-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SIpSyw90p3eN1Nm3woKiBm9I1bumvDVg1/yp5f/8EVCDGTdA1G5Ez7aYN7LUE+ka wx68ciuYBGY8DrohenX8vQ== 0000950005-97-000777.txt : 19970924 0000950005-97-000777.hdr.sgml : 19970924 ACCESSION NUMBER: 0000950005-97-000777 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970919 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CELLEGY PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000887247 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 820429727 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-36057 FILM NUMBER: 97683352 BUSINESS ADDRESS: STREET 1: 1065 E HILLSDALE BLVD STREET 2: SUITE 418 CITY: FORSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 4153826770 MAIL ADDRESS: STREET 1: 1065 E HILLSDALE BLVD STREET 2: SUITE 418 CITY: FORSTER CITY STATE: CA ZIP: 94404 S-3 1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on September 19, 1997 Registration No. 333-_______ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 --------------------- CELLEGY PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) California 82-0429727 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) --------------------- 1065 E. Hillsdale Blvd., Suite 418 Foster City, California 94404 (650) 524-1600 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------------- K. Michael Forrest President and Chief Executive Officer Cellegy Pharmaceuticals, Inc. 1065 E. Hillsdale Blvd., Suite 418 Foster City, California 94404 (650) 524-1600 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- Copies to: C. Kevin Kelso, Esq. Melissa Sayer, Esq. Fenwick & West LLP Two Palo Alto Square, Suite 700 Palo Alto, California 94306 --------------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] --------------------- CALCULATION OF REGISTRATION FEE - ------------------------------------ ------------------------ ----------------------- ------------------------ ---------------------
Proposed Maximum Proposed Maximum Title of Each Class of Securities Amount to be Registered Offering Price per Aggregate Offering Amount of Registration to be Registered Share Price Fee - ------------------------------------ ------------------------ ----------------------- ------------------------ --------------------- Common Stock 1,974,887 $5.94(1) 11,730,829(1) 3,555(1) - ------------------------------------ ------------------------ ----------------------- ------------------------ --------------------- Common Stock issuable upon exercise of warrants 25,000 $5.94(2) 148,500(2) 45(2) - -------------------------------------------------------------------------------------------------------------- --------------------- Total $3,600(1)(2) - -------------------------------------------------------------------------------------------------------------- --------------------- (1) Estimated solely for the purpose of calculating the amount of the registration fee, pursuant to Rule 457(c) under the Securities Act, based on the last sales price of the Common Stock on the Nasdaq SmallCap Market on September 15, 1997. (2) Estimated solely for the purpose of calculating the amount of the registration fee, pursuant to Rule 457(h) under the Securities Act, based on the last sales price of the Common Stock on the Nasdaq SmallCap Market on September 15, 1997.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- This Prospectus and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy be accepted, prior to the time the prospectus is delivered in final form. Under no circumstances shall this Preliminary Prospectus constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Subject to Completion dated September 19, 1997 PROSPECTUS 1,999,887 Shares of Common Stock CELLEGY PHARMACEUTICALS, INC. This prospectus (this "Prospectus") covers the registration for possible resale of shares (the "Shares") of Common Stock, no par value (the "Common Stock"), of Cellegy Pharmaceuticals, Inc. ("Cellegy" or the "Company") and certain warrants (the "Warrants") to purchase Common Stock, held or acquirable by certain persons ("Shareholders") named in this Prospectus. (The Shares and Warrants are referred to hereafter collectively as the "Securities".) This Prospectus covers 1,547,827 shares of Common Stock held by certain Shareholders that were acquired in a private placement transaction (the "Private Placement") completed on July 23, 1997, and described in this Prospectus, see "Selling Shareholders." Each Shareholder in the Private Placement represented to the Company, in the subscription agreement relating to the purchase of such Shares, that it was purchasing such Shares for investment and with no present intention of distributing or reselling such Securities. However, in recognition of the fact that each such Shareholder, even though purchasing such Shares for investment, wishes to be legally permitted to sell the Shares when they deem appropriate, the Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement of which this Prospectus forms a part (the "Registration Statement") with respect to the sale of such Shares from time to time. See "Plan of Distribution." To the Company's knowledge, as of the date of this Prospectus, no Shareholder has entered into any agreement, arrangement or understanding with any particular broker, market maker or other person with respect to sale of any of the Shares offered hereby. In addition, 427,060 of the Shares covered by this Prospectus were acquired by certain Shareholders in purchase transactions from other shareholders prior to the completion of the Private Placement in July 1997. The Shares covered herein also include 25,000 shares of Common Stock that are issuable upon exercise of Warrants to purchase Common Stock held by a certain Shareholder. While the Company will receive proceeds from the exercise of the Warrants, it will not receive any of the proceeds from the resale of the Shares. See "Selling Shareholders" for information with respect to Shares held or acquirable by the Shareholders. The Shares covered by this Prospectus represent approximately 26.3% of the Company's currently outstanding Common Stock (assuming exercise of the Warrant). The Shares are being offered on a continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"). The Company will pay the expenses of registration estimated at $38,600. No underwriting discounts, commissions or expenses are payable or applicable in connection with the sale of the Securities. The Common Stock of Cellegy is quoted on the Nasdaq SmallCap Market under the symbol "CLGY". The Shares offered hereby may be sold from time to time at then prevailing market prices, at prices relating to prevailing market prices or at negotiated prices. On September 15, 1997 the closing price of the Common Stock on the Nasdaq SmallCap Market was $5.94 per share. This Prospectus may be used by the Shareholders or by any broker-dealer who may participate in sales of the Common Stock covered hereby. In addition, any Shares offered hereby which qualify for sale pursuant to Rule 144 under the Securities Act or any other exemption may be sold under Rule 144 or an other exemption rather than pursuant to this Prospectus. See "RISK FACTORS" commencing on page 7 for a discussion of certain factors that should be considered in connection with an investment in the Common Stock offered hereby. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is September 19, 1997. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities of the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Seven World Trade Center, 13th Floor, New York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also maintains a World Wide Web site (located at http://www.sec.gov) that contains reports, proxy and information statements and other information regarding the Company. The Company's Common Stock is listed on the Nasdaq SmallCap Market and reports, proxy statements and other information concerning the Company may be inspected at the offices of the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006-1500. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act with respect to the Shares offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits thereto. For further information with respect to the Company and the Common Stock offered hereby, reference is made to the Registration Statement and the exhibits filed therewith or incorporated therein by reference. Regarding statements contained in this Prospectus as to the contents of any contract or any other document referred to herein, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or incorporated therein by reference, each such statement being qualified in all respects by such reference. A copy of the Registration Statement may be inspected, without charge, at the offices of the Commission in Washington, D.C. and copies of all or any part of the Registration Statement may be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, upon the payment of the fees prescribed by the Commission. No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or any Shareholder. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Company since such date. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission are incorporated herein by reference: (a) The Company's annual report on Form 10-KSB for the fiscal year ended December 31, 1996. (b) The Company's quarterly report on Form 10-QSB for the three months ended March 31, 1997. (c) The Company's quarterly report on Form 10-QSB for the three months ended June 30, 1997. (d) The Company's Proxy Statement for the Annual Meeting of Shareholders filed with the Commission on April 21, 1997. (e) All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act following the fiscal year ended December 31, 1996 and prior to the termination of the offering contemplated hereby. (f) The description of the Company's Common Stock contained in the Company's registration statement on Form 8-A filed with the Commission on August 1, 1995. The Company hereby undertakes to provide without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the information that has been incorporated by reference in this Prospectus (not including the exhibits to the information that is incorporated by reference unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Requests should be directed to Mr. A. Richard Juelis, Chief Financial Officer, 1065 E. Hillsdale Blvd., Suite 418, Foster City, CA 94404; telephone number (650) 524-1600. FORWARD LOOKING STATEMENTS Certain statements contained in this Prospectus, including without limitation, statements containing the words "believes," "estimates," "expects" and words of similar import, constitute "forward looking statements." Such words and expressions are intended to identify such forward looking statements, but are not intended to constitute the exclusive means of identifying such statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. These risks, uncertainties and other factors include, but are not limited to, those discussed below under the heading "Risk Factors." Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward looking statements contained herein to reflect any events or developments. Investors should also review forward looking statements contained in the Company's most recent Annual Report on Form 10-KSB and subsequent quarterly reports on Form 10-QSB. THE COMPANY The Company was founded in 1989 and is engaged in the development of prescription drugs and cosmeceutical products based upon its patented transdermal and topical drug delivery technologies. The Company's first prescription dermatologic drug, GlylorinTM, has been licensed to Glaxo Wellcome and is nearing completion of Phase III clinical trials, the last testing phase required by the Food and Drug Administration before marketing approval of a drug in the United States may be sought. In addition to Glylorin, Cellegy is simultaneously testing and developing several prescription drugs including a transdermal testosterone gel and a line of anti-wrinkling products that belong to a class of marketed compounds which the Company believes will not require a prescription. The principal executive offices of the Company are located at 1065 E. Hillsdale Blvd., Suite 418, Foster City, CA 94404 and its telephone number is (650) 524-1600. In this Prospectus, the term "Cellegy" or "Company" refers to Cellegy Pharmaceuticals, Inc., a California corporation, unless the context otherwise requires. Technology Cellegy's proprietary transdermal and topical drug delivery technologies have been found in preclinical evaluations to permit the delivery of larger or more lipophilic drugs into the systemic circulation and the local tissue. These technologies consist of PERMEATE and IRM, which the Company believes will permit the non-irritating transdermal and local delivery of drugs and other biopharmaceuticals that are the focus of discovery efforts by many of the world's leading pharmaceutical and biotechnology companies. If clinical and commercial development efforts are successful, the technology would permit the delivery of certain drugs that are currently administered by intramuscular or intravenous injection for the treatment of many diseases, and would also allow topical application of drugs whose local administration heretofore has been hampered by irritation, allergy, and inability to achieve a therapeutic dose. Transdermal delivery can also improve patient compliance where frequent, painful dosing regiments are required or where the physical/psychological status of the patient is impaired. PERMEATE is a patented technology which employs the use of bioactive permeation enhancers to permit controlled passage of larger molecule drugs through the skin. This technology potentially enables transdermal delivery of such drugs without the need for systems which are energy dependent, such as iontophoresis, electroporation, ultrasound or laser, to drive drugs through the skin barrier. Cellegy's delivery technology is intended to be used in a variety of topical dosage forms such as gels, creams, and sprays, and is not limited to the more traditional occlusive patches. IRM (Inflammatory Response Modulation) technology employs the use of proprietary substances intended to prevent or reduce inflammation and allergic reactions caused by contact with irritating or allergenic substances, including drugs, certain excipients in skin care products, occupational substances and natural allergens. Product