<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 6, 1995
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SOMATIX THERAPY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3827 94-2762045
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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850 MARINA VILLAGE PARKWAY, ALAMEDA, CA 94501-1034
(510) 748-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID W. CARTER
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
SOMATIX THERAPY CORPORATION
850 MARINA VILLAGE PARKWAY, ALAMEDA, CA 94501-1034
(510) 748-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
J. STEPHAN DOLEZALEK, ESQ. PAUL CLEVELAND, ESQ.
SONYA F. ERICKSON, ESQ. COOLEY GODWARD CASTRO
BROBECK, PHLEGER & HARRISON HUDDLESON & TATUM
TWO EMBARCADERO PLACE FIVE PALO ALTO SQUARE
2200 GENG ROAD 3000 EL CAMINO REAL
PALO ALTO, CA 94303 PALO ALTO, CA 94306
(415) 424-0160 (415) 843-5000
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box. /
/
If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SECURITY(1) PRICE(1) FEE
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Common Stock, $0.01
par value per
share............... 2,476,500 $4.0625 $10,060,781 $3,469
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</TABLE>
(1) The price of $4.0625 per share, which was the average of the high and low
prices of the Common Stock reported by the Nasdaq National Market on June
30, 1995, is set forth solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SOMATIX THERAPY CORPORATION
Cross Reference Sheet showing the location in the Prospectus of the Items
on Form S-3
<TABLE>
<CAPTION>
LOCATION IN
FORM S-3 ITEM AND CAPTION PROSPECTUS
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<S> <C>
1. Forepart of the Registration Statement and Outside Cover
Page of Prospectus...................................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus... Inside Front and Outside
Back Cover Pages
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges........................................... Risk Factors; The Company
4. Use of Proceeds........................................... *
5. Determination of Offering Price........................... *
6. Dilution.................................................. *
7. Selling Security Holders.................................. Selling Stockholders
8. Plan of Distribution...................................... Outside Front Cover Page;
Plan of Distribution
9. Description of Securities to Be Registered................ Description of Capital Stock
10. Interests of Named Experts and Counsel.................... *
11. Material Changes.......................................... *
12. Incorporation of Certain Information by Reference......... Inside Front Cover Page
13. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.............................. *
</TABLE>
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* Such item is inapplicable or the answer thereto is in the negative.
<PAGE> 3
PROSPECTUS
2,476,500 SHARES
SOMATIX THERAPY CORPORATION
COMMON STOCK
($0.01 PAR VALUE PER SHARE)
------------------------
This Prospectus relates to the public offering, which is not being
underwritten, of shares (the "Shares") of Common Stock, par value $0.01 per
share (the "Common Stock") of Somatix Therapy Corporation (the "Company"). The
Shares may be offered by certain stockholders of the Company or by pledges,
donees, transferees or other successors in interest that receive such shares as
a gift, partnership distribution or other non-sale related transfer (the
"Selling Stockholders") from time to time in transactions on the Nasdaq National
Market, in privately negotiated transactions, or by a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Shares are issuable upon conversion of
Series A Preferred Stock and exercise of Warrants received by the Selling
Stockholders in a private placement by the Company. See "Recent Developments."
The Series A Preferred Stock and Warrants, and the Shares issuable upon exercise
of the Warrants, were issued pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 4(2) thereof. The Shares are being registered by the Company
pursuant to registration rights granted to the Selling Stockholders in
connection with the private placement. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Selling Stockholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
certain expenses (other than fees and expenses, if any, of counsel or other
advisors to the Selling Stockholders) in connection with the registration and
sale of the Shares being offered by the Selling Stockholders. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
The Common Stock of the Company is traded on the Nasdaq National Market
("Nasdaq") under the symbol "SOMA." On June 30, 1995, the last sale price for
the Common Stock as reported by Nasdaq was $4.25 per share.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them 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.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 4.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July , 1995.
<PAGE> 4
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Stockholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
covered by this Prospectus, nor does it constitute an offer to or solicitation
of any person in any jurisdiction in which such offer or solicitation may not
lawfully be made.
AVAILABLE INFORMATION
Somatix Therapy Corporation ("Somatix" or the "Company"), is subject to the
information requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, is required to file periodic
reports, proxy materials and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at Suite 1400, Northwest Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661, and at Room 1400, 75
Park Place, New York, New York 10007, and copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock of the
Company is quoted on the Nasdaq National Market, and such material may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W. Washington,
D.C. 20006.
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits and schedules thereto) on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Shares offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and to
which reference is hereby made. Statements made in this Prospectus as to the
contents of any document referred to are not necessarily complete. With respect
to each such document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement may be inspected at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus and made a part hereof:
(i) Annual Report on Form 10-K for the fiscal year ended June 30,
1994.
(ii) Quarterly Report on Form 10-Q for the quarters ended September 30,
1994, December 31, 1994 and March 31, 1995.
(iii) Quarterly Report on Form 10-Q/A for the quarter ended March 31,
1995.
(iv) Definitive Proxy Statement dated October 21, 1994, filed in
connection with the Company's 1994 Annual Meeting of Stockholders.
(v) Report on Form 8-K dated December 19, 1994, filed December 20,
1994, as amended February 14, 1995 and March 3, 1995.
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(vi) The description of the Company's Common Stock contained in its
registration statement on Form 8-A, File No. 0-14758, including any
amendment or report filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be incorporated by reference into this
Prospectus and shall be deemed to be a part of this Prospectus from the date of
filing of such documents. Any statement contained in a document incorporated by
reference shall be deemed to be modified or superseded for all purposes to the
extent that a statement contained in this Prospectus or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, in its unmodified form, to constitute a part of
this Prospectus.
The Company will provide, upon request, without charge to each person to
whom a copy of this Prospectus has been delivered, a copy of any or all of the
documents which have been or may be incorporated in this Prospectus by
reference, other than certain exhibits to such documents. Requests for such
copies should be directed to: Investor Relations, Somatix Therapy Corporation,
950 Marina Village Parkway, Alameda, California 94501-1034; (510) 748-3000.
3
<PAGE> 6
RISK FACTORS
Prospective investors in the shares of the Company's Common Stock offered
hereby should carefully consider the following Risk Factors, in addition to the
other information appearing in or incorporated by reference into this
Prospectus.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The development of the Company's products will require the commitment of
substantial funds to conduct research and development of its products, to
establish commercial scale manufacturing capabilities, and to market its
products. The Company's future capital requirements will depend on many factors,
including the progress of the Company's research and development, the scope and
results of preclinical studies and clinical trials, the cost of obtaining
regulatory approvals, the rate of technological advances, determinations as to
the commercial potential of the Company's products under development, the status
of competitive products and the establishment of manufacturing capacity. The
Company anticipates that its existing cash and interest income will be adequate
to satisfy its capital requirements for approximately the next nine months. The
Company anticipates that it will be required to raise substantial additional
funds, including funds raised through collaborative relationships and public or
private financings. Because of the Company's significant long-term capital
requirements, it may seek to access the public equity markets whenever
conditions are favorable, even if it does not have an immediate need for
additional capital at that time. No assurance can be given that additional
financing will be available on acceptable terms, or at all. If adequate funds
are not available, the Company will be required to curtail significantly its
research and development programs or may be required to relinquish rights to
certain of its technologies or discontinue its programs in their entirety and
liquidate its assets.
VOLATILITY OF STOCK PRICE
The market prices for securities of biopharmaceutical and biotechnology
companies (including the Company) have historically been highly volatile, and
the market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new therapeutic products by the
Company or its competitors, governmental regulation, developments in patent or
other proprietary rights, public concern as to the safety of products developed
by the Company or others and general market conditions may have a significant
effect on the market price of the Common Stock.
EARLY STAGE OF DEVELOPMENT; NO DEVELOPED OR APPROVED PRODUCTS
Somatix's potential gene therapy products are in research and development.
No revenues have been generated from the sale of any of such products, nor are
any such revenues expected for at least the next several years. The products
currently under development by the Company will require significant additional
research and development efforts, including extensive preclinical and clinical
testing and regulatory approval, prior to commercial use. There can be no
assurance that the Company's research and development efforts will be
successful, that any of the Company's potential gene therapy products will prove
to be safe and effective in clinical trials or that any commercially successful
products will ultimately be developed by the Company. Even if developed, these
products may not receive regulatory approval or be successfully introduced and
marketed at prices that would permit the Company to operate profitably.
TECHNOLOGICAL UNCERTAINTY
Gene therapy is a new technology, and existing preclinical and clinical
data on the safety and efficacy of gene therapy are very limited. Data relating
to the Company's specific gene therapy approaches are even more limited. The
Company's GVAX cancer vaccine product is being tested in Phase I human clinical
trials primarily to determine its safety; none of the other products under
development at the Company are in human clinical trials. The results of
preclinical studies do not predict safety or efficacy in humans. Possible
serious side effects of gene therapy include viral infections and the initiation
of cancers and possible autoimmune
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<PAGE> 7
diseases in the patient. There can be no assurance that unacceptable side
effects will not be discovered during preclinical and clinical testing of the
Company's potential products or thereafter. There are many reasons that
potential products that appear promising at an early stage of research or
development do not result in commercialization. Although the Company is testing
one of its proposed products in Phase I clinical trials, there can be no
assurance that the Company will be permitted to undertake human clinical trials
for any of its other products or that the results of such testing will
demonstrate safety or efficacy. Even if clinical trials are successful, there is
no assurance that the Company will obtain regulatory approval for any
indication, or that an approved product can be produced in commercial quantities
at reasonable costs, or be successfully marketed. The Company has also recently
begun development of in vivo approaches to gene therapy that will target
specific cells. There can be no assurance that the desired specificity will be
attained or that such products will not have serious side effects.
OPERATING LOSS AND ACCUMULATED DEFICIT
The Company has incurred net losses since its inception. At March 31, 1995,
the Company's accumulated deficit was approximately $140.2 million. Such losses
have resulted principally from expenses incurred in the Company's research and
development programs, the acquisition of new technology, and to a lesser extent,
from general and administrative expenses. The Company incurred a loss of $13.7
million in fiscal 1994 and expects to incur substantial and increasing losses
for at least the next several years due primarily to the expansion of its
research and development programs, including preclinical studies, clinical
trials and manufacturing. The Company expects that losses will fluctuate from
quarter to quarter and that such fluctuations may be substantial. There can be
no assurance that the Company will successfully develop, commercialize,
manufacture or market its products or ever achieve or sustain product revenues
or profitability.
UNCERTAINTY OF GOVERNMENT REGULATORY REQUIREMENTS; LENGTHY APPROVAL PROCESS
Because gene therapy is a relatively new technology and has not been
extensively tested in humans, the regulatory requirements governing gene therapy
products are uncertain and may be subject to substantial further review by
various regulatory authorities in the United States and abroad. These uncertain
requirements may result in extensive delays in initiating clinical trials and in
the regulatory approval process. Regulatory requirements ultimately imposed
could adversely affect the Company's ability to clinically test, manufacture or
market products.
The Company believes that its potential products will be regulated by the
FDA as biologics. Each potential product for a specific disease application may
be subject to regulation as a separate biologic, depending on its intended use
and FDA policy. The regulatory process for new therapeutic products, including
the required preclinical and clinical testing, is lengthy and expensive, and
there can be no assurance that FDA approvals will be obtained in a timely
manner, if at all. Future United States or foreign legislative or administrative
actions could also prevent or delay regulatory approval of the Company's
products. There can be no assurance that the Company will be able to obtain the
necessary authorizations to initiate clinical trials or approvals to market any
of its potential products. Even if FDA regulatory approvals are obtained, a
marketed product is subject to continual review. Later discovery of previously
unknown problems or failure to comply with the applicable regulatory
requirements may result in product marketing restrictions or withdrawal of the
product from the market, as well as possible civil or criminal sanctions. In
addition, many academic institutions and companies doing research in the gene
therapy field are using a variety of approaches and technologies. Any adverse
results obtained by such researchers in preclinical or clinical studies could
adversely affect the regulatory environment for gene therapy products generally,
possibly leading to delays in the approval process for the Company's potential
products.
On October 25, 1993, the vaccines and related biological products advisory
committee to the Center for Biologics Evaluation and Research ("CBER") of the
FDA met to review issues related to gene therapy, including the use of
retroviruses and adenoviruses. The committee did not recommend limiting the use
of viral vectors in gene therapies and made certain recommendations that will be
incorporated into a revision of the FDA's 1991 "Points to Consider" document
related to gene therapies and somatic cell therapies. There can be
5
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no assurance, however, that new guidelines will not be instituted, or that
Somatix will be able to continue to comply with existing or future regulations.
The Company's business is subject to regulation under state and federal
laws regarding environmental protection and hazardous substances control. The
Company believes that its efforts to comply with these laws have had no adverse
impact upon its capital expenditures, results of operations or competitive
position, but there can be no assurance that this situation will continue.
Federal and state agencies and congressional committees have expressed interest
in further regulation of biotechnology. The Company is unable to estimate the
extent and impact of regulation in the biotechnology field resulting from any
future federal, state or local legislation or administrative action.
DEPENDENCE UPON KEY PERSONNEL AND COLLABORATIVE RELATIONSHIPS
The Company's success is highly dependent on the retention of principal
members of its management and scientific staff and the recruitment of additional
qualified personnel. The loss of key personnel or the failure to recruit
necessary additional qualified personnel could have an adverse effect on the
operations of the Company. There is intense competition from other companies,
research and academic institutions and other organizations for qualified
personnel in the areas of the Company's activities. There is no assurance that
Somatix will be able to continue to attract and retain the qualified personnel
necessary for the development of its business. These activities are expected to
require the addition of new personnel with expertise in the areas of clinical
testing, manufacturing, marketing and distribution and the development of
additional expertise by existing personnel. The failure to acquire such
personnel or develop such expertise could adversely affect prospects for the
Company's success. In May 1994, Richard C. Mulligan, Ph.D. joined the Company as
Executive Vice President of Research and Chief Scientific Officer. Dr. Mulligan
joined the Company with the understanding that he would return to an academic
research position for the 1996 academic year. Dr. Mulligan is currently
negotiating such a position.
The Company has entered into consulting arrangements with former Merlin
Pharmaceutical Corporation founders for their services with respect to
adenoviral vector and adeno-associated viral vector technologies. While the
Agreement and Plan of Reorganization with Merlin calls for a substantial
reduction in shares to be issued to former Merlin stockholders if the founders
do not exclusively work on Somatix projects for the first 18 months after the
Merger, there can be no assurance that they will stay during the period or will
continue to be associated with the Company once the 18 month period has been
completed in August 1996.
