Exhibit 4.3


 


REGISTRATION
RIGHTS AGREEMENT


 


This Registration Rights Agreement (this “Agreement”)
is made and entered into as of March 21, 2006, by and among Valentis, Inc., a
Delaware corporation (the “Company”), and the investors
signatory hereto (each a “Purchaser” and collectively, the “Purchasers”).


 


This Agreement is made pursuant to the
Securities Purchase Agreement, dated as of the date hereof, among the Company
and the Purchasers (the “Purchase Agreement”).


 


NOW, THEREFORE, IN CONSIDERATION of the mutual
covenants contained in this Agreement, and for other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
Company and the Purchasers agree as follows:


 


1.             Definitions.  Capitalized terms used and not otherwise defined
herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement.  As used in this Agreement, the
following terms shall have the respective meanings set forth in this Section 1:


 


“Effective Date”
means the date that the Registration Statement filed pursuant to Section 2(a)
is first declared effective by the Commission.


 


“Effectiveness Date”
means: (a) with respect to the initial Registration Statement required to be
filed to cover the resale by the Holders of the Registrable Securities, the
earlier of: (i) the 105th day following the Closing and (ii) the fifth Trading
Day following the date on which the Company is notified by the Commission that
the initial Registration Statement will not be reviewed or is no longer subject
to further review and comments, and (b) with respect to any additional
Registration Statements that may be required pursuant to Section 2(a) hereof,
the earlier of: (i) the 105th day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section and (ii) the fifth Trading Day
following the date on which the Company is notified by the Commission that such
additional Registration Statement will not be reviewed or is no longer subject
to further review and comments.  “Effectiveness Date”
shall also have the meaning specified in Section 2(b).


 


“Effectiveness Period”
shall have the meaning set forth in Section 2(a).


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended.


 


“Filing Date”
means: (a) with respect to the initial Registration Statement required to be
filed to cover the resale by the Holders of the Registrable Securities, the 30th
day following the Closing, and (b) with respect to any additional Registration
Statements that may be required pursuant to Section 2(a) hereof, the 30th day
following the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under such
Section.


 


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“Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.


 


“Indemnified Party”
shall have the meaning set forth in Section 5(c).


 


“Indemnifying Party”
shall have the meaning set forth in Section 5(c).


 


“Losses” shall
have the meaning set forth in Section 5(a).


 


“Person”
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.


 


“Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by a 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.


 


“Registrable Securities”
means the Shares issued pursuant to the Purchase Agreement and the Warrant
Shares, together with any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event, or any conversion
price adjustment with respect thereto.


 


“Registration Statement”
means each of the following:  (i) an initial registration statement which
is required to register the resale of the Registrable Securities, and (ii) each
additional registration statement, if any, contemplated by Section 2(b), and
including, in each case, the Prospectus, amendments and supplements to each
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.


 


“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.


 


“Rule 415” means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.


 


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“Rule 424” means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such Rule.


 


“Securities Act”
means the Securities Act of 1933, as amended.


 


“Shares” shall
have the meaning set forth in the Purchase Agreement.


 


“Warrant Shares”
shall have the meaning set forth in the Purchase Agreement.


 


2.             Registration.


 


(a)           On or prior to each Filing Date, the Company shall prepare and file
with the Commission a Registration Statement covering the resale of all
Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415.  The Registration Statement shall be on Form S-3
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall
be on another appropriate form for such purpose) and shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) the “Plan of Distribution” in
substantially the form attached hereto as Annex A.  The Company
shall cause the Registration Statement to be declared effective under the
Securities Act as soon as possible but, in any event, no later than the
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the date which
is two years after the date that the Registration Statement is declared
effective by the Commission or such earlier date when all Registrable
Securities covered by the Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Holders (the “Effectiveness Period”). Such Registration Statement shall also cover, to the extent
allowable under the Securities Act and the rules and regulations promulgated
thereunder (including Rule 416), such indeterminate number of additional shares
of Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities. It is agreed and
understood that the Company shall, from time to time, be obligated to file one
or more additional Registration Statements to cover any Registrable Securities
which are not registered for resale pursuant to a pre-existing Registration
Statement.