Development Cellegy's product development efforts are focused in three areas: (i) development of transdermal delivery systems for new drugs discovered by pharmaceutical and biotechnology companies; (ii) utilization of the Company's technologies to improve currently marketed pharmaceutical products, providing them with greater competitive advantages, market expansion possibilities and longer patent life; and (iii) development of improved and effective non-prescription cosmeceutical products which address the skin care needs of the increasing aging and middle-aged populations. The Company's most advanced pharmaceutical product is Glylorin. Based on clinical studies to date, Glylorin may inhibit the abnormal signs, as well as other symptoms, of ichthyosis, a lifelong, debilitating skin condition which in all of its forms afflicts an estimated one million persons in the United States, and for which there is currently no satisfactory treatment. After conducting product development efforts through early Phase III clinical trials, Cellegy licensed Glylorin to Glaxo Wellcome Inc. in November 1996. See "--Corporate and Research Alliances." Glaxo Wellcome is one of the world's largest pharmaceutical companies and a leader in the field of dermatology. The product is nearing completion of Phase III trials in the United States. Glylorin has been awarded Orphan Drug status and Cellegy has received an Orphan Drug grant of $400,000 from the Food and Drug Administration to supplement certain clinical development costs. Another pharmaceutical product under development is transdermal testosterone gel. Based on studies to date, the Company believes its proprietary gel formulation may be capable of providing therapeutic levels of testosterone through a once-a-day topical application to a small area of the body. Furthermore, Cellegy's testosterone gel is expected to have no risk of local irritation, which often accompanies use of traditional drug delivery technologies, such as patches and iontophoresis. Cellegy is also utilizing its drug delivery technologies to develop other products intended to address unmet needs in prescription pharmaceutical markets. The Company is developing a line of cosmeceutical products utilizing Cellegy's IRM technology which, based on studies conducted to date, appear to help protect the skin against physical, environmental or chemical insults and has the potential to reverse inflammation, irritation and allergic reactions caused by many active substances which are applied to the skin. The Company's lead cosmeceuticals include products under development designed to mitigate photoaging and reverse signs of skin wrinkling and dryness. Based on testing to date, these products are expected to produce greater improvements to the skin's appearance with less irritation and other adverse reactions than many current products. This product line may also address the skin barrier abnormalities unique to various ages, sexes and races. Cellegy commenced clinical testing of these products during the second quarter of 1997, and expects to complete clinical trials during 1998. Other targeted non-prescription cosmeceutical products include the alternative therapies for corticosteroid responsive diseases, inflammatory diseases, problem skin, and skin barrier repair following laser or chemical peeling therapy. If successfully developed, these products will be marketed primarily to professional groups including dermatologists, plastic/cosmetic surgeons and medical aestheticians. The Company is seeking partners with franchises in and access to these target markets and professional groups. Corporate and Research Alliances In November 1996, Cellegy licensed its Glylorin treatment for ichthyosis to Glaxo Wellcome Inc. Under the terms of the agreement Cellegy will receive upfront and milestone payments from Glaxo Wellcome, assuming successful completion of the various milestones, as well as a royalty on net sales following regulatory approval. In addition, Glaxo Wellcome will assume responsibility and the associated costs for future development and worldwide commercialization of Glylorin for ichthyosis and other severe dry skin conditions. Cellegy has entered into license agreements for patented skin barrier repair and drug delivery technologies and methods discovered at the University of California at San Francisco School of Medicine. Cellegy is currently pursuing additional corporate alliances with major pharmaceutical companies and may, where appropriate, explore acquisitions to secure marketing distribution channels and/or to augment the Company's core technologies. RISK FACTORS Investors should consider carefully the following factors, in addition to the other information contained in this Prospectus, before purchasing the shares of Common Stock offered hereby. Early Stage of Product Development. Cellegy has not yet completed the development of any products or sought regulatory approval for the marketing of products and, accordingly, has not begun to market or generate revenues from the commercialization of products. Development of products will require significant additional research and development, including process development, extensive clinical testing and market research. All of the Company's product development efforts are based upon technologies and therapeutic approaches that have not been widely tested or used. The Company is not discovering new chemical entities, rather, it is using known commercially available compounds in conjunction with novel therapeutic formulations and strategies. Moreover, the Company's beliefs regarding the therapeutic and commercial potential for its potential products, including without limitation its drug delivery and cosmeceutical products, are based on preliminary assays or studies, and later studies may not support the Company's current beliefs. In addition, results of the Company's tests and studies have not been published in medical journals or reviewed by independent third parties (other than the third parties that in some instances conducted the studies on behalf of the Company) due to patenting strategies, and as a result have not been subjected to the same degree of scrutiny as results that have been published or subjected to review by independent parties. To the Company's knowledge, no company has yet completed human clinical trials for the regulatory approval process, or undertaken successfully commercial manufacture, of products that are based on the Company's proprietary technologies, and it is extremely difficult to predict whether or when the Company's products will meet with regulatory approval, can be manufactured successfully, or will be accepted in the marketplace. As a result, the Company's potential products are subject to the risks of failure inherent in the development of products based on new technologies. These risks include the possibilities that the Company's therapeutic approaches will not be successful; that the results from future clinical trials may not correlate with any safety or effectiveness results from prior clinical studies conducted by the Company or others; that some or all of the Company's potential products will not be successfully developed or will not be found to be safe and effective by the United States Food and Drug Administration, or otherwise will fail to meet applicable regulatory standards or receive necessary regulatory clearances; that the products, if safe and effective, will be difficult to manufacture in commercial quantities at reasonable costs or will be uneconomical to market; that proprietary rights of third parties will preclude the Company from commercializing such products; or that third parties will market superior or equivalent products. In addition, the failure of the Company's most advanced clinical compound, Glylorin, to successfully complete its current Phase III and future clinical testing, including toxicology studies, could have a material adverse effect on the Company. There can be no assurance the Company's research and development activities will result in any commercially viable products. The timetable for the completion of the various milestone events that must occur in order for the Company's products to be approved and marketed is very uncertain. Pharmaceutical research and development is frequently characterized by scientific and regulatory delays and disappointments. Although the Company may set target dates for the completion of various milestone events, the uncertainties and risks in the Company's product development and testing efforts mean that decisions on whether to invest in the Company should not assume that the targets will be met. The evaluation of animal and human clinical test results involves making judgments about data and other information that often are not conclusive. Later testing may show those judgments to have been erroneous. For example, the Company's beliefs regarding the potential comparative therapeutic benefits of its products compared to currently marketed products may be erroneous, or the FDA may not agree with the Company's conclusions regarding such matters. Furthermore, due to the independent and blind nature of certain human clinical testing, there will be extended periods during the testing process when the Company will have only limited, or no, access to information about the status or results of the tests. Other pharmaceutical companies have believed that their products performed satisfactorily in early tests, only to find their performance in later tests, including Phase III clinical trials, to be inadequate or unsatisfactory, or that FDA Advisory Committees have declined to recommend approval of the drugs, or that the FDA itself refused approval, with the result that such companies' stock prices have fallen precipitously. Competition and Technological Change. The pharmaceutical industry is subject to rapid and significant technological change. Competitors of the Company in the United States and abroad are numerous and include, among others, major pharmaceutical, chemical, consumer, and biotechnology companies, specialized firms, universities and other research institutions. There can be no assurance that the Company's competitors will not succeed in developing technologies and products that are more effective than any which are being developed by the Company or that would render the Company's technology and potential products obsolete and noncompetitive. Many of these competitors have substantially greater financial and technical resources and production and marketing capabilities than the Company. In addition, many of the Company's competitors have significantly greater experience than the Company in preclinical testing and human clinical trials of pharmaceutical products and in obtaining FDA and other regulatory approvals of products for use in health care. There can be no assurance that the Company's products under development will be able to compete successfully with existing products or products under development by other companies, universities and other institutions or that they will obtain regulatory approval in the United States or elsewhere. Accumulated Deficit; Anticipated Gains or Losses. The Company had an accumulated deficit of $16.7 million at June 30, 1997. The Company expects to incur net losses for at least the next few years, the amount of which is highly uncertain. There can be no assurance that the Company will ever be able to generate product revenues or achieve or sustain profitability. The Company will be required to conduct significant research, development, testing and regulatory compliance activities that, together with projected general and administrative expenses, are expected to result in significant operating losses for at least the next few years. The Company's ability to achieve profitability depends upon its ability to successfully complete, either alone or with others, development of its potential products, successfully conduct clinical trials, obtain required regulatory approvals, find appropriate third party manufacturers and market its products or enter into license agreements on acceptable terms. In the event the Company enters into any future license agreements, such license agreements may adversely affect the Company's profit margins on its products. Future Capital Needs; Uncertainty of Additional Funding. The Company's operations to date have consumed substantial amounts of cash. The Company has no current source of ongoing revenues or capital beyond existing cash. In order to complete the research and development and other activities necessary to commercialize its products, additional financing will be required. The Company's capital requirements depend on numerous factors, including without limitation the progress of its research and development programs, the progress of preclinical and clinical testing, the time and costs involved in obtaining regulatory approvals, the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, competing technological and market developments, changes in the Company's existing research relationships, the ability of the Company to establish collaborative arrangements, the development of commercialization activities and arrangements, and the purchase of capital equipment. In April 1996, the Company completed a private placement of 750 shares of Series A Preferred Stock resulting in net proceeds of approximately $6.8 million. In July 1997, the Company raised additional $3.8 million in a private placement which are the subject of the shares registered herein. The Company believes that its existing resources will satisfy its anticipated cash requirements through at least December 31, 1998, based upon the Company's current plan. However, the Company will require substantial additional capital to fund its operations, continue research and development programs and preclinical and clinical testing of its potential products and conduct its business. The Company may seek any required additional funding through equity offerings, private financings and collaborative or other arrangements with third parties. There can be no assurance that additional funds will be available on acceptable terms. If additional funds are raised by issuing equity securities, further substantial dilution to existing shareholders may result. If adequate funds are not available, the Company may be required to delay, scale back or eliminate one or