placement agent or broker designated by the Warrantholder) a reasonable number of copies of such supplement or amendment thereto as may be
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necessary so that the Prospectus, as thereafter delivered to the purchasers of the registered securities will not contain a misstatement of a material fact or omit to state a material fact required to be stated therein or necessary to make any statement therein not misleading. The Company shall immediately provide the Warrantholder notice of any stop order or any such mistatement of material fact or omission of material fact.
SECTION 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Common Stock is being acquired for investment and not with a view to the sale or distribution of any part thereof, and the Warrantholder has no present intention of selling or engaging in any public distribution of such right or the Common Stock except pursuant to an effective registration statement or an exemption from the registration requirements of the Act.
(b) Private Issue. The Warrantholder understands (i) that the Common Stock issuable upon exercise of this Agreement is not registered under the Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on such exemption is predicated on the representations set forth in this Section 10.
(c) Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment.
(d) Rule 144. The Warrantholder understands that any sale of (A) its rights hereunder to purchase Common Stock or (B) Common Stock issued or issuable hereunder which might be made by it in reliance upon Rule 144 under the Act may be made only in accordance with the terms and conditions of that Rule.
(e) Accredited Investor. Warrantholder is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Act, as presently in effect.
(f) Short Sales. Warrantholder has not engaged, and will not engage, in “short sales” of the Common Stock of the Company. The term “short sale” shall mean any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of, the seller.
SECTION 11. TRANSFERS.
Subject to compliance with applicable federal and state securities laws, this Agreement and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes) upon surrender of this Agreement properly endorsed. Each taker and holder of this Agreement, by taking or holding the same, consents and agrees that this Agreement, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Agreement shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by the Company and all other persons dealing with this Agreement as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Agreement. The transfer of this Agreement shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer Notice”), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof as the owner for all purposes. Notwithstanding the foregoing, prior to any proposed transfer of this Warrant or the shares of Common Stock received upon the exercise of the purchase rights under this Agreement (the
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“Securities”), unless there is in effect a registration statement under the Act covering the proposed transfer or, in the case of Securities consisting of shares of Common Stock, such shares are eligible for resale under Rule 144, the Warrantholder thereof shall give written notice to the Company of such Warrantholder’s intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail, and shall, if the Company so requests, be accompanied (except in transactions in compliance with Rule 144) by either (i) an unqualified written opinion of legal counsel (which may be in-house counsel of Warrantholder) who shall be reasonably satisfactory to the Company addressed to the Company and reasonably satisfactory in form and substance to Company’s counsel, to the effect that the proposed transfer of the Securities may be effected without registration under the Act and any applicable state securities laws, or (ii) a “no action” letter from the SEC to the effect that the transfer of such Securities without registration shall not result in a recommendation by the staff of the SEC that action be taken with respect thereto, whereupon the Warrantholder of the Securities shall be entitled to transfer the Securities in accordance with the terms of the notice delivered by the Warrantholder to the Company; provided, however, no such registration statement or opinion of counsel shall be necessary for a transfer by a Warrantholder to any affiliate of such Warrantholder, or a transfer by a Warrantholder which is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his spouse or lineal descendants or ancestors, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if such transferee were the original Warrantholder hereunder. Each certificate evidencing the Securities transferred (to the extent issued in certificated form) as above provided shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if (a) in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the Act, (b) such Securities are eligible for resale without restriction under, or continued compliance with any provision of, Rule 144, or (c) such Securities have been resold under an effective registration statement. Any restrictive legends on the Securities may be removed at the request of the holder thereof if any of the conditions set forth in clauses (a), (b) or (c) have been met.
SECTION 12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Agreement shall be binding upon any successors or assigns of the Company.
(b) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to Warrantholder by reason of the Company’s failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable by Warrantholder. If Warrantholder institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that Warrantholder has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.
(c) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment.
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(d) Attorney’s Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys’ fees and expenses and all costs of proceedings incurred in enforcing this Agreement. For the purposes of this Section 12(d), attorneys’ fees shall include without limitation fees incurred in connection with the following: (i) contempt proceedings; (ii) discovery; (iii) any motion, proceeding or other activity of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.
(e) Severability. In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.
(f) Notices. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication that is required, contemplated, or permitted under this Agreement or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the day of transmission by facsimile or hand delivery if transmission or delivery occurs on a business day at or before 5:00 pm in the time zone of the recipient, or, if transmission or delivery occurs on a non-business day or after such time, the first business day thereafter, or the first business day after deposit with an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid, and shall be addressed to the party to be notified as follows:
If to Warrantholder:
HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company:
Attention: ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
Telephone:
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by like notice.