The Company has clinical trial arrangements now in progress with The Johns
Hopkins University covering a Phase I clinical trial to treat kidney cancer
patients, and a Phase I/II clinical trial to treat prostate cancer patients for
which RAC approval has been obtained, but for which no patients have yet been
enrolled. The Company has additional arrangements with the Netherlands Cancer
Institute and the Dana Farber Cancer Center to treat melanoma patients in two
separate Phase I clinical trials. Both trials are currently in progress. In the
event that any of these relationships are terminated, the completion and
evaluation of clinical trials could be adversely affected. In addition, the
Company has an arrangement with the Parkinson's Institute of Santa Clara,
California to provide animal facilities, animals and consulting services in
connection with preclinical testing of its gene therapy product for Parkinson's
disease. If the relationship were terminated, progress of preclinical testing
would be adversely affected.
The Company depends in part on the continued availability of outside
scientific collaborators performing research, which may be funded by the
Company, in certain areas relevant to the Company's research. These
relationships generally may be terminated at any time by the collaborator,
typically by giving 30 days' notice to the Company. The Company's scientific
collaborators are not employees of the Company. As a result, the Company has
limited control over their activities and can expect that only limited amounts
of their time will be dedicated to Company activities. The Company's agreements
with these collaborators as well as those with the Company's scientific
consultants provide that any rights the Company obtains as a result of the
research efforts of these individuals will be subject to the rights of the
research institutions in such work. In addition, some of these collaborators
have consulting or other advisory arrangements with other entities that may
conflict with their obligations to the Company. For these reasons, there can be
no assurance that inventions or
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processes discovered by the Company's scientific collaborators or scientific
consultants will become the property of the Company.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
Patent positions in the field of biotechnology are generally highly
uncertain and involve complex legal and scientific questions. To date, there has
emerged no consistent policy regarding the breadth of claims allowed in
biotechnology patents, especially in the area of gene therapy. Accordingly,
there can be no assurance that patent applications licensed to the Company will
result in patents being issued or that, if issued, the patents will afford
protection against competitors with similar technology. The Company also relies
upon unpatented proprietary technology. No assurance can be given that the
Company can meaningfully protect its rights in such unpatented proprietary
technology or that others will not duplicate or independently develop
substantially equivalent technology.
The Company's processes and potential products may conflict with patents
which have been or may be granted to competitors, academic institutions,
universities or others. As the biotechnology industry expands and more patents
are issued, the risk increases that the Company's processes and potential
products may give rise to claims that they infringe the patents of others. Such
other persons could bring legal actions against the Company claiming damages and
seeking to enjoin certain research, manufacturing and marketing of the affected
process or potential product. If any such actions are successful, in addition to
any potential liability for damages, the Company could be required to obtain a
license in order to continue to use the affected process or to manufacture or
use the affected product or cease using such product or process if enjoined by a
court. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available on acceptable terms, or at all. The Company believes that there may be
significant litigation in the industry regarding patent and other intellectual
property rights. If the Company becomes involved in such litigation, it could
consume a substantial portion of the Company's financial and human resources,
regardless of the outcome of such litigation.
One of the Company's competitors has been granted an exclusive license to a
United States patent issued to the National Institute of Health covering ex vivo
gene therapy. While the Company has licensed two U.S. patents covering the ex
vivo modification of epithelial cells and one U.S. patent covering the ex vivo
modification of cells to treat diseases of the central nervous system, and while
all three patents' filing dates are earlier than the filing date of the
competitor's licensed patent, there can be no assurance that the competitor's
patent will not prevail and that if it prevails, any rights under such will be
available to the Company on commercially reasonable terms, if at all.
In addition, the Company is aware of pending patent applications which have
been licensed to another competitor of the Company relating to certain types of
genetically modified cells. For example, the Company is aware of a pending
application covering genetically modified endothelial cells and their use in
gene therapy. The patent application is assigned to the United States
Government, and it is believed that the patent application is exclusively
licensed to a competitor. There is no assurance that a license to this or
related patent applications will be available to the Company. Furthermore, as
gene therapy becomes more established, others may enter the field who have
patent rights to genes and technology which may be used in gene therapy. If the
Company is unable to obtain licenses to such patents, its business may be
substantially and adversely affected. In addition, since patent applications in
the United States are maintained in secrecy until patents issue, and since
publication of discoveries in the scientific or patent literature often lags
behind actual discoveries, Somatix cannot be certain that its licensors were the
first creators of inventions covered by its pending patent applications or that
they were the first to file patent applications for such inventions.
In order to manufacture and market its potential products, the Company may
be required to obtain licenses to patents or other proprietary rights of third
parties. There can be no assurance that the Company will be able to obtain a
license to any third party technology that it may require to conduct its
business or that, if obtainable, such technology can be licensed at a reasonable
cost. If the Company does not obtain such licenses, it could encounter delays in
introducing any such potential products while it attempts to design around such
patents, or it could find that the development, manufacture or sale of such
potential products
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could be adversely effected. Failure by the Company to obtain a license to any
technology that it may require to commercialize its technologies or potential
products may have a material adverse effect on the Company. In addition, the
Company could incur substantial costs in defending itself in suits brought
against it on such patents or in suits in which the Company's patents may be
asserted by it against another party.
A number of the DNA sequences that the Company expects to use in its gene
therapy products are or may become patented by third parties. As a result, the
Company may be required to obtain licenses under such patents in order to
conduct certain research, to manufacture or to market products that contain
proprietary genes. There can be no assurance that such licenses will be
available on commercially reasonable terms, if at all. The Company is aware of
United States patents for factor VIII DNA sequences that have been licensed to
competitors for exclusive use in their gene therapy programs. Unless the Company
can similarly license such sequences or other sequences, the Company may not be
able to commercialize its hemophilia program. The Company is aware of
proceedings to determine rights to the human GM-CSF cDNA sequence in the United
States and Europe. In the United States, in the most recent public disclosure of
which the Company is aware, the Board of Patent Appeals and Interferences
granted a motion by a third party in an interference proceeding stating that the
human GM-CSF cDNA sequence is not patentable over the prior art. In Europe, a
hearing in an opposition proceeding initiated by a third party to invalidate a
European patent covering human GM-CSF cDNA was unsuccessful. The decision by the
European Patent Office Opposition Division upholding the patent has been
appealed by this third party. There can be no assurance of the outcome of these
proceedings or the outcome of these proceedings on appeal, or that, if required,
a license of rights to the gene sequence will be available to the Company on
commercially reasonable terms, if at all.
The Company has acquired significant proprietary rights under license
agreements that permit the licensors to terminate those agreements in the event
of certain material breaches by the Company. Although the Company is not
currently in default under any of these agreements, there can be no assurance
that such defaults will not occur in the future. Should a default occur, and
should any of those agreements be terminated in the future, the Company could
lose the right to continue to develop one or more of these potential products.
COMMERCIALIZATION: LACK OF MANUFACTURING OR MARKETING EXPERIENCE
The Company intends to market and sell some of its potential products
directly, while relying on sales and marketing expertise of potential corporate
partners for other programs. The Company has no experience in sales, marketing
or distribution of biopharmaceutical products and has not developed a specific
sales and marketing plan with respect to any of its potential products. The
decision to market products directly or through corporate partners will be based
on a number of factors including market size and concentration, the size and
expertise of the partner's sales force in a particular market and the Company's
overall strategic objectives. The Company is currently engaged in various stages
of discussions with potential partners. There can be no assurance that the
Company will be able to establish such relationships on acceptable terms and
conditions, or at all.
The Company's current commercialization strategy is to sell genetically
modified cells to hospitals and clinics. The Company will be required to operate
facilities in which each patient's cells are genetically modified, processed and
tested in compliance with the Good Manufacturing Practices published in the U.S.
Code of Federal Regulations. Currently, the Company can manufacture genetically
modified cells in quantities sufficient to meet its needs for clinical testing
but does not have the capability to manufacture sufficient quantities to meet
large-scale commercial requirements. The Company believes that its processes can
be scaled-up efficiently to meet its anticipated future requirements, but there
can be no assurance that problems or delays will not arise in such scale-up. The
manufacture of sufficient quantities of the Company's potential products can be
an expensive, time-consuming and complex process. If the Company is unable to
develop such manufacturing capabilities, the Company's ability to commercialize
its products will be adversely affected. This could prevent or delay submission
of products for regulatory approval and initiation of new development programs,
which would have a material adverse effect on the Company.
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COMPETITION
The gene therapy field is new and rapidly evolving, and it is expected to
continue to undergo significant and rapid technological change. Rapid
technological development could result in the Company's potential products,
services or processes becoming obsolete before the Company recovers a
significant portion of its related research, development and capital
expenditures. The Company will experience competition both from other companies
in the field of gene therapy and from companies which have other forms of
treatment for the diseases targeted by the Company. The Company is aware of
several development stage and established enterprises, including major
pharmaceutical and biotechnology firms as well as several major universities,
which are exploring the field of human gene therapy or are actively engaged in
research and development in areas including both retroviral vectors and other
methods of gene transfer. To the Company's knowledge, at least one of these
companies and several universities have participated in clinical trials using
retroviral vectors. The Company may also experience competition from companies
that have acquired or may acquire technology from such universities and other
research institutions. As these companies develop their technologies, they may
develop proprietary positions in certain aspects of gene therapy. Certain
competitors and potential competitors of the Company have substantially greater
product development capabilities and financial, scientific, marketing and human
resources than the Company, and other competitors of the Company may enter into
collaborative relationships with other companies having such greater resources.
Other companies may succeed in developing products earlier than the Company,
obtaining FDA approvals for such products more rapidly than the Company, or
developing products that are more effective than those proposed to be developed
by the Company. There can be no assurance that research and development by
others will not render the Company's technology or products obsolete or
non-competitive or result in treatments superior to any therapy developed by the
Company, or that any therapy developed by the Company will be preferred to any
existing or newly developed technologies.
PRODUCT LIABILITY AND INSURANCE
Clinical trials or marketing of any of the Company's potential products may
expose the Company to liability claims resulting from the use of such products.
These claims might be made directly by consumers, health care providers or by
others selling such products. The Company currently maintains product liability
insurance with respect to its former product lines and this coverage includes
clinical trials. The policy coverage is $5 million and is on a claims made
basis. There can be no assurance that the Company will be able to maintain such
insurance or, if maintained, that sufficient coverage can be acquired at a
reasonable cost. An inability to maintain insurance at acceptable cost or at all
could prevent or inhibit the clinical testing or commercialization of products
developed by the Company. A product liability claim or recall could have a
material adverse effect on the business or financial condition of the Company.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
The Company's research and development activities involve the controlled
use of hazardous materials, chemicals, viruses and various radioactive
compounds. The Company is subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
such materials and certain waste products. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by such laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources of the Company.
The Company may be required to incur significant costs to comply with
environmental laws and regulations in the future. The Company's operations,
business or assets may be materially or adversely affected by current or future
environmental laws or regulations.
REIMBURSEMENT
In both domestic and foreign markets, sales of the Company's potential
products will depend in part upon coverage and reimbursement from third-party
payors, including health care organizations, including government agencies,
private health care insurers and other health care payors such as health
maintenance
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organizations, self-insured employee plans and the Blue Cross/Blue Shield plans.
There is considerable pressure to reduce the cost of drug products. In
particular, reimbursement from government agencies and insurers and large health
organizations may become more restricted in the future. The Company's potential
products represent a new mode of therapy, and, while the cost-benefit ratio of
the products may be favorable, the Company expects that the costs associated
with its products will be substantial. There can be no assurance that the
Company's proposed products, if successfully developed, will be considered
cost-effective by third party payors, that insurance coverage will be available
or, if available, that such payors' reimbursement policies will not adversely
affect the Company's ability to sell its products on a profitable basis. In
addition, there can be no assurance that insurance coverage will be provided by
such payors at all or without substantial delay, or, if such coverage is
provided, that the approved reimbursement will provide sufficient funds to
enable the Company to become profitable.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND RELATED MATTERS
The future revenues and profitability of and availability of capital for
biotechnology companies may be affected by the continuing efforts of
governmental and third party payors to contain or reduce the costs of health
care through various means. For example, in certain foreign markets pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
prospects.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares by existing stockholders could adversely affect the
prevailing market price of the Company's Common Stock. On February 13, 1995, the
Company completed the acquisition of Merlin for an aggregate of 3,000,000 shares
of the Company's Common Stock, of which 2,363,895 shares of Common Stock were
registered on June 27, 1995. The shares issued in the Merlin acquisition will be
released from escrow, depending upon certain events, in four equal installments
of 750,000 shares every six months, commencing with the first installment in
August 1995. Additionally on June 27, 1995, the Company registered 4,321,031
shares of Common Stock, including 1,551,139 shares of Common Stock issuable upon
exercise of warrants, sold by the Company in private placement transactions
pursuant to Common Stock Purchase Agreements dated June 17, 1995. With the
exception of shares issued in the Merlin acquisition, the remaining outstanding
shares of the Company's Common Stock are all freely tradeable, subject to volume
and other restrictions imposed by Rule 144 under the Securities Act with respect
to sales by affiliates. Sales of substantial amounts of Common Stock may have an
adverse effect on the market price of the Common Stock.
DILUTION
The price of the Securities issued in this offering is substantially higher
than the book value per share of Common Stock. Investors purchasing Securities
in this offering will therefore incur immediate, substantial dilution.
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THE COMPANY
Somatix Therapy Corporation ("Somatix" or the "Company") is a leader in the
field of in vivo and ex vivo gene therapy. The Company has established a
substantial scientific and intellectual property position in the broadly
enabling technology of gene transfer through the merger and acquisition of four
companies: Hana Biologics, Inc., Somatix Corporation, GeneSys Therapeutics
Corporation and Merlin Pharmaceutical Corporation, as well as through internal
development. Somatix is applying its core scientific expertise to the research
and development of novel treatments for cancer, neurological diseases, and
certain genetic diseases.
Somatix recently acquired Merlin Pharmaceuticals Corporation, a gene
therapy company developing adeno-associated viral vectors (AAV) and adenoviral
vectors (AV) for in vivo gene therapy. In addition to acquiring important
intellectual property in these vector systems, Somatix executed exclusive
consulting relationships with two leading researchers in the gene transfer
field: Richard Samulski, Ph.D. and Thomas Shenk, Ph.D. Combined with extensive
existing vector biology research ongoing at the Company under the direction of
Richard Mulligan, Ph.D., Chief Scientific Officer, this acquisition has
accelerated the Company's development of multiple vector systems for both in
vivo and ex vivo gene therapy.