more of its research and development programs, or to obtain funds through entering into arrangements with third parties that may require the Company to relinquish rights to certain of its technologies or potential products that the Company would not otherwise relinquish. Limits on Secondary Trading; Liquidity of Trading Market. Under the blue sky laws of most states, public sales of Common Stock and the publicly traded class of warrants issued in the Company's initial public offering (the "IPO Warrants") by persons other than the Company in "non-issuer transactions" must either be qualified under applicable blue sky laws, or exempt from such qualification requirements. Blue sky authorities in California or other states may impose other restrictions on the secondary trading of Common Stock or IPO Warrants in those states. Certain additional restrictions may exist in California with respect to secondary trading of certain shares of Common Stock issued or issuable to certain investors, although these restrictions do not apply to any of the shares sold to the public in the Company's initial public offering. Moreover, in many states, secondary trading of the Common Stock or IPO Warrants is permitted only by virtue of an exemption so long as information about the Company is published in a recognized manual published by Standard & Poor's Corporation. As a result of these or other restrictions that might be imposed, shareholders may be restricted or prohibited from selling Common Stock or IPO Warrants in particular states as a result of applicable blue sky laws. These restrictions may have the effect of reducing the liquidity of the Common Stock or IPO Warrants and could adversely affect the market price of the Common Stock or IPO Warrants. The Common Stock and the IPO Warrants are listed on the Nasdaq SmallCap Market. If the Company should be unable to maintain the standards for continued quotation on the Nasdaq SmallCap Market, the Common Stock and the IPO Warrants could be subject to removal from the Nasdaq SmallCap Market. Trading, if any, in the Common Stock and the IPO Warrants would then be conducted in the over-the-counter market on an electronic bulletin board established for securities that do not meet the Nasdaq SmallCap Market listing requirements or in what are commonly referred to as the "pink sheets." As a result, an investor would find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company's securities. In addition, depending on several factors including the future market price of the Common Stock, the Company's securities could become subject to the so-called "penny stock" rules that impose additional sales practice and market making requirements on broker-dealers who sell and/or make a market in such securities, which could affect the ability or willingness of broker-dealers to sell and/or make a market in the Company's securities and the ability of purchasers of the Company's securities to sell their securities in the secondary market. The National Securities Market's Improvement Act of 1996 ("NSMIA"), among other things, prohibits states from preventing secondary trading of securities such as the Common Stock and IPO Warrants in transactions that are exempt from federal registration requirements under Section 4(1) of the Securities Act of 1933, as amended. Section 4(1) of the Securities Act exempts from federal registration requirements transactions by persons other than an issuer, underwriter or dealer, as those terms are defined in a Securities Act. The preemptive effect of NSMIA on regulation of secondary trading in California and other states has not been definitively addressed by the courts or applicable administrative agencies however, and thus some uncertainty may exist concerning the restrictions that states may impose upon secondary trading of the Common Stock and IPO Warrants. Government Regulation and Product Approvals. The research, testing, manufacture, labeling, distribution, marketing and advertising of products such as the Company's products and its ongoing research and development activities are subject to extensive regulation by governmental regulatory authorities in the United States and other countries. The rigorous preclinical and clinical testing requirements and regulatory approval process of the FDA in the United States and of certain foreign regulatory authorities can take five to ten years or more and require the expenditure of substantial resources. There can be no assurance that the Company will be able to obtain the necessary approvals for clinical testing or for the marketing of products. Moreover, additional government regulations may be established that could prevent or delay regulatory approval of the Company's products. Delays in obtaining regulatory approvals could have a material adverse effect on the Company. Even if regulatory approval of a product is granted, such approval may include significant limitations on the indicated uses of the product or the manner in which or conditions under which the product may be marketed. For example, even if the Company seeks FDA approval of a cosmeceutical product for non-prescription consumer sales, the FDA could instead require that the product be distributed by means of a prescription before considering approval for distribution as a non-prescription product. Prescription only approval, which the Company believes is common where a company seeks approval for a product involving a new compound or a compound previously approved for other uses, could delay for several years, or indefinitely, distribution through the consumer (non-prescription) channel of the Company's consumer products which are subject to premarket review and approval by the FDA. Moreover, failure to comply with regulatory requirements could subject the Company to regulatory or judicial enforcement actions, including, but not limited to, product recalls or seizures, injunctions, civil penalties, criminal prosecution, refusals to approve new products and withdrawal of existing approvals, as well as potentially enhanced product liability exposure. Sales of the Company's products outside the United States will be subject to regulatory requirements governing clinical trials and marketing approval. These requirements vary widely from country to country and could delay introduction of the Company's products in those countries. Patents and Proprietary Technology. The Company's success depends, in part, on its ability to obtain patent protection for its products and methods, both in the United States and in other countries. Several of the Company's products are based on existing compounds with a history of use in humans but which are being developed by the Company for new therapeutic use for skin diseases unrelated to the systemic diseases for which the compounds were previously approved. The Company cannot obtain composition patent claims on all formulations that include these compounds, and will instead need to rely on patent claims, if any, directed to use of the compound to treat certain conditions. The Company will not be able to prevent a competitor from using that formulation or compound for a different purpose. No assurance can be given that any additional patents will be issued to the Company, that the protection of any patents that may be issued in the future will be significant, or that current or future patents will be held valid if subsequently challenged. There is a substantial backlog of patent applications at the United States Patent and Trademark Office ("USPTO"). The patent position of companies engaged in businesses such as the Company's business generally is uncertain and involves complex legal and factual questions. Further, issued patents can later be held invalid by the patent office issuing the patent or by a court. There can be no assurance that any patent applications relating to the Company's products or methods will issue as patents, or, if issued, that the patents will not be challenged, invalidated, or circumvented or that the rights granted thereunder will provide a competitive advantage to the Company. In addition, other entities may currently have, or may obtain in the future, legally blocking proprietary rights, including patent rights, in one or more products or methods under development or consideration by the Company. These rights may prevent the Company from commercializing technology, or may require the Company to obtain a license from the entity to practice the technology. There can be no assurance that the Company will be able to obtain any such licenses that may be required on commercially reasonable terms, if at all, or that the patents underlying any such licenses will be valid or enforceable. Moreover, the laws of certain foreign countries do not protect intellectual property rights relating to U.S. patents as extensively as those rights are protected in the United States. As with other companies in the pharmaceutical industry, the Company is subject to the risk that persons located in such countries will engage in development, marketing or sales activities of products that would infringe the Company's patent rights if such activities were in the United States. The agreements with UCSF pursuant to which the Company has exclusive license rights to certain barrier repair and drug delivery technology contain certain development and performance milestones which the Company must satisfy in order to retain such rights. Certain milestone dates have passed with the development or performance milestone not being satisfied. The Company is currently in discussions with the University concerning negotiations of new milestones and milestone dates, but no agreement has yet been reached. While the Company currently believes it will be able to negotiate satisfactory extensions, a loss of rights to the drug delivery technology could have a material adverse effect on the Company. Limited Staff; Third Party Relationship. In view of the early stage of the Company and its research and development programs, the Company has restricted hiring to research and development scientists and a small administrative staff and has made limited or no investment in marketing, product sales and regulatory compliance resources. The Company has certain key collaborations relating to the research, development and commercialization of its potential products. Therefore, the Company may be dependent upon the subsequent success of these outside parties in performing their responsibilities. In addition, the Company may enter into additional arrangements with corporate and academic collaborators and others to research, develop or commercialize potential products. There can be no assurance that the Company will be able to establish any such arrangements or that they will be successful. Failure to enter into any such arrangements that in the future might be necessary could have a material adverse effect on the Company's business. Risk of Product Liability; Limited Product Liability Insurance; Environmental Matters. The testing, marketing and sale of human health care products entails an inherent risk of allegations of product liability, and there can be no assurance that substantial product liability claims will not be asserted against the Company. The Company has obtained limited amounts of insurance relating to its clinical trials. There can be no assurance that the Company will be able to obtain or maintain insurance on acceptable terms for its clinical and commercial activities or that any insurance obtained will provide adequate protection against potential liabilities. Moreover, the Company is subject to federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of certain materials and wastes. The Company's research and development processes involve the limited, controlled use of hazardous and radioactive materials. The Company believes its safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, but the risk of accidental contamination or injury to the Company's employees or others from these materials cannot be eliminated. In the event of such an accident, the Company could be held liable for any damages that result, and any such liability could exceed the resources of the Company. Although the Company believes it is in compliance in all material respects with applicable environmental laws and regulations and currently does not expect to make material capital expenditures for environmental control facilities in the near-term, there can be no assurance that the Company will not be required to incur significant costs to comply with environmental laws and regulations in the future, or that the operations, business or assets of the Company may not be materially adversely affected by current or future environmental laws or regulations. Dependence Upon Key Employees and Consultants. The success of the Company is dependent upon the efforts of its senior management team, including Dr. Carl R. Thornfeldt, Chairman of the Board of Directors and Medical Director of the Company, and K. Michael Forrest, Chief Executive Officer of the Company. A change in the association of these individuals or other officers and directors of the Company could adversely affect the Company if suitable replacement personnel could not be employed. The success of the Company also depends upon its ability to continue to attract and retain qualified scientific and technical personnel. There is intense competition for qualified personnel in the areas of the Company's activities, and there can be no assurance that the Company will be able to continue to attract and retain the qualified personnel necessary for the development or expansion of its business. Anti-Takeover Provisions. Certain provisions of the Company's Amended and Restated Articles of Incorporation, as well as the California General Corporation Law, could discourage a third party from attempting to acquire, or make it more difficult for a third party to acquire, control of the Company without approval of the Company's Board of Directors. Such provisions could also limit the price that certain investors might be willing to pay in the future for shares of the Common Stock. Certain of such provisions allow the Board of Directors to authorize the issuance of preferred stock with rights superior to those of the Common Stock. The Company is also subject to the provisions of Section 1203 of the California General Corporation Law which requires that a fairness