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(g) Entire Agreement; Amendments. This Agreement constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersede and replace in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof (including the proposal letter from Hercules Technology Growth Capital, Inc. dated April 25, 2013). None of the terms of this Agreement may be amended except by an instrument executed by each of the parties hereto.
(h) Headings. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof.
(i) Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss) with its counsel this Agreement and, specifically, the provisions of Sections 12(n), 12(o), 12(p) and 12(q).
(j) No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
(k) No Waiver. No omission or delay by Warrantholder at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by the Company at any time designated, shall be a waiver of any such right or remedy to which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to enforce such provisions thereafter.
(l) Survival. All agreements, representations and warranties contained in this Agreement or in any document delivered pursuant hereto shall be for the benefit of Warrantholder and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement.
(m) Governing Law. This Agreement has been negotiated and delivered to Warrantholder in the State of California, and shall have been accepted by Warrantholder in the State of California. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.
(n) Consent to Jurisdiction and Venue. All judicial proceedings arising in or under or related to this Agreement may be brought in any state or federal court of competent jurisdiction located in the State of California. By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to personal jurisdiction in Santa ▇▇▇▇▇ County, State of California; (b) waives any objection as to jurisdiction or venue in Santa ▇▇▇▇▇ County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 12(f), and shall be deemed effective and received as set forth in Section 12(f). Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.
(o) Mutual Waiver of Jury Trial. Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws. EACH OF THE
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COMPANY AND WARRANTHOLDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY THE COMPANY AGAINST WARRANTHOLDER OR ITS ASSIGNEE OR BY WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY. This waiver extends to all such Claims, including Claims that involve Persons other than Borrower and Warrantholder; Claims that arise out of or are in any way connected to the relationship between the Company and Warrantholder; and any Claims for damages, breach of contract, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement.
(p) Arbitration. If the Mutual Waiver of Jury Trial set forth in Section 12(o) is ineffective or unenforceable, the parties agree that all Claims shall be submitted to binding arbitration in accordance with the commercial arbitration rules of JAMS (the “Rules”), such arbitration to occur before one arbitrator, which arbitrator shall be a retired California state judge or a retired Federal court judge. Such proceeding shall be conducted in San Francisco County, California, with California rules of evidence and discovery applicable to such arbitration. The decision of the arbitrator shall be binding on the parties, and shall be final and nonappealable to the maximum extent permitted by law. Any judgment rendered by the arbitrator may be entered in a court of competent jurisdiction and enforced by the prevailing party as a final judgment of such court.
(q) Prearbitration Relief. In the event Claims are to be resolved by arbitration, either party may seek from a court of competent jurisdiction identified in Section 12(n), any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by binding arbitration.
(r) Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.
| COMPANY: | CEMPRA, INC. | |||
| By: | /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| Title: | CEO | |||
| WARRANTHOLDER: | HERCULES TECHNOLOGY GROWTH CAPITAL, INC. | |||
| By: | /s/ ▇. ▇▇▇▇▇▇▇▇ Martitsch | |||
| Name: | ▇. ▇▇▇▇▇▇▇▇ Martitsch | |||
| Title: | Assoc. General Counsel | |||
[Signature Page to Warrant Agreement]
EXHIBIT I
NOTICE OF EXERCISE
| To: | CEMPRA, INC. |
| (1) | The undersigned Warrantholder hereby elects to purchase [ ] shares of Common Stock of [ ], pursuant to the terms of the Agreement dated the [ ] day of [ , 2013 (the “Agreement”) between Cempra, Inc. and the Warrantholder, and [CASH PAYMENT: tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any.] [NET ISSUANCE: elects pursuant to Section 3(a) of the Agreement to effect a Net Issuance.] |
| (2) | Please issue said shares of Common Stock in the name of the undersigned or in such other name as is specified below. |
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| WARRANTHOLDER: | HERCULES TECHNOLOGY GROWTH CAPITAL, INC. | |||
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EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned CEMPRA, INC., hereby acknowledges receipt of the “Notice of Exercise” from Hercules Technology Growth Capital, Inc., to purchase [ ] shares of the Common Stock of [ ], pursuant to the terms of the Agreement, and further acknowledges that [ ] shares remain subject to purchase under the terms of the Agreement.
| COMPANY: | CEMPRA, INC. | |||
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EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Agreement execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Agreement and all rights evidenced thereby are hereby transferred and assigned to
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