The Company's operations have been unprofitable since its inception, and
will continue to be so, as its research and development programs expand into
preclinical studies and clinical trials.
The Company has in place a strong scientific management team to guide the
Company's programs from the laboratory through commercialization. The Company
has accumulated patents and patent applications which it believes will help it
obtain freedom to commercialize its gene therapy products. Finally, the Company
has an approved GMP manufacturing facility and trained manufacturing staff to
conduct clinical programs.
The Company's principal office is located at 950 Marina Village Parkway,
Alameda, California, 94501, and its telephone and fax numbers are (510) 748-3000
and (510) 814-8838, respectively.
BACKGROUND OF GENE THERAPY
Gene therapy is the genetic modification of cells for therapeutic benefit.
Cells can either be removed from a patient, genetically modified and
transplanted back into the patient (ex vivo gene therapy), or cells can be
modified in the body through the administration of a vector that delivers the
gene into certain cells (in vivo gene therapy). The product of the inserted gene
is a protein which can act directly as a drug, such as proteins now injected
into circulation, or indirectly as an inhibitor of a disease mechanism or as a
vaccine to prevent and treat disease.
Gene transfer vectors are the transport vehicles by which genes can be
inserted into cells. While considerable research efforts are ongoing in novel
vector systems in both academic and institutional laboratories, the most
commonly used approaches fall into two categories: viral-based vectors and
non-viral or synthetic vectors. Each system has unique characteristics. These
differences may be important in evaluating the clinical utility of each
approach.
Different cell types may be selected or targeted for modification based on
their ability to secrete proteins systemically or locally, their capability to
integrate into the tissue at the site of delivery, and their life spans. As a
result, particular cell types may be better suited than others for the delivery
of a specific protein or for the treatment of a specific disease. Researchers in
the field of gene therapy are primarily working with seven major cell types as
candidates for genetic modification: epithelial cells, fibroblasts, endothelial
cells, hepatocytes, myoblasts, hematopoietic stem cells, and lymphocytes. These
are all somatic cells, which differ from germ cells in that the genetic
information contained in them is not passed on to future generations.
Gene therapy approaches to treating disease are still in the development
stage. A number of scientific challenges must be met before the therapeutic
potential of gene therapy is realized and gene therapy products are commercially
available. These challenges include attaining sufficient production of the
desired gene transfer vectors, controlling or regulating the amount of the
desired protein produced, targeting specific cell types for modification and
demonstrating the safety and efficacy of any given approach in human clinical
trials. In addition to its as yet unproven therapeutic effectiveness, gene
therapy may cause unintended side effects. Because with certain gene transfer
methods, the desired gene may be randomly inserted into a cell's genetic
material, it is theoretically possible that a cancer-causing gene could be
activated. The Company believes that this is very unlikely and that other events
besides gene activation must occur in order for cancer to develop. Another issue
is the possibility that a disabled virus could theoretically reassemble and
become virulent. The Company believes that its process for disabling viruses
provides sufficient safeguards against such an event and that current testing
procedures further reduce this risk. Additional research with respect to such
unintended consequences will be necessary, however, before gene therapy products
can be commercialized.
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CORE SCIENCE AND CLINICAL DEVELOPMENT PROGRAMS
CORE SCIENCE
Somatix has built, through several carefully selected mergers and
acquisitions as well as substantial internal development activities, a
broad-based, multiple gene transfer technology platform. The Company has active
research and development efforts in several major gene transfer areas including
retroviral, adeno-associated virus, adenoviral and synthetic vector systems.
Lead by the Company's Founder and Chief Scientific Officer, Richard
Mulligan, Ph.D., Somatix has established extensive internal research programs in
vector biology. While the Company has historically had interests in several
vector systems, the most advanced programs have been in retroviral vectors. With
the acquisition of Merlin Pharmaceutical Corporation in February 1995, the
addition of Richard Samulski, Ph.D. and Thomas Shenk, Ph.D. as core scientific
consultants to the Company and the expansion of the Company's intellectual
property base, Somatix has significantly augmented and expedited its research
efforts in adenoviral and adeno-associated viral vectors. More recently, the
Company has initiated a distinct synthetic vector development program utilizing
expertise from the entire vector biology group.
Another area of Somatix core science has focused on hematopoietic stem cell
gene therapy. Genetic modification of hematopoietic stem cells offers a
fundamental approach for the systemic delivery of proteins as well as the
protection of certain blood cells from infectious diseases or toxic drugs. The
Company's initial clinical application is in the treatment of chronic
granulomatous disease (CGD). In collaboration with Harry Mallech, M.D. at the
National Institutes of Health (NIH), the Company is preparing to evaluate the
use of gene therapy to treat this inherited disease. Dr. Mallech has received
approvals from the Institutional Review Board (IRB) of the NIH as well as from
the Recombinant DNA Advisory Committee (RAC) to NIH. If approved by the Food and
Drug Administration, this study will represent the Company's first clinical
trial involving the genetic modification of hematopoietic stem cells. Future
applications may include hemophilia, Gaucher's disease, multi-drug resistance
and AIDS.
The following table summarizes the current status of the Company's product
development programs:
<TABLE>
<CAPTION>
PRODUCT INDICATION STATUS TARGET DATES PARTNER
- ------------------------------- --------------------- ------------ --------------- -------
<S> <C> <C> <C> <C>
GVAXTM cancer vaccine.......... renal cell carcinoma PI/II Complete 2Q/95 --
melanoma PI/II dose Complete 3Q/95 --
escalation
melanoma PI/II dose Complete 2H/95 --
scheduling
prostate preclinical IND-2H/95 --
colorectal preclinical IND-2H/95 --
Autologous fibroblasts......... Parkinson's preclinical IND-1H/96 --
genetically altered to
produce TH
AAV/TH vectors for in.......... Parkinson's preclinical IND-1H/96
vitro administration
Autologous stem cells.......... chronic preclinical IND-2Q/95 Baxter
genetically altered to granulomatous
produce the p47 phox gene disease
Allogeneic cell line........... hemophilias A & B preclinical IND 1996 Baxter
modified to produce factor VIII
or IX, implanted in membrane
device
</TABLE>
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DISEASE INDICATIONS
CANCER
Cancer, the second leading cause of death in the United States, is a
disease in which certain cells grow uncontrolled by the body's normal
self-regulatory mechanisms. Over 1.2 million new cases of cancer are diagnosed
each year in the United States. While there are several dozen forms of cancer,
Somatix's initial targets are renal cell carcinoma (RCC or kidney cancer),
melanoma, prostate and colorectal cancers. Hundreds of thousands of patients are
newly diagnosed with these cancers each year in the United States.
The GVAX(TM)(1), Cancer Vaccine. Somatix's lead therapeutic program is the
GM-CSF transduced autologous tumor cell vaccine, or GVAX cancer vaccine. The
GVAX cancer vaccine is composed of the patient's own (autologous) tumor cells
which have been genetically modified to secrete the immune-stimulating protein
granulocyte-macrophage colony stimulating factor (GM-CSF). Cytokine-transduced
(e.g., IL-2, IL-4, gamma interferon, etc.) tumor cell vaccines have shown
antitumor activity in several murine studies. Richard Mulligan (Chief Scientific
Officer and Director, Somatix) and colleagues were the first to systematically
compare the efficacy of several genetically modified cancer vaccines differing
only in the molecule being secreted from the engineered tumor cell. The Mulligan
studies showed the GM-CSF transduced tumor vaccine to be the most potent inducer
of systemic antitumor immunity against challenge with live tumor cells. The
study also demonstrated that lethally irradiated, GM-CSF transduced tumor cells
were as effective as live tumor cells in the induction of antitumor immunity.
The immune response was shown to be dependent on both CD4+ and CD8+ T cells, and
long lasting, as mice survived challenge with high doses of live tumor cells
several months after vaccination. The failure of nontransduced tumor vaccines,
formulated with soluble recombinant GM-CSF, to induce protective immunity proved
the necessity of local cytokine delivery over many days. The generality of the
GVAX concept was demonstrated in several murine tumor models including the colon
carcinoma CT-26, the renal carcinoma RENCA, the fibrosarcoma CMS-5, the Lewis
lung carcinoma, and the Dunning rat prostate model. The GM-CSF transduced tumor
cell vaccine was more potent than the nontransduced vaccine in every model
tested.
With this preclinical data in hand and a pilot manufacturing facility for
ex-vivo gene therapy, the Company received FDA clearance to start Phase I
clinical trials. The first trial began at the Johns Hopkins University in RCC in
late 1993. In May 1994, a second Phase I clinical trial started at the
Netherlands Cancer Institute (NKI) using the GVAX cancer vaccine in advanced
melanoma patients. A second Phase I advanced melanoma trial at the Dana Farber
Cancer Institute started early this year. Both of these cancers have shown
responsiveness to immunotherapy approaches. Two other GVAX trials, one in
colorectal cancer and the other in prostate cancer, are expected to begin in
late 1995. The colorectal clinical trial is being funded by an outside party
through Phase I/II. The prostate clinical trial has been approved by the
Recombinant Advisory Committee (RAC) of the NIH in its first accelerated review
of a gene therapy trial and an amendment to the Company's IND is expected to be
submitted soon to the FDA.
The Company will evaluate these trials to determine if the GVAX cancer
vaccine has stimulated an immune response as determined by a test of the skin's
reaction to an injection of irradiated tumor cells from the patient's tumor (a
delayed type hypersensitivity or DTH test). In addition, the patients'
peripheral blood will be analyzed for the presence of tumor-specific cytotoxic
T-lymphocytes (CTLs), and the ability of these CTL's to kill the patient's tumor
cells in an in-vitro diagnostic assay. Preliminary data are encouraging, but it
is too early to draw any conclusions as to efficacy.
THE CENTRAL NERVOUS SYSTEM
The central nervous system ("CNS") is an important target for new drug
development. The brain controls many bodily functions but is one of the most
difficult to treat with drugs since it is a privileged sanctuary whose
blood-brain barrier prevents many drug molecules and most proteins from getting
through. Despite this latter limitation, drugs to treat CNS diseases are the
second largest drug expenditure category behind cardiovascular drugs. Another
limitation to CNS drug development is that the brain, a highly complex,
inaccessible organ in which drug side effects can significantly limit their
usefulness, has not lent itself easily to
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unlocking its biological secrets. In particular, the brain, while a single organ
like the heart, liver etc., operates with many distinct regions as if they were
separate organs tied together in a communications network, not unlike the
complex computer networks of today. Therefore, even if drugs could be made to
get through the blood-brain barrier, it is highly desirable to deliver them
locally to the tissues in the specific region requiring therapy in order to
avoid debilitating side effects. Biotechnology has made major inroads in
understanding the biological mechanisms of the brain, and gene therapy, in
particular, appears to offer the greatest long term promise of being able to
deliver drugs derived from this new understanding to tissues in specific regions
of the brain. Gene therapy is also particularly well suited to neurological
diseases, because most are chronic in nature requiring constant long term
therapy. Because of the lack of adequate drug therapy for major
neurodegenerative diseases such as Alzheimer's and Parkinson's and the discovery
of a number of growth factors in the brain (neurotrophic factors) that could
retard neurodegeneration and perhaps revitalize neuronal cells, this is a major
priority for Somatix.
PARKINSON'S DISEASE
Gene therapy of Parkinson's disease is the Company's most advanced CNS
program.
Although the cause of the neurodegeneration which leads to Parkinson's is
not known, it is known that a consequence of this degeneration, the loss of
dopamine expression in the striatum of the brain, causes the debilitating
movement symptoms of Parkinson's. Dopamine can be delivered to the brain through
administering L-dopa, a precursor which is converted in the brain to dopamine,
and it significantly alleviates the symptoms of Parkinson's. However, L-dopa's
efficacy is sharply attenuated after five years in a majority of patients due to
side effects of the drug thought to relate to the global exposure of the brain
to the drug, the increased dosing required to overcome continued degeneration of
dopaminergic neurons and the unnatural frequency of dosing. Therefore, Somatix
is evaluating the use of gene therapy to transduce cells to produce a continuous
and efficacious supply of dopamine in the striatum, possibly in conjunction with
low doses of timed oral L-dopa administration. The gene required for
transduction is the tyrosine hydroxylase gene (TH). An excellent disease model
exists for Parkinson's Disease. This came about when in 1982 unfortunate drug
addicts took heroin containing the chemical MPTP that was found to cause
symptoms and pathology in these people indistinguishable from severe Parkinson's
Disease. MPTP primate models prepared by Somatix and its investigators respond
clinically and pharmacologically similar to humans with the naturally occurring
disease. While no animal model can be an exact duplicate of the human, the MPTP
model appears to date to be a reasonable facsimile. The final scientific reason
why Parkinson's is an important opportunity for Somatix to focus on is due to
the belief that administration of neurotrophic factors in the substantia nigra
region of the brain where the majority of these dopaminergic neurons reside may
retard their degeneration and keep natural dopamine production at therapeutic
levels for a significantly longer period of time. Recent preclinical data has
strongly suggested that neurotrophic factors may have efficacy that could be
both specific and potent for these particular dopaminergic neurons. Somatix may
have to license certain genes for these factors in order to exploit fully a
combination therapy.
Parkinson's represents a significant commercial opportunity. There are
approximately 750,000 people diagnosed with Parkinson's disease in the United
States. Of these, approximately 600,000 have idiopathic disease, and
approximately 390,000 are in the middle stages of Parkinson's disease. Of this
population of 390,000, the Company believes that approximately 100,000 could
potentially benefit from a gene therapy which could substantially improve their
quality of life and keep them self-sufficient longer than L-dopa maintenance
therapy. The typical patient with Parkinson's disease is diagnosed between 55
and 60 years of age, and lives 14 years postdiagnosis. The Company believes that
the market potential for a safe and effective gene therapy for Parkinson's
disease could be well over $1 billion annually in the United States alone.
Developing both an ex vivo and in vivo approach to Parkinson's
Somatix's initial approach to Parkinson's uses ex vivo gene therapy
technology. The main advantage of this approach is the high level of control it
affords because the cell population is well characterized and assured of gene
expression (protein production) levels before implantation and because dopamine
production is confined to just the striatum implant area requiring therapy.