opinion be provided to the Company's shareholders in connection with their consideration of any proposed "interested party" reorganization transaction. Volatility of Stock Price. The stock market has from time to time experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies. In addition, the market price of the Common Stock and the IPO Warrants, like the stock prices of many publicly-traded pharmaceutical, chemical, consumer, and biotechnology companies, may prove to be highly volatile. Announcements of technological innovations or new commercial products by the Company or its competitors, developments or disputes concerning patent or proprietary rights, publicity regarding actual or potential medical results relating to products under development by the Company or its competitors, regulatory developments in both the United States and foreign countries, public concern as to the safety of pharmaceutical products, sales of a large number of shares of Common Stock in the market, and economic and other external factors, as well as period-to-period fluctuations in financial results, among other factors, may have a significant impact on the market price of the Common Stock and the IPO Warrants. SELLING SHAREHOLDERS The Shareholders consist of (i) the investors who purchased Shares in the Private Placement (the "Investors"), some of whom also purchased Shares in purchase transactions from other shareholders completed in July 1997 and (ii) Charles S. Aker, who holds warrants to purchase Common Stock (the "Other Shareholder"). The Registration Statement of which this Prospectus is a part is being filed, and the Shares offered hereby that were purchased in the Private Placement, are included herein, pursuant to registration rights included in the common stock purchase agreement associated with the Private Placement dated as of July 23, 1997 by and among the Company and the Investors (the "Placement Agreement"), and pursuant to registration rights granted to Mr. Aker in connection with his acquisition of the warrant described below (together, the "Registration Rights"). The Shareholders identified in the table below as "Investors" acquired 1,547,827 shares of Common Stock in the Private Placement pursuant to Securities Subscription Agreements dated as of July 23, 1997 (the "Subscription Agreements"). The Investors include K. Michael Forrest, who has been the Company's President and Chief Executive Officer and a director since December 1996. Each Shareholder in the Private Placement represented to the Company in the Subscription Agreement that it was purchasing such Shares for investment and with no present intention of distributing or reselling such securities. However, in recognition of the fact that each such Shareholder, even though purchasing such Shares for investment, wishes to be legally permitted to sell the Shares when it deems appropriate, the Company has filed the Registration Statement with the Commission with respect to the sale of such Shares from time to time. To the Company's knowledge, as of the date of this Prospectus, no Shareholder has entered into any agreement, arrangement or understanding with any particular broker, market maker or other person with respect to sale of any of the Shares offered hereby. In addition, 427,060 shares were acquired by certain Shareholders in purchase transactions from other shareholders prior to the completion of the Private Placement in July 1997. Also in July 1997, common stock purchase warrants were issued to Charles S. Aker, an investor relations advisor to the Company, to acquire a total of 25,000 shares at an exercise price of $4.00 per share, subject to certain terms and conditions relating to his performance as an advisor to the Company. The following table and accompanying footnotes identify each Shareholder based upon information provided to the Company, set forth as of September 15, 1997, with respect to the Shares beneficially held by or acquirable within 60 days of the date of the information in the table by, each Shareholder and the shares of Common Stock beneficially owned by the Shareholders which are not covered by this Prospectus. Except as described above, based on information supplied to the Company, no Shareholder has had any position, office or other material relationship with the Company within the past three years.
Shares Beneficially Owned Number of Shares Beneficially Prior to Offering Shares Being Owned After Offering Name Number Percent Offered Number Percent - ---- ------ ------- ------- ------ ------- Investors Four Partners 1,053,500 13.9 1,053,500 0 * K. Michael Forrest 425,827 5.6 347,827 78,000 1.0 Biotechnology Value Fund, L.P. 313,560 4.1 313,560 0 * Biotechnology Value Fund, Ltd 160,000 2.1 160,000 0 * Gary William Ross Trust 50,000 * 50,000 0 * Curran Partners, L.P. 25,000 * 25,000 0 * John Curran 25,000 * 25,000 0 * Other Shareholder Charles S. Aker 25,000 * 25,000 0 * * Less than 1%.
PLAN OF DISTRIBUTION The Registration Statement of which this Prospectus forms a part has been filed pursuant to the Registration Rights. To the Company's knowledge, as of the date hereof, no Shareholder has entered into any agreement, arrangement or understanding with any particular broker or market maker with respect to the Shares offered hereby, nor does the Company know the identity of any of the brokers or market makers that any Shareholder may utilize in connection with the sale of any Shares. The Shares covered hereby may be offered and sold from time to time by the Shareholders. The Shareholders will act independently of the Company in making decisions concerning sales or other disposition of any Shares, and will act independently of the Company in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on the Nasdaq SmallCap Market or otherwise, at prices and on terms then prevailing or at prices related to the then market price, or in negotiated transactions. In addition, any Shares offered hereby which qualify for sale pursuant to Rule 144 under the Securities Act of 1933 or any other exemption may be sold under Rule 144 or an other exemption rather than pursuant to this Prospectus. The Shares may be sold by one or more of the following methods: (a) a block trade in which the broker-dealer engaged by the Shareholder will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) through privately negotiated transactions; (c) purchases by the broker-dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus; and (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers. To the Company's knowledge, the Shareholders have not, as of the date hereof, entered into any arrangement with a broker-dealer for the sale of shares through a block trade, special offering, or secondary distribution of a purchase by a broker-dealer. In effecting sales, broker-dealers engaged by the Shareholders may arrange for other broker-dealers to participate. Broker-dealers will receive commissions or discounts from the Shareholders in amounts to be negotiated. In offering their Shares, the Shareholders and any broker-dealers who execute sales for the Shareholders may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales, and any profits realized by the Shareholders and the compensation of such broker-dealer may be deemed to be underwriting discounts and commissions. The Shareholders have advised the Company that, during such time as they may be engaged in a distribution of the shares of Common Stock included herein, they will comply with the applicable provisions under Regulation M under the Securities Exchange Act of 1934, as amended ("Regulation M") and, in connection therewith, each of the Shareholders has agreed not to engage in any stabilization activity in connection with any securities of the Company, to furnish copies of this Prospectus to each broker-dealer through which the shares of Common Stock included herein may be offered, and not to bid for or purchase any securities of the Company or attempt to induce any person to purchase any securities of the Company except as permitted under Regulation M. Each of the Shareholders has also agreed to inform the Company and broker-dealers through whom sales may be made hereunder when the distribution of the shares is completed. Rule 102 and 103 under Regulation M prohibit participants in a distribution from bidding for or purchasing for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Rule 104 under Regulation M governs bids and purchases made to stabilize the price of a security in connection with a distribution of the security. This offering will terminate as to each Shareholder on the earlier of (a) the date on which such Shareholder's shares may be resold without volume restrictions under the Securities Act; or (b) the date on which all Shares offered hereby have been sold by the Shareholders. There can be no assurance that any of the Shareholders will sell any or all of the shares of Common Stock offered hereby. Pursuant to the registration rights granted in the Placement Agreement, the Investors have agreed to sell Shares constituting "Registrable Securities" pursuant to this Prospectus only during a "Permitted Window." As defined in the Purchase Agreement, the term "Registrable Securities" includes, among other shares, (i) all of the Shares purchased in the Private Placement, and (ii) any other shares of Common Stock owned, at the time the Registration Statement is filed, by an Investor that reasonably may be deemed to be an "affiliate" (as defined in Rule 144) of the Company. A "Permitted Window" is a period of 30 consecutive calendar days commencing upon delivery to the Investor of the Company's written notification to the Investor in response to a Notice of Resale that the Prospectus contained in the Registration Statement is available for resale. In order to cause a Permitted Window to commence, an Investor must first give written notice to the Company of its present intention to sell part or all of the Registrable Securities pursuant to such registration (a "Notice of Resale"). Upon receipt of such Notice of Resale, the Company will give written notice to the Investors as soon as practicable, but in no event not more than three business days after such receipt, that (A) the Permitted Window will commence on the date such notice is received by the Investor, (B) it is necessary for the Company to supplement the Prospectus or make an appropriate filing with the Commission so as to cause the Prospectus to become current (unless the Company exercises its deferral rights as provided in the Placement Agreement), or (C) the Company is required under the Securities Act to amend the Registration Statement in order to cause the Prospectus to be current (unless the Company exercises its deferral rights as provided in the Placement Agreement). If the Company determines that a supplement to the Prospectus, the filing of a report pursuant to the Exchange Act or an amendment to the Registration Statement is necessary, it will take such actions as soon as reasonably practicable (subject to certain exceptions), and the Company will notify the Investor of the filing of such supplement, report or amendment, and, in the case of an amendment, the effectiveness thereof, and the Permitted Window will then commence. Under certain circumstances once in any twelve month period, the Company is permitted to postpone the commencement of a Permitted Window for up to 60 days after receipt of a Notice of Resale. The Company may also defer the commencement of the Permitted Window for up to 180 days if so requested by an underwriter in connection with an underwritten offering of the Company's securities so long as any selling shareholders in such underwritten offering are subject to a lock-up agreement of the same duration. The Company is also permitted in certain circumstances and upon notice to the Investors to suspend a Permitted Window after it has opened for up to 60 days (and fewer days in certain circumstances). LEGAL MATTERS The validity of the issuance of the shares of Common Stock offered hereby will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto Square, Suite 700, Palo Alto, California 94306. EXPERTS The financial statements of Cellegy Pharmaceuticals, Inc. appearing in Cellegy Pharmaceuticals, Inc.'s Annual Report (Form 10-KSB) for the year ended December 31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. - -------------------------------------------------------------------------------- No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Company since such date. --------------------- TABLE OF CONTENTS Page ---- Available Information 3 Incorporation of Certain Documents by Reference 4 Forward Looking Statements 5 The Company 5 Risk Factors 7 Selling Shareholders 12 Plan of Distribution 13 Legal Matters 14 Experts 14 1,999,887 Shares of Common Stock September 19, 1997 --------------------- PROSPECTUS --------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. Other Expenses of Issuance and Distribution. The following table sets forth the costs and expenses to be paid in connection with the sale of the shares of Common Stock being registered hereby, all of which will be paid by the Registrant. All amounts are estimates except for the Securities and Exchange Commission registration fee. Securities and Exchange Commission registration fee $ 3,600 Nasdaq SmallCap Market filing fee 7,500 Accounting fees and expenses 3,500 Legal fees and expenses 20,000 Printing and miscellaneous 4,000 ------------ Total $ 38,600 ------------ ITEM 15. Indemnification of Directors and Officers. The Registrant's Amended and Restated Articles of Incorporation (the "Restated Articles") include a provision that eliminates the personal liability of its directors to the Registrant and its shareholders for monetary damages for breach of the directors' fiduciary duties to the maximum extent permitted under California law. This limitation has no effect on a director's liability (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that a director believes to be contrary to the best interests of the Registrant or its shareholders or that involve the absence of good faith on the part of the director, (iii) for any transaction from which a director derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard for the director's duty to the Registrant or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of a serious injury to the Registrant or its