 


(b)           If for any reason the Commission does not permit all of the Registrable
Securities to be included in the Registration Statement filed pursuant to
Section 2(a), then the Company shall prepare and file as soon as possible after
the date on which the Commission shall indicate as being the first date or time
that such filing may be made, but in any event by the 30th day following such date, an additional
Registration Statement covering the resale of all Registrable Securities not
already covered by an existing and effective Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415, on Form S-3
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in 


 


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which
case such registration shall be on another appropriate form for such
purpose).  Each such Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) the “Plan of Distribution” in
substantially the form attached hereto as Annex A.  The Company
shall cause each such Registration Statement to be declared effective under the
Securities Act as soon as possible but, in any event, no later than the 90th day following the date on which the Company
becomes aware that such Registration Statement is required to be filed under
this Agreement (each such 90th day, the “Effectiveness Date” for such Registration Statement), and
shall use its best efforts to keep such Registration Statement continuously
effective under the Securities Act during the entire Effectiveness Period.


 


(c)           If: (i) a Registration Statement is not filed on or prior to its Filing
Date (if the Company files a Registration Statement without affording the
Holders the opportunity to review and comment on the same as required by
Section 3(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), (ii) a Registration Statement is not declared effective by the
Commission on or prior to its required Effectiveness Date, (iii) the Company
fails to file with the Commission a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five (5) Trading Days of
the date on which the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be reviewed
or is not subject to further review, or (iv) after its Effective Date,
such Registration Statement ceases for any reason to be effective and available
to the Holders as to all Registrable Securities to which it is required to
cover at any time prior to the expiration of its Effectiveness Period for an
aggregate of more than 20 consecutive Trading Days or an aggregate of 40
Trading Days (which need not be consecutive), (any such failure or breach being
referred to as an “Event,” and for
purposes of clauses (i) or (ii) the date on which such Event occurs, and for
purposes of clause (iii) the date on which such five Trading Day period is
exceeded and for purposes of clause (iv) the date on which such 20 consecutive
or 40 Trading Day-period (as applicable) is exceeded, being referred to as the “Event Date”), then,
in addition to any other rights available to the Holders: (x) on such Event
Date the Company shall pay to each Holder an amount in cash, as liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase price paid
by such Holder pursuant to the Purchase Agreement; and (y) on each monthly
anniversary of each such Event Date thereof (if the applicable Event shall not
have been cured by such date) until the applicable Event is cured, the Company
shall pay to each Holder an amount in cash, as partial liquidated damages and
not as a penalty, equal to 1.5% of the aggregate purchase price paid by such
Holder pursuant to the Purchase Agreement, provided, that all periods
shall be tolled, with respect to a Holder, by the number of Trading Days in
excess of five (5) during which such Holder fails to provide the Company with
information regarding such Holder which was requested by the Company in order
to effect the registration of such Holder’s Registrable Securities. It shall be
a condition precedent to the obligations of the Company to pay any liquidated
damages pursuant to this Section 2 with respect to the Registrable Securities
of any Holder that such Holder shall furnish to the Company such information
regarding itself and the Registrable Securities held by it. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at a
rate of 12% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Holder, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such interest
thereon, are 


 


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paid in
full.  The partial liquidated damages pursuant to the terms hereof shall
apply on a pro rata basis for any portion of a month prior to the cure of an
Event. Notwithstanding any provisions of this Agreement to the contrary, in no
event shall the Company be obligated to pay any liquidated damages to any
Holder in respect of any Registrable Securities in an amount that exceeds 10%
of the purchase price paid to the Company for such Registrable Securities.


 


(d)           The Company shall not, from the date hereof until the Effective Date of
the Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities other than a
Registration Statement on Form S-8.


 


3.             Registration Procedures


 


In connection with the Company’s registration
obligations hereunder, the Company shall:


 


(a)           Not less than four Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall furnish to the Holders copies of all such documents proposed to
be filed which documents (other than those incorporated by reference) will be
subject to the review of such Holders. The Company shall not file a
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable Securities shall
reasonably object in good faith.