While pre-clinical evidence suggests the
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duration of the implants may prove to be acceptable in humans there is some risk
that the TH production of the transplanted cells falls off or ceases
prematurely. The main advantage of an in vivo approach is that if frequent
re-administration is required it would likely be less invasive since much
smaller amounts of material would have to be injected into the brain, despite
the fact that the surgical technique for implanting cells, stereotaxic surgery,
has been reduced to routine practice. The potential safety risks of the in vivo
approach are the adeno associated virus (AAV) vector Somatix uses could elicit
immune responses that destroy transduced cells or that the vector finds its way
to other regions of the brain transducing cells and compromising normal
neurotransmitter function. The Company is in the process of conducting
experiments that will be more conclusive regarding immunogenicity and the extent
of vector diffusion and is developing cell specific gene expression and
targeting technology to limit gene expression in unwanted cells.
Encouraging primate experiment results
ex vivo. The Company, in 1994, began a primate experiment with the MPTP
model. Certain animals were control animals and certain animals received
transduced autologous cell (fibroblast) implants. They were scored on a clinical
rating scale composed of eight variables. All the implants were healthy, well
vascularized within a reformed blood-brain barrier at the time of sacrifice with
minimal reactions around the implants. All of the TH transduced animals showed
immediate clinical improvement that lasted until they were sacrificed four
months later. None of the animals that did not receive a TH transduced implant
showed any clinical improvement for the time they remained alive although one
that received a non-transduced implant showed a transient improvement in the
first month following implantation. The fibroblast implants were vital at the
time of sacrifice and all TH transduced animals showed clinical improvement
supported by evidence of TH production in their brains, suggesting that the
clinical improvement was caused by the TH production in the implant. These
results will be confirmed and expanded on in a larger controlled primate
experiment. The protocol for this experiment was finalized after a meeting with
the FDA and its results, if confirmatory, are expected to lead to an IND filing
to initiate human clinical trials.
in vivo. In early 1994, collaborators of Merlin (acquired by Somatix in
February 1995) completed a rodent experiment that demonstrated that in vivo
injection of its AAV/TH vector in MPTP lesioned rats resulted in 3-4 month
expression of TH prior to sacrifice and significant improvement in function.
Later in the year these investigators confirmed these results in an MPTP primate
model developed at Yale University that is somewhat different than Somatix's
MPTP primate model. Several animals not severely MPTP lesioned were tested for
safety. Some received AAV/GDNF (glial derived neurotrophic factor) and some
received AAV/TH (the tyrosine hydroxylase gene together with the gene for its
conversion into L-dopa). Some animals were sacrificed after ten days and some,
including the AAV/GDNF monkeys, were sacrificed after 4 1/2 months. Gene
expression was confirmed in all monkeys and no toxicity was observed. Other
monkeys were severely lesioned to mimic end stage, non-L-dopa responsive
patients. Some of the monkeys received a control gene and some received AAV/TH.
For the 2 1/2 months prior to sacrifice all the AAV/TH monkeys had partial
behavioral recovery. The AAV/TH vector appears to diffuse from the injection
site in such a way that more uniform coverage of the striatum with dopamine
appears possible compared to the fixed ex vivo implants. Somatix is now
preparing to confirm these results in its own primate models in an experiment
that will run in parallel to the second expanded ex vivo experiment mentioned
above.
Potential Competitive Risks in Parkinson's
Beyond L-dopa therapy, there are two surgical approaches to Parkinson's
disease which may be competitive with gene therapy: fetal cell transplantation
and pallidotomy. Neither approach has been tested in a well-controlled clinical
trial. Both have modest and uneven efficacy in addition to other drawbacks.
Approximately 4-10 aborted fetuses are required to supply the necessary cellular
material for fetal cell transplantation making it impractical for large scale
use. There are some approaches to reducing this requirement but scientific and
ethical hurdles remain. Pallidotomy, a $20,000-$40,000 procedure, attempts to
destroy minute portions of the brain that control movement thereby ameliorating
the rigidity, jerkiness and freezing in place experienced by later stage
patients. The scientific hypothesis behind the procedure is that cells in the
globus pallidus region of the brain that fire signals for movement are
controlled by dopamine
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production and when it drops below a threshold level, these cells fire
uncontrollably creating the abnormal movements that are a hallmark of
Parkinson's. Blindness and paralysis are potential side-effects of the
treatment. It also appears that some patients experience long term relief of
their symptoms but many patients who experience immediate relief relapse quickly
back to their original state, or worse. Both fetal cell transplantation and
pallidotomy are considered to be the practice of medicine and therefore not
regulated by the FDA. Gene therapy, by contrast, will be regulated by the FDA
and ultimately stands to benefit by the requirement for well-controlled clinical
studies to prove its safety and efficacy.
ALZHEIMER'S DISEASE
Alzheimer's disease, a condition characterized by progressive dementia,
affects over 4 million Americans. The function of degenerating nerve cells which
cause this disease could be enhanced by administration of nerve growth factor
("NGF"). Since NGF does not cross the blood-brain barrier, and the current
method of using a catheter to deliver this chemical is impractical, Somatix is
studying the use of NGF-modified cells for its delivery. This method involves
genetically modifying a patient's own non-neural cells ex vivowith the gene for
NGF, then implanting the cells into a specific area in the brain.
HEMOPHILIA
Hemophilia A, a blood coagulation disorder resulting from the deficiency of
the blood clotting protein factor VIII, may affect up to 25,000 Americans.
Severe cases, approximately 70% of this patient population, are characterized by
frequent and sometimes fatal episodes of internal bleeding into the soft
tissues, joints, and intracranial space. The direct costs of treating severe
Hemophilia A range from $80,000 to $130,000 per year.
The Somatix approach involves modifying a patient's own cells with the gene
for factor VIII, and re-implanting the modified cells at an appropriate site in
the patient's body. This ex vivo gene therapy could be prophylactic, and more
cost-effective than current factor VIII replacement. The Company has obtained in
vitro production of biologically active factor VIII at levels 100 times higher
than those reported to date. The Company's next task will be to identify the
optimal cell type and engraftment method.
In November 1993, the Company entered into a collaborative development and
license agreement with Baxter Healthcare Corporation for the treatment of
hemophilia through the use of genetically modified non-autologous cells.
Pursuant to the agreement, the Company will develop and supply Baxter with a
genetically modified cell line designed to over-produce the human blood clotting
proteins factor VIII or factor IX, and Baxter will incorporate these transduced
cells into their proprietary membrane device for in vivo production and delivery
of these clotting factors. The agreement provides that Somatix shall develop and
supply Baxter with all preclinical and initial clinical supplies of its
transduced cell lines required for completion of the first clinical trial in
humans. Baxter shall be responsible for conducting all preclinical and clinical
trials, obtaining all regulatory approvals, manufacturing and supplying its
implantable semipermeable and biocompatible membrane device to deliver the
genetically modified cells, and ultimately establishing and maintaining a
marketing and sales force.
Baxter shall receive exclusive worldwide marketing rights with respect to
such products, subject to non-exclusivity for failure to use diligent efforts.
In addition to collaborating with Somatix on certain research and manufacturing
at Somatix, Baxter shall pay Somatix a license fee, certain milestone payments,
and royalties based on the sale of any products resulting from the
collaboration. The parties have agreed to negotiate as to responsibility for
manufacturing the necessary quantity of transduced cells for use in clinical
trials and for commercial production. In addition, Somatix has agreed to provide
Baxter with a right of first negotiation to certain other approaches for the
treatment of hemophilia A and B.
RECENT DEVELOPMENTS
On June 28, 1995, the Company completed a $16.5 million private placement,
before offering costs, of 2,769,892 shares of Common Stock (the "Common
Shares"), 254,000 shares of Series A Preferred Stock (the "Preferred Stock") and
Warrants to purchase 2,440,139 shares of Common Stock. The Common Shares and
Warrants to purchase 1,551,139 shares of Common Stock (the "Common Warrants")
16
<PAGE> 19
were issued to certain investors (the "Common Investors") pursuant to an
exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof. Pursuant to registration rights granted to the Common
Investors, the resale of the Common Shares and Common Warrants was previously
registered on a Registration Statement on Form S-3 pursuant to which all of the
Common Shares and shares issuable upon exercise of the Common Warrants may be
offered from time to time by the Common Investors. The Preferred Stock and
Warrants to purchase 889,000 shares of Common Stock (the "Preferred Warrants")
were issued to the Selling Stockholders pursuant to an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof. The Preferred Stock is initially convertible, at any time, into an
aggregate of 1,587,500 shares of Common Stock. The Company granted S-3
registration rights to the Selling Stockholders covering the resale of the
shares of Common Stock issuable upon conversion of the Preferred Stock and
exercise of the Preferred Warrants (collectively, the "Shares"). The Shares are
being registered by the Company on a registration Statement on Form S-3, of
which this Prospectus forms a part, pursuant to which all of the Shares may be
offered from time to time by the Selling Stockholders. In addition, the
Preferred Stock contains rights, preferences and privileges, including a
provision that resets the conversion price of the Preferred Stock to the lesser
of the initial conversion price of $4.00 or the thirty (30) trading day
consecutive average closing market price of the Common Stock for the thirty
(30) trading days prior to the thirteenth month following the date of issuance;
provided that the conversion price will not be less than $2.00 per share of
Common Stock. See "Description of Capital Stock." A copy of the Preferred Stock
Purchase Agreement between the Company and the Selling Stockholders (the
"Purchase Agreement"), and a copy of the form of Warrant and the Company's
Certificate of Designation of Preferences of Preferred Shares designating the
rights, preferences and privileges of the Preferred Stock, are filed as
Exhibits hereto.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of each Selling Stockholder and as adjusted to give
effect to the sale of the Shares offered hereby. The Shares are being registered
to permit public secondary trading of the Shares, and the Selling Stockholders
may offer the Shares for resale from time to time. See "Plan of Distribution".
The Shares being offered by the Selling Stockholders were acquired from the
Company (i) following conversion of Series A Preferred Stock acquired from the
Company in private placement transactions pursuant to the Purchase Agreement at
a per common share purchase price of $4.00 or (ii) upon exercise of Warrants
acquired in the same transactions. The placement agent in connection with the
sale of Preferred Stock pursuant to the Purchase Agreement (the "Placement
Agent") was paid a fee of $444,500. In addition, the Company reimbursed the
Placement Agent for its travel and out-of-pocket expenses incurred in connection
with the sale of Preferred Stock pursuant to the Purchase Agreement.
Each Selling Stockholder that purchased Preferred Stock pursuant to a
Purchase Agreement represented to the Company that it would acquire the Shares
for investment and with no present intention of distributing any of such Shares
except pursuant to this Prospectus. In lieu of granting the Selling Stockholders
demand registration rights, the Company has filed with the Commission, under the
Act, a Registration Statement on Form S-3, of which this Prospectus forms a
part, with respect to the resale of the Shares from time to time on the Nasdaq
National Market or in privately-negotiated transactions and has agreed to use
its best efforts to keep such Registration Statement effective until the earlier
of (i) the third anniversary of the closing under the Purchase Agreement (or
ninety (90) days following the final issuance of Additional Registrable
Securities (as defined in the Purchase Agreement), if late), (ii) such date as
all of the Shares have been resold, or (iii) such time as all of the Shares held
by the Selling Stockholders can be sold within a given three-month
17
<PAGE> 20
period without compliance with the registration requirement of the Securities
Act pursuant to Rule 144.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED
PRIOR BENEFICIAL OWNERSHIP
TO OFFERING (1) AFTER OFFERING (1)
--------------------- NUMBER OF ---------------------
NUMBER OF SHARES BEING NUMBER OF
NAME OF SELLING STOCKHOLDERS SHARES PERCENT OFFERED SHARES PERCENT
- -------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Robert S. Birch(2).................... 39,000 * 39,000 0 *
Aeneas Venture Corporation(3)......... 2,178,726 11.9% 585,000 1,593,726 8.8%
Phoenix Partners, L.P.(4)............. 198,900 1.1% 198,900 0 *
Betje Partners, L.P.(5)............... 62,400 * 62,400 0 *
Morgens, Waterfall, Vintiadis
Investments(6)...................... 168,700 * 128,700 40,000 *
Olin Nisbet(7)........................ 97,500 * 97,500 0 *
SBSF Biotechnology Fund, L.P.(8)...... 292,500 1.6% 292,500 0 *
Counselors Emerging Growth Fund(9).... 1,190,000 6.5% 585,000 605,000 3.3%
WHI Somatix Partners(10).............. 195,000 1.1% 195,000 0 *
WPG-Farber Partners Fund, L.P.(11).... 208,650 1.1% 208,650 0 *
WPG-Farber Overseas Partners,
Ltd.(12)............................ 83,850 * 83,850 0 *
--------- ------------ ---------
Total....................... 4,715,226 2,476,500 2,238,726
</TABLE>
- ---------------
* Less than 1%
(1) Based upon 18,112,056 shares of Common Stock outstanding on May 31, 1995.
This Registration Statement shall also cover additional shares of Common
Stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock dividend, stock split, recapitalization
or other similar transaction effected without the receipt of consideration
which results in an increase in the number of the Registrant's outstanding
shares of Common Stock.
(2) Includes shares issuable upon exercise of warrants to purchase 14,000
shares of Somatix Common Stock.
(3) Includes shares issuable upon exercise of warrants to purchase 210,000
shares of Somatix Common Stock. Michael R. Eisenson, a director of the
Company, is a Vice President and member of the investment committee of
Aeneas Venture Corporation. He may be deemed the beneficial owner of
2,178,726 shares of Common Stock held by Aeneas Venture Corporation with
shared voting and investment power with respect thereto. Mr. Eisenson
disclaims beneficial ownership of such shares.
(4) Includes shares issuable upon exercise of warrants to purchase 71,400
shares of Somatix Common Stock.
(5) Includes shares issuable upon exercise of warrants to purchase 22,400
shares of Somatix Common Stock.
(6) Includes shares issuable upon exercise of warrants to purchase 46,200
shares of Somatix Common Stock.
(7) Includes shares issuable upon exercise of warrants to purchase 35,000
shares of Somatix Common Stock.
(8) Includes shares issuable upon exercise of warrants to purchase 105,000
shares of Somatix Common Stock.
(9) Includes shares issuable upon exercise of warrants to purchase 210,000
shares of Somatix Common Stock.
(10) Includes shares issuable upon exercise of warrants to purchase 70,000
shares of Somatix Common Stock.
(11) Includes shares issuable upon exercise of warrants to purchase 74,900
shares of Somatix Common Stock.
(12) Includes shares issuable upon exercise of warrants to purchase 30,100
shares of Somatix Common Stock.
18
<PAGE> 21
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold by the Selling Stockholders from time to time in transactions
in the over-the-counter market, in negotiated transactions, or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them 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.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.