shareholders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to the Registrant or its shareholders, (vi) under Section 310 of the California Corporations Code (the "California Code") (concerning contracts or transactions between the Registrant and a director) or (vii) under Section 316 of the California Code (concerning directors' liability for improper dividends, loans and guarantees). The provision does not extend to acts or omissions of a director in his capacity as an officer. Further, the provision has no effect on claims arising under federal or state securities laws and will not affect the availability of injunctions and other equitable remedies available to the Registrant's shareholders for any violation of a director's fiduciary duty to the Registrant or its shareholders. The Restated Articles also include an authorization for the Registrant to indemnify its agents (as defined in Section 317 of the California Code), through bylaws provisions, by agreement or otherwise, to the fullest extent permitted by law. Pursuant to this latter provision, the Registrant's Bylaws provide for indemnification of the Registrant's directors, officers and employees. Indemnification may only be authorized by a majority of Registrant's directors or shareholders or by order of a court, unless the agent has been successful on the merits. In addition, the Registrant's policy is to enter into indemnification agreements with each of its officers and directors. These indemnification agreements provide that directors and officers will be indemnified and held harmless to the fullest extent permitted by law. These agreements, together with the Restated Articles, may require the Registrant, among other things, to indemnify such directors, officers and employees against certain liabilities that may arise by reason of their status or service as directors or officers (other than liabilities resulting from willful misconduct of a culpable nature), to advance expenses to them as they are incurred, provided that they undertake to repay the amount advanced if it is ultimately determined by a court that they are not entitled to indemnification, and to obtain directors' and officers' insurance if available on reasonable terms. Section 317 of the California Code makes provisions for the indemnification of officers, directors and other corporate agents in terms sufficiently broad to indemnify such persons, under certain circumstances, for liabilities (including reimbursement of expenses incurred) arising under the Securities Act. The Underwriting Agreement referred to below sets forth certain provisions with respect to the indemnification of the Registrant and certain directors, officers, and controlling persons against certain losses and liabilities, including certain liabilities under the Securities Act. The Amended and Restated Registration Rights Agreement dated April 10, 1992, entered into by and among the Registrant and various investors, and the Amended and Restated Registration Rights Agreement dated February 10, 1995, entered into by and among the Registrant and various investors provide for cross indemnification of certain holders of Registrant's securities, and of Registrant and its officers and directors for certain liabilities existing under the Securities Act and otherwise. The Registrant also maintains a director and officer liability policy. ITEM 16. Exhibits. The following exhibits are filed herewith or incorporated by reference herein: Exhibit Number Exhibit Title - ------ ------------- 4.1 Amended and Restated Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form SB-2 (Registration No. 33-93288 LA) declared effective on August 11, 1995 (the "SB-2")). 4.2 Bylaws of the Company. (Incorporated by reference to Exhibit 3.3 to the SB-2). 4.3 Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the SB-2). 4.4 Common Stock Purchase Agreement dated as of July 23, 1997 by and among the Company and the Investors. 5.1 Opinion of Fenwick & West LLP. 23.1 Consent of Ernst & Young LLP, Independent Auditors. 24.1 Power of Attorney (See signature page). ITEM 17. Undertakings. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"); (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information in the Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that (i) and (ii) do not apply if the information required to be included in a post-effective amendment thereby is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and authorized this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Foster City, State of California, on September 19, 1997. CELLEGY PHARMACEUTICALS, INC. By: /s/ K. MICHAEL FORREST ------------------------------------ K. Michael Forrest President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints K. Michael Forrest and A. Richard Juelis, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement on Form S-3, and to file the same with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all of said attorneys-in-fact and agents, or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated.
Name Title Date Principal Executive Officer: /s/ K. MICHAEL FORREST President, Chief Executive Officer and September 19, 1997 - ------------------------------------ Director K. Michael Forrest Principal Financial Officer and Principal Accounting Officer: /s/ A. RICHARD JUELIS Vice President, Finance, Chief Financial September 19, 1997 - ------------------------------------ Officer and Secretary A. Richard Juelis Directors: /s/ CARL R. THORNFELDT, M.D. Chairman of the Board of Directors September 19, 1997 - ------------------------------------ Carl R. Thornfeldt, M.D. /s/ JACK L. BOWMAN Director September 19, 1997 - ------------------------------------ Jack L. Bowman /s/ DENIS R. BURGER, PH.D. Director September 19, 1997 - ------------------------------------ Denis R. Burger, Ph.D. /s/ PETER M. ELIAS, M.D. Director September 19, 1997 - ------------------------------------ Peter M. Elias, M.D. /s/ TOBI B. KLAR, M.D. Director September 19, 1997 - ------------------------------------ Tobi B. Klar, M.D. /s/ ALAN A. STEIGROD Director September 19, 1997 - ------------------------------------ Alan A. Steigrod /s/ LARRY J. WELLS Director September 19, 1997 - ------------------------------------ Larry J. Wells
EX-4.4 2 COMMON STOCK PURCHASE AGREEMENT EXHIBIT 4.4 CELLEGY PHARMACEUTICALS, INC. COMMON STOCK PURCHASE AGREEMENT THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of July 23, 1997 by and among Cellegy Pharmaceuticals, Inc., a California corporation (the "Company"), and the parties listed on the Schedule of Investors separately delivered to the Investors (the "Schedule of Investors") (each hereinafter individually referred to as an "Investor" and collectively referred to as the "Investors"). 1. AGREEMENT TO PURCHASE AND SELL STOCK. 1.1 Authorization. As of the Closing (as defined below) the Company will have authorized the issuance, pursuant to the terms and conditions of this Agreement, of up to 1,547,827 shares of the Company's Common Stock, no par value (the "Common Stock"). 1.2 Agreement to Purchase and Sell. The Company agrees to sell to each Investor at the Closing, and each Investor agrees, severally and not jointly, to purchase from the Company at the Closing, the number of shares of Common Stock for the aggregate price set forth beside such Investor's name on the Schedule of Investors, at the price per share for such Investor set forth on the Schedule of Investors. The shares of Common Stock purchased and sold pursuant to this Agreement will be collectively hereinafter referred to as the "Purchased Shares." 2. CLOSING. 2.1 The Closing. The purchase and sale of the Purchased Shares will take place at the offices of Fenwick & West LLP, Two Palo Alto Square, Suite 800, Palo Alto, California, at 11 a.m. Pacific Time, on July 23, 1997 or at such other time and place as the Company and Investors who have agreed to purchase a majority of the Purchased Shares listed on the Schedule of Investors mutually agree upon (which time and place are referred to in this Agreement as the "Closing"). At the Closing, the Company will deliver to each Investor a certificate representing the number of Purchased Shares that such Investor has agreed to purchase hereunder as shown on the Schedule of Investors against delivery to the Company by such Investor of the full purchase price of such Purchased Shares, paid by (i) a check payable to the Company's order, (ii) wire transfer of funds to the Company or (iii) any combination of the foregoing. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Investor that, except as set forth in the Disclosure Schedule and Schedule of Exceptions (the "Disclosure Schedule") separately delivered by the Company to the Investors (which Disclosure Schedule shall be deemed to be representations and warranties to the Investors by the Company under this Section and to qualify each of the representations and warranties set forth herein), the statements in the following paragraphs of this Section 3 are all true and correct: 3.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California, and has all requisite corporate power and authority to conduct its business as currently conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction where failure to be so qualified could reasonably be expected to have a material adverse effect on the business, financial condition, results of operations, assets or prospects of the Company (the "Business") (such effect referred to as a "Material Adverse Effect"). 3.2 Capitalization. Immediately before the Closing the capitalization of the Company will consist of the following: (a) Preferred Stock. A total of 5,000,000 authorized shares of Preferred Stock, no par value per share (the "Preferred Stock"), 1,100 of which have been designated as Series A Preferred Stock (the "Series A Preferred"). The Series A Preferred has the rights, preferences and privileges stated in the Certificate of Designation filed with the California Secretary of State on April 15, 1996. A total of 25 shares of Series A Preferred are issued and outstanding, and no other shares of Preferred Stock are outstanding. (b) Common Stock. A total of 20,000,000 authorized shares of Common Stock, of which approximately 5,879,115 shares were issued and outstanding as of June 30, 1997 (subject to increase only by employee stock option exercises after June 30, 1997 or by conversion of outstanding shares of Series A Preferred into shares of Common Stock). (c) Options, Warrants, Reserved Shares. Except for: (i) the conversion privileges of the Series A Preferred, (ii) the approximately 1,049,047 shares of Common Stock issuable upon exercise of options outstanding as of June 30, 1997, (iii) approximately additional 74,000 shares of Common Stock reserved for issuance under the Company's 1995 Directors Stock Option Plan, (iv) approximately additional 391,830 shares of Common Stock reserved for issuance under the Company's 1995 Equity Incentive Plan and (v) warrants to purchase an aggregate of 1,497,911 shares of Common Stock, there are not outstanding any options, warrants, rights or agreements for the purchase or acquisition from the Company of any shares of its capital stock or any securities convertible into or ultimately exchangeable or exercisable for any shares of the Company's capital stock. 3.3 Subsidiaries. The Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association, or other entity. 3.4 Due Authorization; No Violation. All corporate action on the part of the Company and its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Agreement, and the authorization, issuance, reservation for issuance and delivery of all of the Purchased Shares being sold under this Agreement, has been taken or will be taken prior to the Closing, and this Agreement constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Neither the execution, delivery or performance by the Company of this Agreement nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in a breach of any provision of the Restated Articles of Incorporation of the Company (the "Restated Articles") or the Company's Bylaws, (ii) cause a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any material agreement, instrument or obligation to which the Company is a party, which default could reasonably be expected to have a Material Adverse Effect or (iii) violate any law, statute, rule or regulation or judgment, order, writ, injunction or decree of any governmental authority, in each case applicable to the Company or its properties or assets and which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 3.5 Valid Issuance of Stock. The Purchased Shares, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration provided for herein, will be duly and validly issued, fully paid and nonassessable and are not subject to preemptive rights of any shareholder of the Company. 3.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for qualifications or filings under the Securities Act of 1933, as amended (the "Act") and the applicable rules and regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") under the Act, and all other applicable securities laws as may be required in connection with the transactions contemplated by this Agreement. All such qualifications will be effective on the Closing, and all such filings be made within the time prescribed by law. 3.7 Absence of Changes. After the respective dates as of which information is given in the Company's Proxy Statement for the annual meeting of shareholders held on June 5, 1997, the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996 and the Company's Quarterly Reports on Form 10-QSB for the quarter ended March 31, 1997, respectively (such documents, together with the Disclosure Schedule, referred to collectively as the "Disclosure Documents"), there has not been (i) any material adverse change in the Business, (ii) any transaction that is material to the Company, (iii) any obligation, direct or contingent, that is material to the Company, incurred by the Company, (iv) any change in the outstanding indebtedness of the Company that is material to the Company, (v) any dividend declared, paid or made on the capital stock of the Company or (vi) any loss or damage (whether or not insured) to the property of the Company which has been sustained which could reasonably be expected to have a Material Adverse Effect. 