 


(b)           (i)  Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for its Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten Trading
Days, to any comments received from the Commission with respect to each
Registration Statement or any amendment thereto and, as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to such Registration Statement that
pertains to the Holders as Selling Stockholders but not any comments that would
result in the disclosure to the Holders of material and non-public information
concerning the Company; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
Registration Statements and the disposition of all Registrable Securities
covered by each Registration Statement.


 


(c)           Notify the Holders as promptly as reasonably possible (and, in the case
of (i)(A) below, not less than three Trading Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day: (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration 


 


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Statement
is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a “review” of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (in which case the
Company shall provide true and complete copies thereof and all written
responses thereto to each of the Holders that pertain to the Holders as a
Selling Stockholder or to the Plan of Distribution, but not information which
the Company believes would constitute material and non-public information); and
(C) with respect to each Registration Statement or any post-effective
amendment, when the same has been declared effective; (ii) of any request by
the Commission or any other Federal or state governmental authority for
amendments or supplements to a Registration Statement or Prospectus or for
additional information that pertains to the Holders as Selling Stockholders or
the Plan of Distribution; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) 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; and (v) of the occurrence of
any event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made
in such Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to such Registration Statement, Prospectus or
other documents so that, in the case of such Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.


 


(d)           Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.


 


(e)           Furnish to each Holder, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission; provided, that the Company shall have no obligation to provide any
document pursuant to this clause that is available on the EDGAR system.


 


(f)            Promptly deliver to each Holder, without charge, as many copies of each
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. 
The Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.


 


(g)           Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or 


 


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qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of those
jurisdictions within the United States as any Holder reasonably requests in
writing to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statements; provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or subject the Company to any material tax in any such jurisdiction where it is
not then so subject.


 


(h)           Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to the Registration Statements, which certificates shall
be free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request. In connection
therewith, if required by the Company’s transfer agent, the Company shall
promptly after the effectiveness of the Registration Statement cause an opinion
of counsel as to the effectiveness of the Registration Statement to be
delivered to and maintained with its transfer agent, together with any other
authorizations, certificates and directions required by the transfer agent
which authorize and direct the transfer agent to issue such Registrable
Securities without legend upon sale by the holder of such shares of Registrable
Securities under the Registration Statement.


 


(i)            Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.


 


(j)            The Company may require each selling Holder to furnish to the Company a
certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and any Affiliate thereof.


 


(k)           The Company has read and understands the exercise
limitations contained in certain of the Warrants and, except as may be required
by applicable law or rules or regulations of the Commission, will not take a
position in any Registration Statement or other filing with the Commission that
a Holder whose Warrant contains such exercise limitations is the beneficial
owner of more than the percentage of Common Stock permitted to be beneficially
owned by such Holder absent an affirmative written statement by such Holder to
such effect. It is understood and agreed that current law, rules and
regulations of the Commission do not require the adoption of a position that a
Holder whose Warrant contains such exercise limitations is the beneficial owner
of more than the percentage of Common Stock permitted to be beneficially owned
by such Holder pursuant to the exercise limitations contained in the Warrants.


 


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4.             Registration Expenses. All fees and expenses incident to the Company’s
performance of or compliance with its obligations under this Agreement
(excluding any underwriting discounts and selling commissions and all legal
fees and expenses of legal counsel for any Holder) shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement.  The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the Trading Market on which the Common
Stock is then listed for trading, and (B) in compliance with applicable state
securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is reasonably requested
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement.  In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated
by this Agreement (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.


 


5.             Indemnification.


 


(a)           Indemnification
by the Company.  The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless each Holder, the officers,
directors, agents, partners, members, stockholders and employees of each of
them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
costs of preparation and reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus or any form of prospectus
or in any amendment or supplement thereto (it being understood that the Holder
has approved Annex A hereto for this purpose) or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (1) such untrue statements, alleged
untrue statements, omissions or alleged omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose) or (2)


 


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in the case of
an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of an Advice (as defined below) or an
amended or supplemented Prospectus, but only if and to the extent that
following the receipt of the Advice or the amended or supplemented Prospectus
the misstatement or omission giving rise to such Loss would have been
corrected.  The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.