The Shares were issued to the Selling Stockholders pursuant to an exemption
from the registration requirements of the Securities Act provided by Section
4(2) thereof. The Company agreed to register the Shares under the Securities Act
and to indemnify and hold the Selling Stockholders harmless against certain
liabilities under the Securities Act that could arise in connection with the
sale by the Selling Stockholders of the Shares. The Company has agreed to pay
all reasonable fees and expenses incident to the filing of this Registration
Statement.
DESCRIPTION OF CAPITAL STOCK
The Company has 26,000,000 shares of authorized capital stock, of which
25,000,000 shares have been designated Common Stock, $0.01 par value, and
1,000,000 shares have been designated Preferred Stock, $0.01 par value (the
"Preferred Stock") of which 254,000 shares have been designated Series A-1
Preferred Stock and 100,000 shares have been designated Series A-2 Preferred
Stock. The Company had 18,112,056 shares of Common Stock outstanding on May 31,
1995 and 254,000 shares of Series A Preferred Stock outstanding on June 28,
1995.
The holders of Preferred Stock are entitled to receive on a quarterly basis
cumulative paid-in-kind dividends at the rate of 7% per annum per share
(exclusive of Preferred Stock received as dividends) in preference to the
holders of Common Stock. In addition, in the event of a liquidation, winding up,
or change in control of the Company, the holders of Preferred Stock are entitled
to receive in preference to any distribution of funds to the holders of Common
Stock, an amount of $25.00 per share of Preferred Stock (as adjusted for stock
dividends, combinations or splits with respect to such shares), plus any accrued
but unpaid dividends. The Preferred Stock is redeemable by the Company at any
time on or after the thirty-month anniversary date of issuance of the Preferred
Stock at the then-conversion price of the Preferred Stock in the event that (i)
the Common Stock closing price for forty (40) of sixty (60) consecutive trading
days exceeds 100% of the then conversion price, and (ii) the Common Stock into
which the Preferred Stock is convertible may be resold by
19
<PAGE> 22
the holders pursuant to an effective registration statement under the Securities
Act of 1933 until June 1998 or Rule 144(k). In addition, the Preferred Stock is
redeemable by the Company at any time on or after three years from the date of
issuance of the Preferred Stock at the liquidation preference payable either in
cash or Common Stock; however, the liquidation preference must be paid in cash
unless the holders can resell the Common Stock pursuant to an effective
registration statement under the Securities Act of 1933 until June 1998 or Rule
144(k). The Preferred Stock is convertible into Common Stock at any time after
issuance at a conversion price of $4.00 per share of Common Stock (the "Initial
Conversion Price") plus accrued and unpaid dividends. On the date thirteen
months from the date of issuance, the Initial Conversion Price of the Preferred
Stock (excluding shares of Preferred Stock that have been converted, redeemed or
repurchased prior to such date) will be automatically reset to the lesser of (i)
the Initial Conversion Price, and (ii) the 30 trading day consecutive average
closing market price of the Common Stock for the period beginning on the 30th
day prior to the date thirteen months from the date of issuance, but in no event
will the Initial Conversion Price be reset to an amount less than $2.00 per
share of Common Stock. In addition, the conversion price will be further reset
lower by 10% upon the first occurrence after the conversion price reset set
forth in the preceding sentence of (i) a failure to make material filings under
the 1934 Act on a timely basis, or (ii) the receipt of a qualified audit
opinion. The holders of Preferred Stock are entitled to elect a majority of the
Board of Directors in the event that the Company's available cash falls below $5
million. In addition, consent of the holders of a majority of the outstanding
Preferred Stock is required for (i) the sale, license or disposal of all or a
substantial portion of the Company's assets, (ii) any indebtedness for borrowed
money (other than indebtedness with recourse limited to tangible real and
personal property of the Company), (iii) the merger, consolidation, or
recapitalization of the Company; or (iv) the amendment or repeal of the
Company's charter or bylaws in a manner that adversely affects the holders of
the Preferred Stock.
Holders of shares of Common Stock (and Common Stock issuable upon
conversion of Preferred Stock) are entitled to one vote per share on all matters
to be voted on by stockholders. Subject to the preferences applicable to the
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors in its
discretion from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably with the holders of Preferred Stock (on an as-converted basis)
in all assets remaining after payment of liability and the liquidation
preference of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities. The outstanding shares of Common Stock and Preferred Stock
are, and the Common Stock to be outstanding upon completion of this offering,
will be, fully paid and nonassessable.
The Company has outstanding warrants to purchase an aggregate of 3,098,006
shares of the Company's Common Stock. Of the outstanding warrants, the Common
Stock issuable upon exercise of warrants to purchase 889,000 shares of Common
Stock are being registered in this offering (the "Warrants"). The Warrants are
exercisable at any time beginning 60 days from the date of issuance until the
third anniversary of the date of issuance. The Warrants are exercisable at a
price of $4.00 per share of Common Stock. The exercise price of the warrants is
subject to proportional adjustment in the event that the Company undertakes a
stock split, stock dividend, or recapitalization.
LEGAL MATTERS
The legality of the securities being offered hereby will be passed upon for
the Company by Brobeck, Phleger & Harrison, Palo Alto, California.
EXPERTS
The consolidated financial statements of Somatix Therapy Corporation at
June 30, 1994 and 1993, and for each of the three years in the period ended June
30, 1994, appearing in this Registration Statement and Prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
20
<PAGE> 23
SOMATIX THERAPY CORPORATION
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-1
Financial Statements.................................................................. F-2
Consolidated Balance Sheets........................................................... F-2
Consolidated Statements of Operations................................................. F-3
Consolidated Statements of Stockholders' Equity....................................... F-4
Consolidated Statements of Cash Flows................................................. F-5
Notes of Consolidated Financial Statements............................................ F-6
</TABLE>
<PAGE> 24
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
SOMATIX THERAPY CORPORATION
We have audited the accompanying consolidated balance sheets of Somatix
Therapy Corporation as of June 30, 1994 and 1993, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended June 30, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Somatix Therapy Corporation at June 30, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 1994, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Francisco, California
July 29, 1994
except for Note 8, as to which the date is
June 28, 1995
F-1
<PAGE> 25
SOMATIX THERAPY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
-----------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................... $ 777,000 $ 5,214,000
Marketable securities......................................... 19,196,000 6,482,000
Other current assets.......................................... 901,000 761,000
------------ ------------
Total current assets.................................. 20,874,000 12,457,000
Marketable securities........................................... 249,000 6,365,000
Restricted cash................................................. 250,000 275,000
Equipment and improvements, at cost:
Laboratory and production equipment........................... 4,040,000 4,585,000
Equipment under capital leases................................ 2,107,000 927,000
Furniture and office equipment................................ 1,204,000 1,741,000
Leasehold improvements........................................ 3,555,000 3,159,000
------------ ------------
Total equipment and improvements...................... 10,906,000 10,412,000
Less accumulated depreciation and amortization................ 6,720,000 6,119,000
------------ ------------
Net equipment and improvements........................ 4,186,000 4,293,000
Other assets.................................................... 188,000 134,000
------------ ------------
Total assets.......................................... $ 25,747,000 $ 23,524,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities...................... $ 1,418,000 $ 1,174,000
Accrued compensation and related expenses..................... 311,000 356,000
Capital lease obligations, current portion.................... 517,000 173,000
Other current liabilities..................................... 15,000 32,000
------------ ------------
Total current liabilities............................. 2,261,000 1,735,000
Capital lease obligations....................................... 1,627,000 176,000
Deferred rent, net of current portion........................... 13,000 61,000
Stockholders' Equity:
Series A Preferred stock, $.01 par value, 1,000,000 shares
authorized; none outstanding Common stock, $.01 par value,
25,000,000 shares authorized; 15,748,937 shares issued and
outstanding (1993--13,266,606 shares issued and
outstanding)............................................... 157,000 133,000
Capital in excess of par value................................ 132,109,000 118,132,000
Accumulated deficit........................................... (110,420,000) (96,713,000)
------------ ------------
Total stockholders' equity...................................... 21,846,000 21,552,000
------------ ------------
Total liabilities and stockholders' equity............ $ 25,747,000 $ 23,524,000
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE> 26
SOMATIX THERAPY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Licensing agreement............................ $ 2,000,000 $ -- $ --
Research agreements............................ 900,000 -- --
Contract manufacturing......................... -- -- 69,000
------------ ------------ ------------
Total revenues......................... 2,900,000 -- 69,000
------------ ------------ ------------
Costs and Expenses:
Cost of revenues............................... -- -- 1,035,000
Research and development....................... 13,186,000 12,732,000 7,444,000
General and administrative..................... 3,895,000 3,903,000 2,568,000
In-process technology.......................... -- -- 33,038,000
------------ ------------ ------------
Total costs and expenses............... 17,081,000 16,635,000 44,085,000
------------ ------------ ------------
Operating loss................................... (14,181,000) (16,635,000) (44,016,000)
Other income, net................................ 474,000 964,000 793,000
------------ ------------ ------------
Net loss............................... $(13,707,000) $(15,671,000) $(43,223,000)
============ ============ ============
Net loss per share............................... $(0.95) $(1.19) $(4.43)
------------ ------------ ------------
Shares used in calculation of net loss per
share.......................................... 14,417,679 13,191,035 9,751,973
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 27
SOMATIX THERAPY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK IN EXCESS TOTAL
---------------------- OF PAR DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT VALUE COMPENSATION DEFICIT EQUITY
----------- -------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Years ended June 30, 1994, 1993 and 1992
Balances, June 30, 1991.................... $ 7,584,544 $ 76,000 $ 48,964,000 $(42,000) $ (37,819,000) $ 11,179,000
----------- -------- ------------ -------- ------------- -----------
Issuance of shares of common stock under
stock option and purchase plans.......... 127,951 1,000 291,000 -- -- 292,000
Issuance of common stock to and assumptions
of options and warrants upon the
acquisition of GeneSys................... 1,967,214 20,000 32,203,000 -- -- 32,223,000
Public offering of common stock at $11.50
per share, net of issuance costs......... 3,450,000 34,000 36,029,000 -- -- 36,063,000
Issuance of common stock to officer as
compensation............................. 12,500 -- -- -- -- --
Amortization of deferred compensation...... -- -- -- 42,000 -- 42,000
Purchase and retirement of common stock.... (4,892) -- (66,000) -- -- (66,000)
Net loss................................... -- -- -- -- (43,223,000) (43,223,000)
----------- -------- ------------ -------- ------------- -----------
Balances, June 30, 1992.................... $13,137,317 $131,000 $117,421,000 $ -- $ (81,042,000) $ 36,510,000
----------- -------- ------------ -------- ------------- -----------
Issuance of shares of common stock under
stock option and purchase plans.......... 137,736 2,000 711,000 -- -- 713,000
Purchase and retirement of common stock.... (8,447) -- -- -- --
Net loss................................... -- -- -- -- (15,671,000) (15,671,000)
----------- -------- ------------ -------- ------------- -----------
Balances, June 30, 1993.................... $13,266,606 $133,000 $118,132,000 $ -- $ (96,713,000) $ 21,552,000
Issuance of shares of common stock under
stock option and purchase plans.......... 13,521 -- 69,000 -- -- 69,000
Private investment in public equity
financing at $5.85 per share, net of
issuance costs........................... 2,005,483 20,000 10,842,000 -- -- 10,862,000
Issuance of common stock to investor at
$6.88 per share, net of issuance costs... 232,558 2,000 1,582,000 -- -- 1,584,000
Issuance of common stock to investor at
$6.50 per share, net of issuance costs... 230,769 2,000 1,484,000 -- -- 1,486,000
Net loss................................... -- -- -- -- (13,707,000) (13,707,000)
----------- -------- ------------ -------- ------------- -----------
Balances, June 30, 1994.................... $15,748,937 $157,000 $132,109,000 $ -- $(110,420,000) $ 21,846,000
=========== ======== ============ ======== ============= ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 28
SOMATIX THERAPY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(13,707,000) $(15,671,000) $(43,223,000)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization.................. 1,466,000 1,232,000 909,000
Write-off of acquired in-process technology.... -- -- 33,038,000
Decrease in contract revenue receivable........ -- -- 76,000
Increase in other current assets............... (140,000) (320,000) (558,000)
Increase in other assets....................... (54,000) (134,000) (56,000)
Increase (decrease) in accounts payable and
accrued liabilities......................... 244,000 (72,000) (482,000)
Increase (decrease) in accrued compensation and
related expenses............................ (45,000) 94,000 142,000
Decrease in accrued acquisition costs.......... (17,000) (75,000) (1,354,000)
Increase (decrease) in deferred rent........... (48,000) 76,000 --
------------ ------------ ------------
Net cash used for operating
activities........................... (12,301,000) (14,870,000) (11,508,000)
Cash flows from investing activities:
Net proceeds from GeneSys acquisition.......... -- -- 2,171,000
Sales of marketable securities and changes in
restricted cash............................. 9,625,000 6,533,000 3,910,000
Purchase of marketable securities.............. (16,198,000) (3,453,000) (11,907,000)
Purchase of equipment and improvements......... (1,359,000) (2,480,000) (960,000)
------------ ------------ ------------
Net cash used in investing
activities........................... (7,932,000) 600,000 (6,786,000)
Cash flows from financing activities:
Borrowings under sale/leaseback agreements..... 2,000,000 -- --
Principal payments under capital lease
obligations................................. (205,000) (296,000) (942,000)
Net proceeds from issuance of common stock..... 14,001,000 713,000 37,276,000
------------ ------------ ------------
Net cash provided by financing
activities........................... 15,796,000 417,000 36,334,000
Net increase (decrease) in cash.................. (4,437,000) (13,853,000) 18,040,000
Cash and cash equivalents, beginning of period... 5,214,000 19,067,000 1,027,000
------------ ------------ ------------
Cash and cash equivalents, end of period......... $ 777,000 $ 5,214,000 $ 19,067,000
============ ============ ============
Cash paid for interest........................... $ 132,000 $ 121,000 $ 100,000
Capital lease obligations incurred............... $ -- $ -- $ 658,000
</TABLE>
See accompanying notes.
F-5
<PAGE> 29
SOMATIX THERAPY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
NOTE 1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
COMPANY AND BASIS OF PRESENTATION. Somatix Therapy Corporation ("Somatix"
or the "Company") is a leader in the emerging field of gene therapy. Somatix is
applying its gene therapy expertise to research and develop therapies to treat a
variety of diseases. The Company is the result of two transactions. The first
transaction, which was consummated in March 1991, combined Somatix Corporation
and Hana Biologics, Inc. The second transaction occurred in January 1992, when
the Company acquired GeneSys (See Note 7). The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS. Cash equivalents consist of government
securities, short-term corporate debt securities and demand deposits with
maturities at the date of acquisition of three months or less. Cash equivalents
are stated at cost which approximates market value.