3.8 Litigation. There is no action, suit, proceeding, claim, arbitration or investigation ("Action") pending (or, to the Company's knowledge, currently threatened) against the Company, its activities, properties or assets, which (i) might prevent the consummation of the transactions contemplated hereby or (ii) if adversely resolved against the Company could reasonably be expected to have a Material Adverse Effect. 3.9 Nasdaq Listing. The Common Stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is listed on the Nasdaq SmallCap Market. To its knowledge, the Company has not received any notification that the Commission or the National Association of Securities Dealers, Inc. is contemplating the termination of such registration or listing. Before the Shelf Registration Statement is declared effective by the Commission, the Purchased Shares will have been approved for quotation on the Nasdaq SmallCap Market, subject to notice of issuance. 3.10 Exchange Act Filings. The Company has filed in a timely manner all reports and other information required to be filed ("Filings") with the Commission pursuant to the Exchange Act during preceding the twelve calendar months. On their respective dates of filing, the Filings complied as to form in all material respects with the requirements of the Exchange Act, and the published rules and regulations of the Commission promulgated thereunder. To the Company's knowledge, on their respective dates of filing, the Filings did not include any untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and all financial statements contained in the Filings fairly present the financial position of the Company on the dates of such statements and the results of operations for the periods covered thereby in accordance with generally accepted accounting principles consistently applied throughout the periods involved and prior periods, except as otherwise indicated in the notes to such financial statements. 3.11 Disclosure. To the Company's knowledge, the representations and warranties made by the Company in this Agreement (including the Disclosure Schedule) when read together do not contain any untrue statement of a material fact and do not omit to state a material fact necessary to make the statements herein as a whole not misleading. 3.12 Governmental Permits, Etc. The Company possesses all licenses, franchises, governmental approvals, permits or other governmental authorizations (collectively, "Authorizations") relating to the operation of the Business, except for those Authorizations the failure of which to possess would not, separately or in the aggregate, have a Material Adverse Effect. To the Company's knowledge, the Company is in compliance with the terms of all Authorizations and all laws, ordinances, regulations and decrees which to the Company's knowledge are applicable to the Business, except for such non-compliance which does not, separately or in the aggregate, have a Material Adverse Effect. 3.13 Business Relationships. In November 1996, the Company entered into a license agreement (the "Glaxo Agreement") with Glaxo Dermatology ("Glaxo"), a division of Glaxo Wellcome, Inc., granting Glaxo worldwide rights to Glylorin, a lipid compound of the Company. The Company does not have any knowledge that leads the Company to believe that Glaxo intends to terminate the Glaxo Agreement or its relationship with the Company, and the Company has not received any notices or other communications from Glaxo to that effect. 4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each Investor hereby represents and warrants to, and agrees with, the Company, that: 4.1 Authorization. All corporate action on the part of the Investor and its officers, directors and stockholders necessary for the authorization, execution and delivery of, and the performance of all obligations of the Investor under, this Agreement has been taken or will be taken prior to the Closing, and this Agreement constitutes a valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. 4.2 Purchase for Own Account. The Purchased Shares to be purchased by such Investor hereunder will be acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. If not an individual, such Investor also represents that such Investor has not been formed for the specific purpose of acquiring Purchased Shares. 4.3 Disclosure of Information. The Investor has received a copy of the Disclosure Documents and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Purchased Shares to be purchased by the Investor under this Agreement. Investor further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Purchased Shares and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Investor or to which the Investor had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3. 4.4 Investment Experience. Such Investor understands that the purchase of the Purchased Shares involves substantial risk. Such Investor: (i) has experience as an investor in securities of companies in the development stage and acknowledges that such Investor is able to fend for itself, can bear the economic risk of such Investor's investment in the Purchased Shares and has such knowledge and experience in financial or business matters that such Investor is capable of evaluating the merits and risks of this investment in the Purchased Shares and protecting its own interests in connection with this investment and/or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Investor to be aware of the character, business acumen and financial circumstances of such persons. 4.5 Accredited Investor Status. Unless otherwise expressly indicated on the Schedule of Investors to this Agreement, such Investor is an "accredited investor" within the meaning of Regulation D promulgated under the Act. 4.6 Restricted Securities. Such Investor understands that the Purchased Shares are characterized as "restricted securities" under the Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Act and the Rules and Regulations such securities may be resold without registration under the Act only in certain limited circumstances. In this connection, such Investor represents that such Investor is familiar with Rule 144 of the Commission and understands the resale limitations imposed thereby and by the Act. Such Investor understands that the Company is under no obligation to register any of the Purchased Shares except as provided in Section 7 below. 4.7 Further Limitations on Disposition. Without in any way limiting the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Purchased Shares unless and until: (a) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement and the provisions of Section 7 of this Agreement; or (b) (i) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) such Investor shall have furnished the Company, at the expense of such Investor or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such securities under the Act. Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be required: (i) for any transfer of any Purchased Shares in compliance with Rule 144 or Rule 144A, or (ii) for any transfer of Purchased Shares by an Investor that is a partnership or a corporation to (A) a partner of such partnership or shareholder of such corporation, or (B) the estate of any such partner or shareholder, or (iii) for the transfer by gift, will or intestate succession by any Investor to his or her spouse or lineal descendants or ancestors or any trust for any of the foregoing; provided, that in each of the foregoing cases the transferee agrees in writing to be subject to the terms of this Section 4 (other than Section 4.5) to the same extent as if the transferee were an original Investor hereunder. 4.8 Legends. It is understood that the certificates evidencing the Purchased Shares will bear the legends set forth below: (a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF, AND MAY HAVE CERTAIN REGISTRATION RIGHTS PURSUANT TO, THE PROVISIONS OF A PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER, WHICH MAY RESTRICT THE TRANSFER OF SUCH SHARES IN CERTAIN CIRCUMSTANCES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE. (c) After consultation with counsel for the Investor, any legend that counsel to the Company reasonably deems appropriate under the laws of the State of California. The legends set forth in (a) and (b) above shall be removed by the Company from any certificate evidencing Purchased Shares upon delivery to the Company of an opinion of counsel to the Investor, reasonably satisfactory to the Company, that the legended security can be freely transferred in a public sale without a registration statement being in effect under the Act and in compliance with exemption requirements under applicable state securities laws and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Purchased Shares. 4.9 Resale Restrictions. Each Investor agrees that it will not, to the extent requested by the Company or an underwriter or placement agent of securities of the Company, directly or indirectly offer, sell, contract or grant an option to sell, pledge, encumber, or otherwise dispose of or otherwise transfer (a "Disposition") any Purchased Shares (other than to donees, shareholders or partners of the Investor who agree to be similarly bound) for up to 180 days after the effective date of a registration statement of the Company filed under the Act; provided, however, that (i) such agreement shall be applicable only to the first such registration statement of the Company filed after the date of this Agreement that covers securities to be sold on its behalf to the public in an underwritten offering but not to any Registrable Securities (as hereinafter defined) that are included in and sold pursuant to such registration statement; and (ii) all executive officers and directors of the Company then holding Common Stock enter into similar agreements. 5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. 5.1 Closing. The obligations of each Investor under Section 2 of this Agreement to purchase the Purchased Shares at the Closing are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, and the Company shall use all reasonable efforts to cause such conditions to be satisfied on or before the Closing: 5.1.1 Representations and Warranties True. Each of the representations and warranties of the Company contained in Section 3 shall be true and correct on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 5.1.2 Performance. The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein. 5.1.3 Compliance Certificate. The Company shall have delivered to the Investors at the Closing a certificate signed on its behalf by its President, Chief Executive Officer, or Chief Financial Officer certifying that the conditions specified in Sections 5.1.1 and 5.1.2 have been fulfilled. 5.1.4 Registration; Securities Exemptions. The offer and sale of the Purchased Shares to the Investors pursuant to this Agreement shall be exempt from the registration requirements under the Act and the California Corporate Securities Law of 1968, as amended, and the rules thereunder (the "Law") and the registration and/or qualification requirements of all other applicable state securities laws. 5.1.5 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investor and to special counsel to the Investors, and they shall each have received all such documents as they may reasonably request. 5.1.6 Transfer Agent. The Company shall have made provision to include the Purchased Shares within the authority of its transfer agent and/or registrar for its shares. 5.1.7 No Material Change. There shall have been no material adverse change in the Business from the date of this Agreement. 5.1.8 Opinion of Counsel. The Investors shall have received an opinion of counsel to the Company substantially in the form of Exhibit B attached hereto. 6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. 6.1. Closing. The obligations of the Company under this Agreement to sell the Purchased Shares to the Investors at the Closing are subject to the fulfillment or waiver on or before the Closing of each of the following conditions by the Investor, and each Investor shall use all reasonable efforts to cause such conditions to be satisfied on or before the Closing: 6.1.1 Representations and Warranties. The representations and warranties of the Investor contained in Section 4 shall be true and correct on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 6.1.2 Payment of Purchase Price. The Investor shall have delivered to the Company the purchase price for the Purchased Shares specified for such Investor on the Schedule of Investors attached hereto, in accordance with the provisions of Section 2. 6.1.3 Registration; Securities Exemptions. The offer and sale of the Purchased Shares to the Investor pursuant to this Agreement shall be exempt from the registration requirements under the Act and shall be exempt from the qualification requirements of the Law and the registration and/or qualification requirements of all other applicable state securities laws. 6.1.4 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Company and to the Company's legal counsel, and the Company shall have received such documents as it may reasonably request. 7. REGISTRATION RIGHTS. 7.1 Definitions. For purposes of this Agreement: (a) Form S-3. The term "Form S-3" means such form under the Act as is in effect on the date hereof or any successor registration form under the Act subsequently adopted by the Commission which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission. (b) Holder. The term "Holders" shall mean holders of Registrable Securities that have registration rights pursuant to this Agreement. (c) Registration. The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement. (d) Registrable Securities. The term "Registrable Securities" means: (1) all of the Purchased Shares, (2) any other shares of Common Stock owned, at the time of filing of the Form S-3 by the Company, by an Investor that reasonably may be deemed to be an "affiliate" (as defined in Rule 144) of the Company, and (3) any shares of Common Stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, any of the shares of Common Stock that are included in clauses (1) and (2) above; provided, however, that the term "Registrable Securities" shall exclude in all events (and such securities shall not constitute "Registrable Securities") (i) any Registrable Securities sold or transferred by a person in a transaction in which the registration rights granted under this Agreement are not assigned in accordance with the provisions of this Agreement, (ii) any Registrable Securities sold in a public offering pursuant to a registration statement filed with the Commission or sold pursuant to Rule 144 promulgated under the Act ("Rule 144") or (iii) as to any Holder, the Registrable Securities held by such Holder if all of such Registrable Securities can be publicly sold without volume restriction within a three-month period pursuant to Rule 144. (e) Prospectus: The term "Prospectus" shall mean the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Act), as amended or supplemented by any prospectus supplement (including, without limitation, any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Shelf Registration Statement), and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. (f) Shelf Registration Statement. See Section 7.2(a). 