 


(b)           Indemnification by Holders. Each
Holder shall, notwithstanding any termination of this Agreement, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon: (x) if the Company has
notified such Holder that the Company is no longer a “Seasoned Issuer” and the
prospectus delivery requirements of the Securities Act apply to sales by such
Holder, such Holder’s failure to comply with the prospectus delivery
requirements of the Securities Act or (y) any untrue statement of a material
fact contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus, or any form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading to the extent, but
only to the extent that, (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of an Advice or
an amended or supplemented Prospectus, but only if and to the extent that
following the receipt of the Advice or the amended or supplemented Prospectus
the misstatement or omission giving rise to such Loss would have been corrected.  In no event
shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.


 


(c)           Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified 


 


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Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.


 


An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless:  (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; (2) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party), provided, that the
Indemnifying Party shall not be liable for the fees and expenses of more than
one separate firm of attorneys at any time for all Indemnified Parties. 
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld.  No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.


 


All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).


 


(d)           Contribution. If a claim for indemnification
under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or 


 


10

















 


alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission.  The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in Section 5(c), any reasonable attorneys’
or other reasonable fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.


 


The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph.  Notwithstanding the provisions of this
Section 5(d), no Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually received by such
Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.


 


The indemnity and contribution agreements
contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties and are not in
diminution or limitation of the indemnification provisions under the Purchase
Agreement.


 


6.             Miscellaneous


 


(a)           Remedies. In the event of a breach by the
Company or by a Holder, of any of their obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.


 


(b)           Compliance.  Each Holder covenants and
agrees that it will comply with the prospectus delivery requirements of the
Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.


 


(c)           Discontinued Disposition. 
Each Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c), such Holder will forthwith discontinue disposition
of such Registrable Securities under the Registration Statement until such
Holder’s receipt of the 


 


11

















 


copies of
the supplemented Prospectus and/or amended Registration Statement or until it
is advised in writing (the “Advice”) by the Company that the
use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement.  The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.


 


(d)           Amendments and Waivers. No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and the Holder or Holders (as applicable) of
no less than two-thirds of the then outstanding Registrable Securities. 
The Company shall provide prior notice to all Holders of any proposed waiver or
amendment.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.


 


(e)           Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 5:00 p.m.
(California time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 5:00 p.m.
(California time) on any date and earlier than 11:59 p.m. (California time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.  The address for
such notices and communications shall be as follows:


 


	
   

  	
  If to the Company:

  	
   

  	
  Valentis, Inc.

  
	
   

  	
   

  	
   

  	
  863A Mitten Road

  
	
   

  	
   

  	
   

  	
  Burlingame, CA 94010

  
	
   

  	
   

  	
   

  	
  Attention:  Benjamin F. McGraw III, Pharm. D.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  	
  Latham & Watkins LLP

  
	
   

  	
   

  	
   

  	
  135 Commonwealth Drive

  
	
   

  	
   

  	
   

  	
  Menlo Park, CA 94025

  
	
   

  	
   

  	
   

  	
  Attention: Patrick A. Pohlen

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to a Purchaser:

  	
   

  	
  To the address set forth under such Purchaser’s name on the signature
  pages hereto

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to any other Person who is then the registered Holder:

  	
   

  	
  To the address of such Holder as it appears in the stock transfer
  books of the Company

  



 


12

















 


or such other address as may be designated in writing hereafter, in the
same manner, by such Person.


 


(f)            Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the benefit of each
Holder.  The Company may not assign its rights or obligations hereunder
without the prior written consent of the Holders of no less than two-thirds of the
then outstanding Registrable Securities.  Each Holder may assign its
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.


 


(g)           Execution and Counterparts. This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.


 


(h)           Governing Law. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of California, without regard to the principles of conflicts
of law thereof.  Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
Affiliates, employees or agents) may be commenced in the state and federal
courts sitting in the City of San Francisco (the “California Courts”).  Each party hereto hereby irrevocably submits to the
non-exclusive jurisdiction of the California Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally
subject to the jurisdiction of any California Court, or that such Proceeding has
been commenced in an improper or inconvenient forum.  Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.  Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any Proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby.  If either
party shall commence a Proceeding to enforce any provisions of this Agreement,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.