REVENUE RECOGNITION. License revenue is recorded as revenue when all
contractual obligations have been met. Research revenue is recorded when earned
as defined under the term of the respective agreements. Payments received which
are related to future performance are deferred and recognized as income when
earned.
MARKETABLE SECURITIES. Current marketable securities consist primarily of
government securities and corporate debt securities having maturities between
three months and one year. Non-current marketable securities consist of
government securities, bank repurchase agreements and medium-term corporate debt
securities having maturities greater than one year. Marketable securities are
stated at cost which approximates market value.
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Company is required to
adopt the statement in its financial year ending June 30, 1995. This statement
addresses the accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. The Company believes its short-term investments will be classified
as held-to-maturity and recorded at amortized cost with realized gains and
losses included in the statement of operations. In addition, the Company
believes that if it had adopted this statement in 1994, the effect on its
consolidated financial position at June 30, 1994, and results of 1994 operations
would not have been significant.
It is the Company's policy to invest funds not required for current
operations in financial instruments with strong credit ratings. The Company has
not experienced significant losses to date on these investments.
EQUIPMENT AND IMPROVEMENTS. Depreciation of equipment and furniture is
provided over estimated useful lives of three to ten years using the
straight-line method. Assets under capital leases are amortized by the
straight-line method over their useful lives from three to five years. Leasehold
improvements are being amortized over the remaining lives of the applicable
leases.
RETIREMENT PLAN. On January 1, 1993, the Company established a defined
contribution plan which covers all employees 21 years and older. The Company's
contributions to the plan are at the discretion of the Company's Board of
Directors. Amounts contributed to the plan for the years ended June 30, 1994 and
1993 amounted to $46,000 and $26,000 respectively.
INCOME TAXES. In February 1992, the FASB issued SFAS No. 109, "Accounting
for Income Taxes." The Company adopted the provisions of the Statement effective
July 1, 1993. Under SFAS No. 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are
F-6
<PAGE> 30
SOMATIX THERAPY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. There was no cumulative effect of adopting
SFAS No. 109.
PER SHARE INFORMATION. Per share information is based on the weighted
average number of common shares outstanding during each period. Shares issuable
upon the exercise of stock options and warrants are not included since their
inclusion would be anti-dilutive.
NOTE 2. STOCKHOLDERS' EQUITY
ACQUISITION OF GENESYS THERAPEUTICS CORPORATION
Pursuant to the acquisition of GeneSys in 1992 (see Note 7), the Company
assumed a warrant to purchase 993,740 shares of Series B Preferred Stock from a
shareholder at an exercise price of $2.0162 per share. By its terms, this
warrant can be exercised for GeneSys Series B Preferred Stock from November 9,
1992 to November 9, 1994. Concurrently with the acquisition, the Company entered
into an agreement with the warrant holder whereby the shares of GeneSys stock
issuable upon exercise of the warrant may be exchanged for 348,753 shares of the
Company's common stock.
T-BODY TECHNOLOGY RESEARCH AND DEVELOPMENT AGREEMENT
On April 29, 1994 the Company signed collaborative research and equity
purchase agreements with Baxter Healthcare Corporation ("Baxter") to jointly
research, develop and commercialize T-body technology for the treatment of
cancer. Under the terms of the agreements, the Company and Baxter will be
responsible for their own research expenditures. In 1994, the Company received a
non-refundable technology license fee of $400,000, as well as $1,600,000 for the
sale of 232,558 shares of common stock to Baxter at $6.88/share. Baxter agreed
to purchase $1,000,000 in common stock at the then-market price along with
making a milestone payment of $1,000,000 after the first patient has been
treated in a Phase I clinical trial. Before initiating Phase III clinical
trials, the companies will have the opportunity to form a joint venture to
complete clinical development and commercialization of this technology. The
funding supported by each party at that point will determine the ownership of
the joint venture; provided, however, that each party can supplement its funding
contributions so that the total amount funded by each party equals at least 30
percent and up to 50 percent of the total expenditures under the program.
COLORECTAL CANCER TREATMENT RESEARCH AND DEVELOPMENT AGREEMENT
On May 12, 1994 the Company signed an agreement with a private group of
investors (the "Investors") to develop the Company's GVAXTM vaccine technology
for the treatment of colorectal cancer. Under the terms of the agreement, the
Company received $500,000 to fund preclinical research and $1,500,000 for the
sale of 230,769 shares of common stock to the Investors, at $6.50 per share.
These initial research funds have been used to finance staffing, overhead
and supply costs associated with the Company's preclinical development of the
GVAX vaccine for colorectal cancer. Upon filing an IND, the Company is to
receive $2,500,000 from the Investors consisting of research funding of
$1,250,000 and $1,250,000 from the sale of additional shares of common stock at
the thencurrent market price. In exchange for funding the program, the Investors
will receive royalty payments of 2% of net sales of the colorectal product,
although such payments are to be terminated when the Investors have received
aggregate payments totaling $1,750,000, therefore recovering research funding
under the agreement.
OTHER BENEFIT OR BONUS PLANS
1992 STOCK OPTION PLAN. The 1992 Stock Option Plan (the "Option Plan") was
adopted by the Board of Directors on September 15, 1992, as the successor of the
1983 Stock Option Plan (the "1983 Plan"). All outstanding options under the 1983
Plan were incorporated into the Option Plan, and no further option grants
F-7
<PAGE> 31
SOMATIX THERAPY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are to be made under the 1983 Plan. However, each outstanding option
incorporated into the Option Plan will continue to be governed by the terms and
conditions of the instrument evidencing such grant, and nothing in the Option
Plan will affect the rights and obligations of the holders of such options with
respect to their acquisition of shares of the Company's common stock thereunder
or their exercise of any outstanding stock appreciation rights pertaining to
those options. Under the 1992 Stock Option Plan, 2,200,000 shares have been
authorized for the grant to employees of either non-qualified or incentive stock
options and the grant to consultants of non-qualified options. Incentive options
are to be granted with exercise prices not less than the fair market value of
common stock at the date of grant and non-qualified options at not less than 85%
of fair market value. Options are exercisable as determined by the Board of
Directors, and the Company may be granted the right to repurchase shares
acquired in diminishing amounts over varying periods of time (none through June
30, 1994). The following table summarizes the activity under the Plan for the
years ended June 30, 1994, 1993, and 1992:
<TABLE>
<CAPTION>
OPTIONS EXERCISE
FOR THE YEARS ENDED JUNE 30, OUTSTANDING PRICE
---------------------------------------------------------- ----------- ------------
<S> <C> <C>
1991
Balance................................................... 642,261 $2.50-$25.00
1992
Options granted........................................... 661,327 $2.44-$ 8.50
Options canceled.......................................... (119,696) $2.88-$ 8.52
Options exercised......................................... (34,919) $2.88-$ 8.52
----------- ------------
Balance................................................... 1,148,973 $2.44-$25.00
1993
Options granted........................................... 787,538 $5.75-$ 9.25
Options canceled.......................................... (399,730) $3.75-$ 8.50
Options exercised......................................... (137,736) $2.50-$ 8.52
----------- ------------
Balance................................................... 1,399,045 $2.50-$ 9.25
1994
Options granted........................................... 483,538 $5.63-$ 6.88
Options canceled.......................................... (56,737) $3.75-$25.00
Options exercised......................................... (13,521) $2.88-$ 7.00
----------- ------------
Balance................................................... 1,812,325 $2.88-$25.00
========= ===========
</TABLE>
Of the options outstanding at June 30, 1994, 870,157 shares were
exercisable, 428,352 would be subject to repurchase rights if exercised, and
942,169 were unvested and unexercisable.
1988 SOMATIX CORPORATION STOCK OPTION PLAN. As a result of the merger in
March 1991 with Somatix Corporation, the Company adopted Somatix Corporation's
1988 Stock Option Plan. At June 30, 1994, 15,541 options are outstanding under
the plan, with an exercise price of $0.14 per share.
NOTE 3. JOINT RESEARCH AND DEVELOPMENT AGREEMENT
On November 2, 1993 Baxter Healthcare Corporation and the Company signed an
agreement to jointly research and develop a gene therapy approach for the
treatment of hemophilia. Under the terms of the agreement, the Company received
a non-refundable technology license fee of $2,000,000. The agreement grants
Baxter worldwide marketing rights to products developed.
F-8
<PAGE> 32
SOMATIX THERAPY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a part of this relationship, Baxter and the Company will collaborate in
areas of research and manufacturing and Baxter will make certain milestone
payments to the Company. Baxter will conduct clinical trials and market the
product worldwide. The Company will receive royalties on product sales. The
Company has also agreed to provide Baxter with a right of first negotiations for
certain other approaches for the treatment of hemophilia A and B.
NOTE 4. INCOME TAXES
Significant components of the Company's non-current deferred tax assets are
as follows at June 30, 1994:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
------------ ---------- ------------
<S> <C> <C> <C>
NONCURRENT DEFERRED TAX ASSETS
Net operating loss carryforward.................... $ 21,000,000 $2,400,000 $ 23,400,000
Capitalization research and development costs...... 500,000 -- 500,000
Research and development credit carryforward....... 3,000,000 800,000 3,800,000
------------ ---------- ------------
Gross non-current deferred tax assets.............. 24,500,000 3,200,000 27,700,000
Valuation allowance................................ (24,500,000) (3,200,000) (27,700,000)
------------ ---------- ------------
Net non-current deferred tax asset................. $ -- $ -- $ --
------------ ---------- ------------
</TABLE>
The valuation allowance increased $6,600,000 in fiscal year 1994.
At June 30, 1994 the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $62,000,000 and
$26,000,000, respectively, which expire in the years 1995 through 2009. The
Company also has federal and state research and development credit carryforwards
of approximately $3,000,000 and $800,000, respectively, which expire in the
years 1996 through 2009.
Because of "change in ownership" provisions of the Tax Reform Act of 1986,
a portion of the Company's net operating loss and research and development
credit carryforwards will be subject to an annual limitation regarding their
utilization against taxable income in future periods.
NOTE 5. COMMITMENTS
The Company leases certain laboratory and production equipment under
capital leases and all office and laboratory space under operating leases. The
operating lease agreements generally require the Company to pay operating costs
including property taxes, insurance and maintenance.
F-9
<PAGE> 33
SOMATIX THERAPY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under capital and operating leases at June
30, 1994 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
1995........................................................ $ 796,000 $1,143,000
1996........................................................ 718,000 1,494,000
1997........................................................ 670,000 1,330,000
1998........................................................ 606,000 783,000
1999........................................................ -- 627,000
Thereafter.................................................. -- --
---------- ----------
Total minimum lease payments................................ $2,790,000 $5,377,000
========= =========
Less amount representing interest........................... 646,000
----------
Present value of minimum lease payments..................... 2,144,000
Less current portion........................................ 517,000
----------
Long-term portion........................................... $1,627,000
=========
</TABLE>
At June 30, 1994, the Company has certificates of deposit totaling $250,000
which secure certain operating and capital leases.
Rent expense was approximately $1,051,000, $784,000 and $488,000 for fiscal
years 1994, 1993, and 1992, respectively. At June 30, 1994, the net book value
of equipment under capital leases is $2,071,000 ($371,000 in 1993). Certain
other facilities are sub-leased under a non-cancelable lease for terms
substantially identical to the original lease.
On May 24, 1994, the Company entered into a $2,000,000 sale/leaseback
transaction for equipment used in the Company's operations. The Company's
resulting gain of $358,000 has been recorded on the accompanying balance sheets
as an offset to equipment under capital leases and is being amortized over the
lease term. The lessor also received warrants, exercisable until May 24, 1999,
to purchase 25,000 shares of the Company's common stock at an exercise price of
$7.00 per share.
NOTE 6. OTHER INCOME
Other income is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------
1994 1993
--------- ----------
<S> <C> <C>
Interest income............................................. $ 731,000 $1,067,000
Interest expense............................................ (132,000) (124,000)
Other income (expense), net................................. (125,000) 21,000
--------- ----------
$ 474,000 $ 964,000
========= =========
</TABLE>
NOTE 7. ACQUISITION OF GENESYS THERAPEUTICS CORPORATION
On January 17, 1992, the Company completed its acquisition (the
"Acquisition") of GeneSys, a privately held gene therapy company, pursuant to a
transaction in which a wholly owned subsidiary of the Company was merged into
GeneSys. The Company acquired all capital stock of GeneSys by issuing 1,967,214
shares of common stock in exchange for all of the outstanding capital stock of
GeneSys and assumed options and warrants to purchase an aggregate of 549,453
shares of the Company's common stock at exercise prices between $0.28 and $5.73
per share.
F-10
<PAGE> 34
SOMATIX THERAPY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The transaction was accounted for as a purchase and the consideration
issued by the Company was allocated to the tangible and intangible assets
acquired based upon their estimated fair values on the Acquisition date. The
aggregate purchase price of $35.7 million consisted of (in thousands):
<TABLE>
<S> <C>
Market value of common stock....................... $26,727
Fair value, net of accrued proceeds from exercise
of warrants and options assumed.................. 5,429
Acquisition costs and expenses..................... 3,114
Liabilities assumed................................ 425
-------
Total purchase price..................... $35,695
=======
</TABLE>
The aggregate purchase price exceeded the fair value of GeneSys tangible
assets by $33 million. This amount was allocated to acquired in- process
technology and written off to operations in fiscal 1992. The allocation of the
aggregate purchase price was as follows (in thousands):
<TABLE>
<S> <C>
Current assets..................................... $ 2,388
Property, plant and equipment...................... 269
In-process technology.............................. 33,038
-------
$35,695
=======
</TABLE>
The operating results of GeneSys have been included in the Company's
statement of operations commencing January 17, 1992. Had the Acquisition
occurred on July 1, 1990, Somatix Therapy Corporation's unaudited pro forma
operating results would have been as follows (in thousands) for the year ended
June 30, 1992:
<TABLE>
<S> <C>
Revenues........................................... $ 69
Operating loss..................................... (11,383)
Net loss........................................... (10,590)
Net loss per share................................. $ (.98)
</TABLE>
The summarized pro forma results above consolidate GeneSys' operating
results with those of Somatix. The pro forma results are for comparative
purposes only and do not purport to present what would have occurred had the
Acquisition been made at the beginning of fiscal 1991 or of the results which
may occur in the future.
NOTE 8. SUBSEQUENT EVENT
On June 28, 1995, the Company received approximately $16 million for units
consisting of common stock and warrants or preferred stock and warrants.