7.2 Form S-3 Shelf Registration. (a) Registration. The Company shall prepare and file with the Commission within 60 days following the Closing and use all reasonable efforts to have declared effective as soon as practicable thereafter, a registration statement on Form S-3 (or, if the Company is not then eligible to use Form S-3, then another appropriate form) providing for the resale by the Holders of all of the Registrable Securities (the "Shelf Registration Statement"). The Shelf Registration Statement may include securities other than those held by Holders. Cellegy shall use its best efforts to keep the Shelf Registration Statement continuously effective, pursuant to the Act and the Rules and Regulations promulgated thereunder, until (i) the date when such Registrable Securities cease to meet the definition of Registrable Securities pursuant to Section 7.1, or (ii) the Company's obligations hereunder terminate; provided, however: (i) that the Holders will sell the Registrable Securities pursuant to such registration only during a "Permitted Window" (as defined below); (ii) if the Company furnishes to the Holders a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for sales to be made from such Shelf Registration Statement at such time (or, in the case a "Notice of Resale" (as defined below) has been given, that would be seriously detrimental to the Company and its shareholders for the Permitted Window to commence at such time) due to (A) the existence of a material development or potential material development involving the Company which the Company would be obligated to disclose in the Prospectus contained in the Shelf Registration Statement, which disclosure would in the good faith judgment of the Board of Directors of the Company be premature or otherwise inadvisable at such time or (B) concurrent public filings with the Commission of other registration statements, then the Company will have the right to defer the filing (the "Deferral Right") of the Shelf Registration Statement (or the commencement of the Permitted Window, as the case may be) for a period of not more than 60 days after the date it would otherwise be required to file the Shelf Registration Statement pursuant to this Section 7.2(a) (or after receipt of the Notice of Resale, as the case may be); provided, however, that the Company will not utilize the Deferral Right more than once in any twelve month period; and provided further, however, that the Company may defer the filing of the Shelf Registration Statement (or the commencement of the Permitted Window as the case may be) for up to 180 days if so requested by an underwriter in connection with an underwritten offering of the Company's securities so long as any selling shareholders in such underwritten offering are subject to a lock-up agreement of the same duration (other than with respect to the Company securities to be sold by such selling shareholders in such underwritten offering); and (iii) that the Company will not be required to effect any such registration, qualification or compliance under applicable state blue sky laws in any particular jurisdiction in which the Company would thereby be required to qualify to do business or to execute a general consent to service of process. In the event that the Shelf Registration Statement shall cease to be effective, the Company shall promptly prepare and file a new registration statement covering the Registrable Securities and shall use its best efforts to have such registration statement declared effective as soon as possible. Any such registration statement shall be considered a "Shelf Registration Statement" hereunder. (b) Permitted Window. For the purposes of this Agreement, a "Permitted Window" with respect to a Holder is a period of 30 consecutive calendar days commencing upon delivery to the Holder of the Company's written notification to the Holder in response to a Notice of Resale that the Prospectus contained in the Shelf Registration Statement is available for resale. In order to cause a Permitted Window to commence, a Holder must first give written notice to the Company of its present intention to sell part or all of the Registrable Securities pursuant to such registration (a "Notice of Resale"). Upon receipt of such Notice of Resale, the Company will give written notice to the Holders as soon as practicable, but in no event not more than three business days after such receipt, that (A) the Permitted Window will commence on the date such notice is received by the Holder, (B) it is necessary for the Company to supplement the Prospectus or make an appropriate filing under the Exchange Act so as to cause the Prospectus to become current (unless a certificate of the President or Chief Executive Officer is delivered as provided in 7.2(a)(ii) above), or (C) the Company is required under the Act and the Rules and Regulations thereunder to amend the Shelf Registration Statement in order to cause the Prospectus to be current (unless a certificate of the President or Chief Executive Officer is delivered as provided in 7.2(a)(ii) above). If the Company determines that a supplement to the Prospectus, the filing of a report pursuant to the Exchange Act or an amendment to the Shelf Registration Statement required under the Act, as provided above, is necessary, it will take such actions as soon as reasonably practicable (subject to paragraph (c) below), and the Company will notify the Holder of the filing of such supplement, report or amendment, and, in the case of an amendment, the effectiveness thereof, and the Permitted Window will then commence. (c) Closing of Permitted Window. During a Permitted Window and in the event (i) of the happening of any event of the kind described in Section 7.3(c) hereof or (ii) that, in the judgment of the Company's Board of Directors, it is advisable to suspend use of the Prospectus for a discrete period of time due to undisclosed pending corporate developments or pending public filings with the Commission (which need not be described in detail), the Company shall deliver a certificate in writing to the Holder to the effect of the foregoing and, upon receipt of such certificate, the Permitted Window shall terminate. The Permitted Window shall resume upon the Holder's receipt of copies of the supplemented or amended Prospectus, or at such time as the Holder is advised in writing by the Company that the Prospectus may be used, and at such time as the Holder has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus and which are required to be delivered as part of the Prospectus. In any event, the Permitted Window shall resume no later than 60 days after it has been terminated pursuant to this Section. If the Company has previously terminated a Permitted Window pursuant to this subsection within 90 days of the date that it delivers another notice pursuant this subsection terminating another Permitted Window, then the time period set forth in the preceding sentence shall be shortened so that the Permitted Window shall resume no later than 10 days after it has been terminated pursuant to such second notice. (d) Expenses. The registration fees and expenses incurred by the Company in connection with the Shelf Registration Statement and actions taken by the Company in connection with each Permitted Window shall be borne by the Company. Holder shall be responsible for any fees and expenses of its counsel or other advisers. 7.3 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously as reasonably possible: (a) Furnish to the Holder such number of copies of a Prospectus, including a preliminary Prospectus, in conformity with the requirements of the Act, and such other documents as it may reasonably request in order to facilitate the disposition of the Registrable Securities owned by it that are included in such registration. (b) Use all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (c) Notify the Holder promptly (i) of any request by the Commission or any other federal or state governmental authority during the period of effectiveness of a registration statement for amendments or supplements to such registration statement or related prospectus or for additional information, (ii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose and (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (d) Make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible time. 7.4 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7.2 that the Holder shall furnish to the Company such information regarding it, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to timely effect the registration of its Registrable Securities. 7.5 Indemnification. In the event any Registrable Securities are included in a registration statement under this Agreement: (a) By Cellegy. To the extent permitted by law, the Company will indemnify and hold harmless the Holder, officers and directors of the Holder, each entity that may be deemed to be an "underwriter" within the meaning of the Act in connection with the sale of any Registrable Securities pursuant to the Shelf Registration Statement and each person, if any, who controls the Holder or any such underwriter within the meaning of the Act or the Exchange Act (such persons and entities referred to as "Holder Indemnified Parties"), against any losses, expenses, damages or liabilities to which they may become subject under the Act, the Exchange Act or other federal or state law (a "Loss"), insofar as such Losses (or actions in respect thereof) arise out of any claim, action or proceeding brought by a third party arising out of or based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement filed pursuant to this Section 7; (ii) the omission or alleged omission to state in a registration statement filed pursuant to this Section 7 a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each Holder Indemnified Party for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such Violation; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such Loss, if such settlement is effected without the consent of the Company, nor shall the Company be liable in any such case for any such Loss to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Holder Indemnified Party; and provided further, that the Company will not be liable for the legal fees and expenses of more than one counsel to the Holder Indemnified Parties. (b) By the Holder. To the extent permitted by law, each Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, and each person, if any, who controls the Company within the meaning of the Act (such persons and entities referred to as "Company Indemnified Parties") against any Losses to which such Company Indemnified Parties may become subject under the Act, the Exchange Act or other federal or state law, insofar as such Losses (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holder expressly for use in connection with such registration; and the Holder will reimburse any legal or other expenses reasonably incurred by such Company Indemnified Parties in connection with investigating or defending any such Violation; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of the Holder; provided further, that the Holder shall not be liable for the legal fees and expenses of more than one counsel to the Company Indemnified Parties; and provided further, that the total amounts payable in indemnity by the Holder under this subsection in respect of any Violation shall not exceed the net proceeds received by the Holder in the registered offering out of which such Violation arises. (c) Notice. Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim for indemnification in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement of such an action and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel elected by the indemnifying party and reasonably acceptable for the indemnified party materially; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if the indemnified party has been advised in writing by counsel that representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of liability to the indemnified party under this Section to the extent such delay caused actual prejudice to the indemnified party, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section. (d) Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of the Company and the Holder are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question becomes effective or in the amended prospectus filed with the Commission pursuant to Rule 424(b) of the Commission (the "Final Prospectus"), such indemnity agreements shall not inure to the benefit of any person if a copy of the Final Prospectus was furnished in a timely manner to the indemnified party and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Act. (e) Contribution. In order to provide for just and equitable contribution to joint liability under the Act in any case in which either (i) a Holder Indemnified Party makes a claim for indemnification pursuant to this Section but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section provides for indemnification in such case, or (ii) contribution under the Act may be required on the part of the Holder Indemnified Party in circumstances for which indemnification is provided under this Section then, and in each such case, the Company and the Holder Indemnified Parties will contribute to the aggregate Losses to which they may be subject (after contribution from others) in proportion to their relative fault as determined by a court of competent jurisdiction; provided however, that in no event, except in instances of fraud by the Holder in which there is no limitation, (i) shall the Holder be responsible for more than the portion represented by the percentage that the public offering price of its Registrable Securities offered by and sold under the registration statement bears to the public offering price of all securities offered by and sold under such registration statement and (ii) shall the Holder be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by the Holder pursuant to such registration statement; and in any event, no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (f) Survival. The obligations of the Company and the Holder under this Section shall survive the completion of any offering of Registrable Securities in a registration statement, and otherwise. 