 


(i)            Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.


 


13

















 


(j)            Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction.  It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.


 


(k)           Headings. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.


 


(l)            Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser hereunder is several and not joint
with the obligations of any other Purchaser hereunder, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser hereunder.  The decision of each Purchaser to purchase
Securities pursuant to the Transaction Documents has been made independently of
any other Purchaser.  Nothing contained herein or in any other agreement
or document delivered at any closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this
Agreement.  Each Purchaser acknowledges that no other Purchaser has acted
as agent for such Purchaser in connection with making its investment hereunder
and that no Purchaser will be acting as agent of such Purchaser in connection
with monitoring its investment in the Securities or enforcing its rights under
the Transaction Documents.  Each Purchaser shall be entitled to protect
and enforce its rights, including without limitation the rights arising out of
this Agreement, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.


 


14

















 


IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.


 


 


	
   

  	
  VALENTIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Benjamin F. McGraw, III, Pharm.D.

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
					



 

















 


IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.


 


	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
   

  	
   

  
	
   

  	
  Attn.:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
   

  	
   

  
	
   

  	
  Attn:

  	
   

  	
   

  
											



 

















 


ANNEX
A


 


PLAN
OF DISTRIBUTION


 


The Selling Stockholders and any of their
pledgees, donees, transferees, assignees or other successors-in-interest may,
from time to time, sell, transfer or otherwise dispose of any or all of their
shares of Common Stock or interests in shares of Common Stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or
at negotiated prices. The Selling Stockholders may use one or more of the
following methods when disposing of the shares or interests therein:


 


•                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;


 


•                  block trades in
which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;


 


•                  purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;


 


•                  an exchange
distribution in accordance with the rules of the applicable exchange;


 


•                  privately
negotiated transactions;


 


•                  short sales
entered into after the effective date of the registration statement of which
this prospectus is a part;


 


•                  through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;


 


•                  broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;


 


•                  a combination of
any such methods of disposition; and


 


•                  any other method
permitted pursuant to applicable law.


 


The Selling Stockholders may also sell shares
under Rule 144 under the Securities Act, if available, rather than under this
prospectus.


 


Broker-dealers engaged by the Selling
Stockholders may arrange for other broker-dealers to participate in
sales.  Broker-dealers may receive commissions or discounts from the
Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser
of shares, from the 


 


2

















 


purchaser) in
amounts to be negotiated.  The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.


 


The Selling Stockholders may from time to
time pledge or grant a security interest in some or all of the Shares owned by
them and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell shares of Common Stock from time
to time under this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.


 


Upon the Company being notified in writing by
a Selling Stockholder that any material arrangement has been entered into with
a broker-dealer for the sale of Common Stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of
each such Selling Stockholder and of the participating broker-dealer(s), (ii)
the number of shares involved, (iii) the price at which such shares of Common
Stock were sold, (iv) the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated
by reference in this prospectus, and (vi) other facts material to the
transaction.  In addition, upon the Company being notified in writing by a
Selling Stockholder that a donee or pledge intends to sell more than 500 shares
of Common Stock, a supplement to this prospectus will be filed if then required
in accordance with applicable securities law.


 


The Selling Stockholders also may transfer
the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.


 


In connection
with the sale of the shares of Common Stock or interests in shares of Common
Stock, the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of Common Stock short and
deliver these securities to close out their short positions, or loan or pledge
the common stock to broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).


 


The Selling Stockholders and any
broker-dealers or agents that are involved in selling the shares may be deemed
to be “underwriters” within the meaning of the Securities Act in connection
with such sales.  In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act.


 


3

















 


The Company has advised the Selling
Stockholders that they are required to comply with Regulation M promulgated
under the Securities and Exchange Act during such time as they may be engaged
in a distribution of the shares.  The foregoing may affect the marketability
of the common stock.


 


The Company is required to pay all fees and
expenses incident to the registration of the shares.  The Company has
agreed to indemnify the Selling Stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act or
otherwise.


 


The
Company has agreed with the Selling Stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (a) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the registration statement
or (b) the date on which the shares may be sold without any volume limitations
pursuant to Rule 144(k) of the Securities Act.


 


4