F-11
<PAGE> 35
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors.......................... 4
The Company........................... 11
Selling Stockholders.................. 17
Plan of Distribution.................. 18
Description of Capital Stock.......... 19
Legal Matters......................... 20
Experts............................... 20
Index to Consolidated Financial
Statements.......................... 21
Report of Independent Auditors........ F-1
Financial Statements.................. F-2
- --------------------------------------
- --------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
2,476,500 SHARES
SOMATIX
THERAPY
CORPORATION
COMMON STOCK
--------------
JULY , 1995
--------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The fees and expenses incurred by the Company in connection with the
offering are payable by the Company and, other than filing fees, are estimated
as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . . . . . . . . . . . . . . $ 3,469
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Transfer Agent Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,469
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended (the
"DGCL"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any
such person serving in any such capacity who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor, against
expenses actually and reasonably incurred in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or such other court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
II-1
<PAGE> 37
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL (relating to unlawful payment of dividends and unlawful stock
purchase and redemption) or (iv) for any transaction from which the director
derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation provides that the
Registrant's directors shall not be liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that exculpation from liabilities is not permitted under
the DGCL as in effect at the time such liability is determined. The Registrant
has entered into indemnification agreements with all of its officers and
directors, as permitted by the DGCL.
Item 16. Exhibits and Financial Statement Schedules.
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.3 Certificate of Designation of Preferences of Preferred Shares.
5.1 Opinion of Brobeck, Phleger & Harrison.
10.20 Common Stock Purchase Agreement.
10.21 Preferred Stock Purchase Agreement.
10.22 Form of Warrant to Purchase Shares of Common Stock.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Brobeck, Phleger & Harrison.
25.1 Power of Attorney (included in Part II of this Registration
Statement under the caption "Signatures").
</TABLE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the
II-2
<PAGE> 38
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) (Section 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (i) and (ii)
do not apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i) and
(ii) is contained in periodic reports filed with or furnished to the Commission
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to
II-3
<PAGE> 39
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-4
<PAGE> 40
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF ALAMEDA, STATE OF CALIFORNIA
ON THIS 5TH DAY OF JULY, 1995.
SOMATIX THERAPY CORPORATION
By /s/ DAVID W. CARTER
---------------------------------------
David W. Carter, Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Somatix Therapy
Corporation, a Delaware corporation, do hereby constitute and appoint jointly
and severally, David W. Carter and Mark N.K. Bagnall, and each of them, the
lawful attorneys and agents, with power and authority to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both
pre-effective and post-effective, and supplements to this Registration
Statement, and to any and all instruments or documents filed as part of or in
conjunction with this Registration Statement or amendments or supplements
thereof, and each of the undersigned hereby ratifies and confirms all that said
attorneys and agents or any of them shall do or cause to be done by virtue
hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act, this
Amendment to Registration Statement has been signed below by the persons whose
II-5
<PAGE> 41
signatures appear below, which persons have signed such Registration
Statement in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ DAVID W. CARTER Chairman of the Board, July 5, 1995
--------------------------------------------------- President, Chief Executive
David W. Carter Officer and Director
(Principal Executive
Officer)
/s/ MARK N. K. BAGNALL Vice President, Finance, and July 5, 1995
--------------------------------------------------- Chief Financial Officer
Mark N. K. Bagnall (Principal Financial and
Accounting Officer)
/s/ KAREN DAVIS Director July 5, 1995
---------------------------------------------------
Karen Davis, Ph.D.
Director July , 1995
---------------------------------------------------
Michael R. Eisenson
/s/ FRED H. GAGE Director July 5, 1995
---------------------------------------------------
Fred H. Gage, Ph.D.
/s/ HARRY F. HIXSON, JR. Director July 5, 1995
---------------------------------------------------
Harry F. Hixson, Jr., Ph.D.
Director July , 1995
---------------------------------------------------
Richard C. Mulligan, Ph.D.
Director July , 1995
---------------------------------------------------
John T. Potts, Jr.
Director July , 1995
---------------------------------------------------
Thomas E. Shenk
/s/ SAMUEL D. WAKSAL Director July 5, 1995
---------------------------------------------------
Samuel D. Waksal, Ph.D.
</TABLE>
II-6
<PAGE> 42
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
No. EXHIBIT Page No.
- ------- --------
<S> <C> <C>
3.3 Certificate of Designation of Preferences of Preferred Stock . . . . . . . . . . . . . .
5.1 Opinion of Brobeck, Phleger & Harrison . . . . . . . . . . . . . . . . . . . . . . . . .
10.20 Common Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.21 Preferred Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.22 Form of Warrant to Purchase Shares of Common Stock . . . . . . . . . . . . . . . . . . .
23.1 Consent of Ernst & Young LLP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.2 Consent of Brobeck, Phleger & Harrison (See Exhibit 5.1) . . . . . . . . . . . . . . . .
25.1 Power of Attorney (see page II-5) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
CERTIFICATE OF DESIGNATION
OF PREFERENCES OF PREFERRED SHARES OF
SOMATIX THERAPY CORPORATION
A DELAWARE CORPORATION
The undersigned David W. Carter and Mark N.K. Bagnall hereby certify that:
(a) They are the duly elected and acting Chairman, President and Chief
Executive Officer and Secretary, respectively, of Somatix Therapy Corporation, a
Delaware corporation (the "Corporation").
(b) Pursuant to the authority conferred upon the Board of Directors of
the Corporation by paragraph (B) of Article IV of the Corporation's Restated
Certificate of Incorporation (the "Certificate"), the Board of Directors of the
Corporation on April 20, 1995 and June 16, 1995 adopted the following
resolutions creating two series of preferred stock designated as Series A-1 and
Series A-2 Preferred Stock;
WHEREAS, the Certificate provides for a class of shares known
as Preferred Stock, issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Corporation is
authorized by the Certificate to determine the powers, rights, preferences,
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, to fix the number of shares
constituting any such series, and to determine the designation thereof, or any
of them;
WHEREAS, the Board of Directors of the Corporation desires,
pursuant to its authority as aforesaid, to determine and fix the powers, rights,
preferences, qualifications, limitations and restrictions relating to series of
Preferred Stock and the number of shares constituting, and the designation of,
each such series:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
vested in the Board of Directors of the Corporation in accordance with the
provisions of the Certificate, two series of Preferred Stock are hereby created,
and the Board of Directors hereby fixes and determines the designation of, the
number of shares constituting, and the rights, preferences, privileges and
restrictions relating to, each such series of Preferred Stock as follows:
1. Designation. The series of Preferred Stock of the
Corporation (the "Preferred Stock") shall be designated as "Series A-1 Preferred
Stock" and "Series A-2 Preferred Stock". Where appropriate in this Certificate,
"Series A-1 Preferred Stock" and "Series A-2 Preferred Stock" shall be jointly
referred to as "Series A Preferred Stock".
2. Authorized Number. The number of shares constituting the
Series A-1 Preferred Stock shall be Two Hundred Fifty Four Thousand (254,000)
shares. The number of shares constituting the Series A-2 Preferred Stock shall
be One Hundred Thousand (100,000) shares. The rights, preferences, restrictions
and other matters relating to the Series A Preferred Stock set forth below are
subject to the issuance of any subsequent series of preferred stock. The Board
of Directors is also authorized to decrease the number of shares of any series
of preferred stock prior or subsequent to the issue of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series shall
<PAGE> 2
be so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
3. Dividend Provisions.
(A) Subject to the rights of series of Preferred Stock
which may from time to time come into existence, the holders of the Series A-1
Preferred Stock shall be entitled to receive dividends at the rate of .0175
shares of Series A-2 Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) per share per quarter. Such
dividends shall be cumulative.
(B) No dividends shall be paid on any Common Stock of
the Corporation during any fiscal year of the Corporation unless a dividend (in
addition to the amount of any dividends paid pursuant to the above provision of
this Section 3) is paid with respect to all outstanding shares of Series A
Preferred Stock in an amount for each such share of Series A Preferred Stock
equal to the aggregate amount of such dividends for all shares of Common Stock
into which each such share of Series A Preferred Stock could then be converted.
(C) In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights to purchase any such securities or evidences of indebtedness
(after obtaining the vote required pursuant to Section 7), then, in each such
case the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock were the holders of the number of shares of Common Stock of
the Corporation into which their respective shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the Corporation entitled to receive such distribution.
4. Liquidation Preference.
(A) In the event of any liquidation, dissolution,
change of control or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by reason of
their ownership thereof, the amount of $25.00 per share (as adjusted for any
stock dividends, combinations or splits with respect to such shares) plus all
accrued or declared but unpaid dividends on such share for each share of Series
A Preferred Stock then held by them. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(B) After payment to the holders of the Series A
Preferred Stock of the amounts set forth in Sections 4(A) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock.
(C) For purposes of this Section 4, (i) any
acquisition of the Corporation by means of merger or other form of corporate
reorganization in which outstanding shares of the Corporation are exchanged for
securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction) or (ii) a sale of all or substantially all of the assets of the
Corporation or (iii) any other transaction or series of related transactions by
the Corporation in which in excess of 50% of the Corporation's voting power is
transferred, shall be treated as a liquidation, dissolution, change of control
or winding up of the Corporation within the meaning
2.
<PAGE> 3
of this Section 4; provided that, if such transaction or series of transactions
results in the holders of the Series A Preferred Stock receiving securities upon
conversion which may then be resold pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"), then
such transaction or series of transactions shall not be as a liquidation,
dissolution, change of control or winding up of the Corporation within the
meaning of this Section 4.
(D) Whenever the distribution provided for in this
Section 4 shall be payable in securities or property other than cash, the value
of such distribution shall be as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability:
(A) If traded on a securities exchange, the
value shall be deemed to be the average of the closing prices of the
securities on such exchange over the 30-day period ending three (3)
days prior to the closing;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale
prices (whichever are applicable) over the 30-day period ending three
(3) days prior to the closing; and
(C) If there is no active public market, the
value shall be the fair market value thereof, as determined in good
faith by the Board of Directors of the Corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as determined in good faith by the Board of Directors of
the Corporation.
5. Redemption.
(A) Subject to the rights of series of Preferred Stock
which may from time to time come into existence, on or at any time after June
27, 1998, the Corporation may at any time it may lawfully do so, at the option
of the Board of Directors, redeem in whole or in part the Series A Preferred
Stock by paying therefor a sum equal to $25.00 per share of Series A Preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares) plus all declared or accumulated but unpaid dividends on such
shares (the "Series A Redemption Price"). The Series A Redemption Price shall be
payable at the option of the Corporation (i) in cash or (ii) in Common Stock,
provided that the liquidation preference must be paid in cash unless the holders
of Series A Preferred Stock may resell the Common Stock into which the Series A
Preferred Stock is convertible immediately upon issuance and thereafter pursuant
to an effective registration statement under the 1933 Act until June 27, 1998,
and thereafter pursuant to Rule 144(k). Any redemption effected pursuant to this
subsection (5)(a) shall be made on a pro rata basis among the holders of the
Series A Preferred Stock in proportion to the number of shares of Series A
Preferred Stock then held by them.
(B) On June 27, 2000, the Corporation shall redeem all
of the shares of Series A Preferred Stock that have not previously been
converted, redeemed or repurchased, by paying therefor a sum equal to the Series
A Redemption Price. The Series A Redemption Price shall be payable at the option
of the Corporation (i) in cash or (ii) in Common Stock.
3.
<PAGE> 4
(C) As used herein and in subsection (5)(d) and (e)
below, the term "Redemption Date" shall refer to each of "Series A Redemption
Date" and the term "Redemption Price" shall refer to each of "Series A
Redemption Price." Subject to the rights of series of Preferred Stock which may
from time to time come into existence, at least fifteen (15) but no more than
thirty (30) days prior to each Redemption Date, written notice shall be mailed,
first class postage prepaid, to each holder of record (at the close of business
on the business day next preceding the day on which notice is given) of the
Series A Preferred Stock to be redeemed, at the address last shown on the
records of the Corporation for such holder, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in subsection (5)(d) on or after the
Redemption Date, each holder of Series A Preferred Stock to be redeemed shall
surrender to the Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable in cash or Common
Stock, at the election of the Company, to the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. Shares of Series A Preferred Stock
called for Redemption under this Section 5 shall be convertible into Common
Stock up to and including, but not after, the close of business on the
Redemption Date.
(D) From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of the
holders of shares of Series A Preferred Stock designated for redemption in the
Redemption Notice as holders of Series A Preferred Stock (except the right to
receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever.
6. Conversion. The holders of Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(A) Right to Convert. Each share of Series A Preferred
Stock shall be convertible, at the option of the holder thereof, at any time at
the office of the Corporation or any transfer agent for the Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $25.00 by the Conversion Price for the Series A-1
Preferred Stock and Series A-2 Preferred Stock in effect at the time of the
conversion (determined as hereinafter provided). The Conversion Price for the
Series A-1 Preferred Stock and Series A-2 Preferred Stock shall initially be
$4.00 (the "Initial Conversion Price"). Such Initial Conversion Price shall be
adjusted as hereinafter provided.
(B) Automatic Conversion. Each share of Series A
Preferred Stock shall automatically be converted into shares of Common Stock at
the option of the Corporation, in whole or in part, at any time on or after
December 27, 1997 at the Conversion Price then in effect for such share of
Series A Preferred Stock provided that:
(i) the Corporation's Common Stock has
closed on the Nasdaq National Market for 40 trading days out of the 60
consecutive trading days ending on December 27, 1997 in excess of X, where X is
the product of (A) two (2) multiplied by (B) the Conversion Price then in
effect; and
4.
<PAGE> 5
(ii) the Common Stock into which the
Series A Preferred Stock is convertible may be resold by the holders immediately
upon conversion and thereafter pursuant to an effective registration statement
under the 1933 Act until June 27, 1998, and thereafter pursuant to Rule 144(k).
(C) Mechanics of Conversion. Before any holder of
Series A Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to the Corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of the Series A Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date.
(D) Adjustments to Conversion Price. The Conversion
Price for the Series A-1 Preferred Stock is subject to the following
adjustments:
(i) On July 27, 1996 (the "Conversion Price Reset
Date"), the Initial Conversion Price of the Series A-1 Preferred Stock shall be
adjusted to a Conversion Price which shall be the lesser of (i) the Initial
Conversion Price and (ii) the average closing price of the Corporation's Common
Stock during the period beginning twenty (20) trading days prior to the
Conversion Price Reset Date and ending on the Conversion Price Reset Date (the
"Measurement Period"), as reported on the Nasdaq National Market; provided,
however, that the Conversion Price for the Series A-1 Preferred Stock shall in
no event be reset to an amount less than $2.00, and provided, further, that the
Initial Conversion Price shall not be reset with respect to any shares of Series
A Preferred Stock that have been converted, redeemed or repurchased prior to the
Conversion Price Reset Date.