7.6 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, for so long as the Holder owns any Registrable Securities, the Company agrees to: (a) Make and keep adequate, current public information available, as those terms are understood and defined in Rule 144 under the Act, at all times; (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and (c) So long as the Holder owns any Registrable Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 7.7 Termination of Cellegy's Obligations. The Company shall have no obligations to register, or maintain, a registration statement governing Registrable Securities, (i) if all Registrable Securities have been registered and sold pursuant to registrations effected pursuant to this Agreement, or (ii) with respect to any particular Holder, at such time as all Registrable Securities held by such Holder may be sold within a three month period under Rule 144, as it may be amended from time to time, including but not limited to amendments that reduce that period of time that securities must be held before such securities may be sold pursuant to such rule. 7.8 Piggyback Registrations. (a) The Company shall use its best efforts to notify all Holders of Registrable Securities in writing at least twenty (20) days before filing any registration statement under the Act for purposes of effecting a public offering by the Company of securities of the Company (excluding registration statements relating to any employee benefit plan or a corporate reorganization) and will afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by such Holder shall, within ten (10) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any such registration statement filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. The Holders' rights to include any Registrable Securities in any offering under this Section are subject in all events to the ability of the managing underwriter for such offering (or, if there is no underwriter, then the Company) to exclude some or all of the Registrable Securities requested to be registered on the basis of a good faith determination that inclusion of such securities might adversely affect the success of the offering or otherwise adversely affect the Company. Any such exclusion shall be pro rata among all Holders who have requested to sell Registrable Securities in such registration. (b) Underwriting. If a registration statement under which the Company gives notice under this Section is for an underwritten offering, then the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder's Registrable Securities to be included in a registration pursuant to this Section shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting and shall furnish such information and documents as the Company or the managing underwriter or underwriters may reasonably request. Notwithstanding any other provision of this Agreement, if the managing underwriter determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude Registrable Securities from the registration and the underwriting, pro rata among all Holders who have requested to sell Registrable Securities in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. (c) Expenses. The Holders shall be responsible for their pro rata share of registration fees and underwriters' and brokers' discounts and commissions relating to any Registrable Securities included in such registration. Other registration expenses (such as legal and accounting fees of counsel to the Company, printing fees, road show expenses, and the like) shall be shall be borne by the Company. (d) Number of Piggyback Registrations. The piggyback registration rights granted to the Holders under this Section shall apply to the first three registrations filed by the Company after the Closing. 8. ASSIGNMENT. Notwithstanding anything herein to the contrary, the registration rights of the Holder under Section 7 hereof may be assigned only to a party who acquires from the Holder at least 33% of the shares of Common Stock that constituted the original number of Registrable Securities acquired by the original Holder of the Registrable Securities or, if less, at least 100,000 shares of Registrable Securities (as such number may be adjusted to reflect subdivisions, combinations and stock dividends of the Company's Common Stock), (such party is referred to as a "Assignee"); provided, however, that (w) no party may be assigned any of the foregoing rights until the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the Assignee and identifying the securities of the Company as to which the rights in question are being assigned; (x) that any such Assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement; and (y) no such assignment or assignments shall increase the obligations of the Company hereunder. 9. MISCELLANEOUS. 9.1 Survival of Warranties. The representations, warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investors, their counsel or the Company, as the case may be. 9.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. 9.3 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed under the internal laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California, without reference to principles of conflict of laws or choice of laws. The parties hereby submit to the exclusive jurisdiction of the state and federal courts located in San Mateo County, California, for purposes of any action arising out of or relating to this Agreement or the transactions contemplated hereby, and agree that service of process in such action may be made in the manner provided herein for the delivery of notices. 9.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.5 Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference. 9.6 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified, by telecopier or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified in the case of the Company, at 1065 E. Hillsdale Blvd., Foster City, CA 94404, attention: President, with a copy to C. Kevin Kelso, Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306, or in the case of Investor, at the record address for such Investor as reflected on the books of the Company, with a copy to: William Greason, Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, NY 10112, or at such other address as any party may designate by giving ten (10) days advance written notice to the other party. Notices shall be deemed delivered upon delivery if personally delivered, one business day after transmission with confirmation of receipt if sent by telecopier, or three days after deposit in the mails if mailed. 9.7 No Finder's Fees. Each party represents that it neither is nor will be obligated for any finder's or broker's fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's or broker's fee (and any asserted liability) for which the Investor or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and to hold harmless each Investor from any liability for any commission or compensation in the nature of a finder's or broker's fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 9.8 Costs, Expenses. Each party's costs in connection with the preparation, execution delivery and performance of this Agreement (including without limitation legal fees) shall be borne by that party. 9.9 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors holding a majority of the Purchased Shares purchased hereunder. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Purchased Shares at the time outstanding (even if such Investor or other holder did not vote with respect to, or voted against, such amendment or waiver), each future holder of such securities, and the Company. The Investors acknowledge that by virtue of this provision, holders of a majority of the Purchase Shares may bind other holders to amendment or waivers that such other holders may have voted to oppose. 9.10 Severability. If one or more provisions of this Agreement are held to be invalid, illegal or unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms. 9.11 Entire Agreement. This Agreement, together with any exhibits or schedules hereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings duties or obligations between the parties with respect to the subject matter hereof. 9.12 Further Assurances. From and after the date of this Agreement, upon the request of an Investor or the Company, the Company and the Investors shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. [Remainder of this page intentionally left blank] COUNTERPART SIGNATURE PAGE COMMON STOCK PURCHASE AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Common Stock Purchase Agreement as of the date first above written. THE COMPANY: INVESTOR: Cellegy Pharmaceuticals, Inc., a California corporation By:________________________________ By:________________________________ Title:_____________________________ Title:_____________________________ EX-5.1 3 OPINION OF FENWICK & WEST LLP EXHIBIT 5.1 September 19, 1997 Cellegy Pharmaceuticals, Inc. 1065 E. Hillsdale Blvd. Suite 418 Foster City, CA 94404 Gentlemen/Ladies: At your request, we have examined the Registration Statement on Form S-3 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission (the "Commission") on or about September 19, 1997 in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 1,999,887 shares of your Common Stock (the "Stock"), including 1,974,887 shares that are presently issued and outstanding (the "Outstanding Shares") and 25,000 shares (the "Warrant Shares") that are issuable upon the exercise of a warrant (the "Warrant") and all of which will be sold by the selling shareholders named in the Prospectus included within the Registration Statement (the "Selling Shareholders"). In rendering this opinion, we have examined the following: (1) the Registration Statement, together with the Exhibits filed as a part thereof; (2) your registration statement on Form 8-A filed with the Commission in connection with the Company's initial public offering in August 1995; (3) the Prospectus prepared in connection with the Registration Statement; (4) the minutes of meetings and actions by written consent of the Board of Directors that are contained in your minute books and that are in our possession, that relate to issuance of the Stock and the Warrant; (5) the stock purchase and other agreements, other than those filed as exhibits to the Registration Statement, pursuant to which the Selling Shareholders acquired the Stock and the Warrant as described in the Registration Statement; and (6) a Management Certificate addressed to us and dated of even date herewith executed by the Company containing certain factual and other representations. In our examination of documents for purposes of this opinion, we have assumed, and express no opinion as to, the genuineness of all signatures on original documents, the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies, the legal capacity of all natural persons executing the same, the lack of any undisclosed terminations, modifications, waivers or amendments to any documents reviewed by us and the due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof. As to matters of fact relevant to this opinion, we have relied solely upon our examination of the documents referred to above and have assumed the current accuracy and completeness of the information obtained from records included in the documents referred to above. We have made no independent investigation or other attempt to verify the accuracy of any of such information or to determine the existence or non-existence of any other factual matters; however, we are not aware of any facts that would lead us to believe that the opinion expressed herein is not accurate. In rendering any opinion that the shares of Stock are, or will when issued be, "fully paid," we have assumed that such shares were issued in accordance with the terms of the plans or agreements governing the issuance of such shares, and that the Company received full consideration for the issuance of such shares, provided for in the plans and agreements relating to such shares, and we have relied solely, without independent investigation, upon the representation of the Company to that effect in the Management Certificate referred to above. Based upon the foregoing, it is our opinion that the Outstanding Shares to be sold by the Selling Shareholders pursuant to the Registration Statement are, and the Warrant Shares, when issued upon exercise of the Warrant and fully paid for as provided in the Warrant will be, legally issued, and nonassessable and, to our knowledge, fully paid. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to all references to us, if any, in the Registration Statement, the Prospectus constituting a part thereof and any amendments thereto. This opinion speaks only as of its date and is intended solely for your use as an exhibit to the Registration Statement for the purpose of the above sale of the Stock and is not to be relied upon for any other purpose. Very truly yours, FENWICK & WEST LLP By: /s/ Fenwick & West LLP ------------------------- EX-23.1 4 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 and related Prospectus of Cellegy Pharmaceuticals, Inc. for the registration of 1,999,887 shares of its common stock and to the incorporation by reference therein of our report dated February 5, 1997 with respect to the financial statements of Cellegy Pharmaceuticals, Inc. included in its Annual Report on Form 10-KSB for the year ended December 31, 1996, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP San Jose, California September 19, 1997 -----END PRIVACY-ENHANCED MESSAGE-----