Exhibit
4.3


REGISTRATION RIGHTS AGREEMENT


        This
Registration Rights Agreement (this “Agreement”)
is made and entered into as of December 2, 2003, 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”).


        The
Company and the Purchasers hereby 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:


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


        “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 Date 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, (b) with respect to the
Registration Statement required to be filed to cover the resale by the Holders
of any Additional Shares not previously registered for resale, the earlier of:
(i) the 105th day following the first year anniversary of the Closing Date
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 (c) 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 45th day following the
Closing Date, (b) with respect to the Registration Statement required to
be filed to cover the resale by the Holders of any Additional Shares not
previously registered for resale, the first year anniversary of the Closing
Date and (c) with respect to any additional Registration Statements that
may be required pursuant to Section 2(a) hereof, the 45th 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.


        “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).


 


1

















 


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


        “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:
(i) the Shares issued pursuant to the Purchase Agreement, (ii) the
Warrant Shares and (iii) the Additional Shares issued and/or issuable
pursuant to the Purchase Agreement, 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, (ii) an additional
registration statement which is required to register the resale of any
Additional Shares not previously registered for resale, and (iii) each
additional registration statement, if any, contemplated by Section 2(d),
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.


        “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”
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


 


2

















 


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”). It is agreed and
understood that the Company shall, from time to time, be obligated to file an
additional Registration Statement 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 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”
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)), or (ii) a Registration Statement is not declared
effective by the Commission on or prior to its required Effectiveness Date, or
(iii) 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, or for purposes of
clause (iii) the date which such 20 consecutive or 40 Trading Day-period
(as applicable) is exceeded, being referred to as “Event Date”), then, in addition to any other rights available
to the Holders: (x) on the first month anniversary of each 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 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


 


3

















 


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 liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full. The 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.


        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 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 (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 become 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


 


4

















 


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 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 set
forth on Schedule 3(g) hereto 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.


        (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.


 


5

















 


        (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.


        4.    Registration Expenses.    All
fees and expenses incident to the Company’s performance of its obligation 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, investment advisors, partners, members,
shareholders 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 or omissions are based solely upon
information regarding


 


6

















 


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) 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. 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) 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 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 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.


 


7

















 


        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 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


 


8

















 


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.


        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.


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)    No Piggyback on
Registrations.    Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in a Registration Statement other than the
Registrable Securities, and the Company shall not during the Registration
Period enter into any agreement providing any such right to any of its security
holders. Except as and to the extent specified in Schedule 6(b) hereto,
the Company has not previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person which
have not been fully satisfied.


        (c)    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.


        (d)    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 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.


        (e)    Piggy-Back Registrations.    If
at any time during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities (including,
but not limited to, any Additional Shares) and the Company shall determine to
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 on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities (including, but not


 


9

















 


limited to, any Additional Shares) such holder
requests to be registered, subject to customary underwriter cutbacks applicable
to all holders of registration rights.


        (f)    Amendments and Waivers.    The
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Holder or Holders (as applicable) of
no less than 85% of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of certain Holders and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates, provided, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.


        (g)    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 telephone number
specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (ii) the Trading 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 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such
date, (iii) the Trading 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

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

  
	
  

  With a copy to:

  	
  

   

  	
  

  Patrick A. Pohlen

  Latham & Watkins LLP

  135 Commonwealth Drive

  Menlo Park, CA 94025

  
	
  

  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

  



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


        (h)    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 each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.


        (i)    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


 


10

















 


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.


        (j)    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 New York, 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 New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the non-exclusive jurisdiction of the New York 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 New York 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.


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


        (l)    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.


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


        (n)    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


 


11

















 


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.


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 

SIGNATURE PAGES TO FOLLOW]


 


12