(ii) If after the Conversion Price Reset Date the
Corporation (i) fails to make a material filing under the Securities Act of 1934
(the "1934 Act") on a timely basis or (ii) receives a qualified audit opinion,
then the Conversion Price then in effect for the Series A-1 Preferred Stock
shall be reduced by ten percent (10%); provided that there shall be no more than
one (1) such adjustment to the Conversion Price pursuant to this Section
6(D)(ii).
(E) Adjustments to Conversion Prices for Stock
Dividends and for Combinations or Subdivisions of Common Stock. In the event
that the Corporation at any time or from time to time after the purchase date of
the Series A Preferred shall declare or pay, without consideration, any dividend
on the Common Stock payable in Common Stock or in any right to acquire Common
Stock for no consideration, or shall effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock (by stock
split, reclassification or otherwise than by payment of a dividend in Common
Stock or in any right to acquire Common Stock), or in the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for any series of Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that the
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration
then the
5.
<PAGE> 6
Corporation shall be deemed to have made a dividend payable in Common Stock in
an amount of shares equal to the maximum number of shares issuable upon exercise
of such rights to acquire Common Stock.
(F) Adjustments for Reclassification and
Reorganization. If the Common Stock issuable upon conversion of the Series A
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 6(E) above or a merger or other reorganization referred
to in Section 4(C) above), the Conversion Price then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Series A Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series A Preferred Stock immediately before that change.
(G) Rights Offerings. In the event the Corporation
shall grant any rights to subscribe for, or any rights or options to purchase,
Common Stock or any stock or other securities convertible into or exchangeable
for Common Stock (such convertible or exchangeable stock or securities being
herein called "Convertible Securities"), whether or not such rights or options
or the right to convert or exchange any such Convertible Securities are
immediately exercisable, which rights or options do not result in any adjustment
to the Conversion Price of the Series A Preferred under either Section 6(E) or
Section 6(F) above, then the Company shall distribute such rights or options to
the holders of Series A Preferred as though they were holders, at the time of
such distribution, of that number of shares of Common Stock into which the
shares of Series A Preferred held by each holder could be then be converted.
(H) No Impairment. The Corporation will not, by
amendment of its Certificate or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.
(I) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued upon
conversion of the Series A Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of the Series A Preferred Stock pursuant to
this Section 6, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series A
Preferred Stock.
6.
<PAGE> 7
(J) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(K) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the Series A Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all the then outstanding Series A Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Series A Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
(L) Notices. Any notice required by the provisions of
this Section 6 to be given to the holders of Series A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
7. Voting Rights.
(A) Each holder of shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Series A Preferred Stock is convertible into
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). Each holder of Common Stock shall be entitled to one (1) vote
for each share of Common Stock held.
(B) In the event the Corporation's cash, cash
equivalents and marketable securities, as determined in accordance with
generally accepted accounting principles, shall at any time be less than $5
million, the holders of a majority of the outstanding shares of Series A
Preferred Stock, voting together as a class, shall be entitled to immediately
remove a majority of the Board of Directors and select and have appointed
directors to fill such vacancies.
(C) In the case of a vacancy in the office of the
directors elected by the holders of the Series A Preferred Stock as provided in
Section 7(B), the holders of Series A Preferred may by affirmative vote of a
majority thereof elect successors to hold office for the unexpired term of the
directors whose place shall be vacant. Any director who shall have been elected
by the holders of the Series A Preferred Stock may be removed during the
aforesaid term of office, whether with or without cause, only by the affirmative
vote of the holders of a majority of the Series A Preferred Stock.
7.
<PAGE> 8
8. Protective Provisions. So long as any shares of Series A
Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series A
Preferred Stock:
(i) sell, convey, or otherwise dispose of or
encumber all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Corporation is
disposed of;
(ii) sell, license or otherwise dispose of all or
a substantial portion of the Corporation's assets (including intellectual
property assets);
(iii) incur any indebtedness for borrowed money
other than indebtedness that has recourse only to real estate and tangible
personal property of the Corporation;
(iv) adopt, alter, amend or repeal any provisions
of the Corporation's charter or bylaws, or file any certificate of determination
of preferences in a manner which affects the holders of the Preferred Stock
adversely;
(v) authorize or increase, whether by
reclassification or otherwise, the authorized amount of any class of shares or
series of equity securities of the Corporation ranking in a parity with or
senior to Series A Preferred Stock in right of redemption, liquidation
preference, voting, dividends or otherwise; and
(vi) take any action that results in the
redemption, repurchase, payment of dividends or other distributions with respect
to the Common Stock.
9. Status of Converted or Redeemed Stock. In the event any
Series A Preferred Stock shall be converted pursuant to Section 6 hereof, the
shares so converted shall be cancelled and shall not be issuable by the
Corporation. The Certificate of the Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
* * *
RESOLVED FURTHER, that the Chairman of the Board, the Chief
Executive Officer, the President or any Vice President, and the Secretary, the
Chief Financial Officer, the Treasurer, or any Assistant Secretary or Assistant
Treasurer of the Corporation are each authorized to execute, verify, and file a
Certificate of Determination of Preferences in accordance with Delaware law.
8.
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this
certificate on June ___, 1995.
________________________________________________
David W. Carter
Chairman, President, and Chief Executive Officer
________________________________________________
Mark N.K. Bagnall, Secretary
The undersigned certify under penalty of perjury that they have
read the foregoing Certificate of Determination of Preferences and know the
contents thereof, and that the statements therein are true.
Executed at Alameda, California, on June ___, 1995.
_________________________________________________
David W. Carter,
Chairman, President, and Chief Executive Officer
_________________________________________________
Mark N.K. Bagnall, Secretary
9.
<PAGE> 1
Exhibit 5.1
July 5, 1995
Somatix Therapy Corporation
950 Marina Village Parkway
Suite 100
Alameda, California 94501-1034
Ladies and Gentlemen:
We have acted as counsel to Somatix Therapy Corporation (the
"Company"), a Delaware corporation, in connection with its registration of
2,476,500 shares of Common Stock (the "Common Stock") as described in the
Company's Registration Statement on Form S-3, filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Registration Statement").
We are familiar with the corporate proceedings taken by the
Company in connection with the issuance and sale of the Common Stock, and
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement. It is our opinion that the Common Stock has been duly authorized
and is validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus which is part of the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON
<PAGE> 1
_______________________________
SOMATIX THERAPY CORPORATION
COMMON STOCK PURCHASE AGREEMENT
JUNE 17, 1995
_______________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1 Authorization and Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 Closing Date; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Corporate Power; Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Issuance and Delivery of the Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Private Placement Offering Memorandum; SEC Documents; Financial Statement . . . . . . . . . 2
3.5 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.9 No Liens, Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.10 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4 Representations, Warranties and Covenants of the Purchasers . . . . . . . . . . . . . . . . 4
4.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Investment Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Registration or Exemption Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Restriction on Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 No Legal, Tax or Investment Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5 Conditions to Closing of Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6 Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 7 Affirmative Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.2 Registration Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8 Restrictions on Transferability of Units:
Compliance with Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.1 Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.2 Instruction Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.3 Transfer of Units After Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.4 Purchaser Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
i.
<PAGE> 3
<TABLE>
<S> <C>
Section 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.2 Broker's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.7 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.8 Severability of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.11 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.13 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
Schedule I -- Schedule of Purchasers
Exhibit A -- Form of Warrant
Exhibit B -- Form of Purchaser's Questionnaire
Exhibit C -- Form of Purchaser's Legend Removal Certificate
Exhibit D -- Form of Purchaser's Certificate of Subsequent Sale
ii.
<PAGE> 4
SOMATIX THERAPY CORPORATION
COMMON STOCK PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of June 17, 1995,
by and among Somatix Therapy Corporation, a Delaware corporation (the "Company")
with its principal office at 850 Marina Village Parkway, Alameda, California
94501, and the persons listed on the Schedule of Purchasers attached hereto as
Schedule I (the "Purchasers").
Section 1
Authorization and Sale of Units
1.1 Authorization. The Company has authorized the sale and issuance
pursuant to this Agreement of 2,769,892 Units (the "Units") consisting of the
following immediately separable securities: (i) 2,769,892 shares of its Common
Stock (the "Common Stock") and (ii) Warrants to purchase 1,551,139 shares of
Common Stock (the "Warrants"). The Warrants shall have the terms, and be
exercisable in the manner, set forth in the form of Warrant attached hereto as
Exhibit A.
1.2 Sale of Units. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company the number of Units,
consisting of the number of shares of Common Stock and Warrants to purchase the
number of shares of Common Stock set forth opposite each Purchaser's name on
Schedule I for a price per Unit equal to the closing price of the Common Stock
as reported by the Nasdaq National Market on the trading day immediately prior
to the date of this Agreement.
Section 2
Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of the Units
hereunder (the "Closing") shall be held at the offices of Brobeck, Phleger &
Harrison, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California at 10:00
a.m. Pacific Daylight Time, on the business day following the date on which the
Registration Statement (as defined in Section 7.2) registering the resale of the
Common Stock and shares of Common Stock issuable upon exercise of the Warrants
(the "Shares") by the Purchasers is declared effective by the Securities and
Exchange Commission ("SEC") or at such other time and place upon which the
Company and the Purchasers purchasing the majority of the Units shall agree. The
date of the Closing is hereinafter referred to as the "Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser certificates, registered in the Purchaser's name as shown on Schedule
I, representing the number of shares of Common Stock and Warrants to be
purchased by the Purchaser. Such delivery shall be against payment of the
purchase price therefor by wire transfer to the Company's bank account in the
amount set forth on Schedule I.
<PAGE> 5
Section 3
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as of the Closing
Date as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state with all requisite corporate power and authority to own, operate and
lease its properties and conduct its business as presently conducted. The
Company is qualified to do business as a foreign corporation and is in good
standing in the States of California and North Carolina and in each other state
of the United States where its failure to do so would have a material adverse
effect on its business as presently conducted. The Company holds all licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
business.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement and the Warrants, to sell and issue the Units and to
carry out and perform all of its obligations under this Agreement and the
Warrants. This Agreement and the Warrants constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) as limited by equitable principles
generally. The execution and delivery of this Agreement and the Warrants do not,
and the performance of this Agreement and the Warrants and the compliance with
the provisions hereof and thereof, and the issuance, sale and delivery of the
Units by the Company will not materially conflict with, or result in a material
breach or violation of the terms, conditions or provisions of, or constitute a
material default under, or result in the creation or imposition of any material
lien pursuant to the terms of, the Certificate of Incorporation or Bylaws of the
Company or any statute, law, rule or regulation or any state or federal order,
judgment or decree or any indenture, mortgage, lease or other material agreement
or instrument which the Company is required to file as an Exhibit to its Form
10-K.
3.3 Issuance and Delivery of the Units. The Units, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. The issuance and delivery of the Units is not subject to
preemptive or any other similar rights of the stockholders of the Company or any
liens or encumbrances.
3.4 Private Placement Offering Memorandum; SEC Documents; Financial
Statement. Each complete or partial statement, report, or proxy statement
included as an Exhibit to the Company's Private Placement Offering Memorandum
dated April 28, 1995 (the "Memorandum") is a true and complete copy of or
excerpt from such document as filed by the Company with the Securities and
Exchange Commission (the "SEC"). The Company has filed in a timely manner all
documents that the Company was required to file with the SEC under Sections 13,
14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), during the twelve (12) months preceding the date of this
Agreement, and all of such documents conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations thereunder as of
their respective filing dates. As of their respective filing dates, all
documents filed by the Company with the SEC (the "SEC Documents") complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as applicable.
Neither the Memorandum nor any of the SEC Documents as of their respective dates
contained any untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents or the Memorandum (the "Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with
2.
<PAGE> 6
respect thereto. The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the consolidated financial position of the Company and any subsidiaries at the
dates thereof and the consolidated results of their operations and consolidated
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring adjustments that are not in the aggregate
material).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for (a) compliance with the securities and blue sky laws
in the states in which Units are offered and/or sold, which compliance will be
effected in accordance with such laws, (b) the filing of the Nasdaq National
Market Notification Form with the Nasdaq National Market, (c) the filing of Form
10-C with the SEC, and (d) a determination by the Nasdaq National Market that
stockholder approval of this Agreement and the transactions contemplated hereby
is not required under the provisions of the Nasdaq National Market's
Non-Quantitative Requirements.
3.6 No Material Adverse Change. Except as otherwise disclosed herein,
since March 31, 1995, there have not been:
(a) Any changes in the financial condition or results of
operations of the Company from that reflected in the Financial Statements except
changes in the ordinary course of business which have not been, either
individually or in the aggregate, materially adverse;
(b) Any material increase in indebtedness for borrowed money,
current liabilities or total liabilities (whether absolute, accrued, contingent
or otherwise) incurred by the Company, except for liabilities, commitments and
obligations incurred in the ordinary course of business;
(c) Any sale, assignment, transfer or other disposition of any
material tangible or intangible asset of the Company, except in the ordinary
course of business;
(d) Any extraordinary transaction; and
(e) Any material agreement that the Company would be required
to file with the SEC.
3.7 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 40,000,000 shares of Common Stock, $.01 par value, of
which, as of May 31, 1995, 18,112,056 shares were outstanding, and (ii)
1,000,000 shares of Preferred Stock, $.01 par value, none of which were
outstanding immediately prior to the Closing. As of May 31, 1995, an aggregate
of 3,200,000 shares of Common Stock were reserved for issuance pursuant to stock
option, employee stock purchase, 401(k) savings, stock incentive and restricted
stock plans.
3.8 Litigation. There are no actions, suits proceedings or
investigations pending or, to the best of the Company's knowledge, threatened
against the Company or any of its properties before or by any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood (in the judgment of the Company) of an adverse decision
that (a) could have a material adverse effect on the Company's properties or
assets or the business of the Company as presently conducted or proposed to be
conducted or (b) could impair the ability of the Company to perform in any
material respect its obligations under this Agreement.
3.9 No Liens, Encumbrances. Except as reflected in the Financial
Statements, all tangible and intangible personal property of the Company is free
and clear of all material liens, pledges, charges, security interests, prior
assignments and encumbrances.
3.
<PAGE> 7
3.10 Registration Rights. Except for the registration rights granted in
connection with (i) that certain Amended and Restated Registration Rights
Agreement dated May 12, 1994 between the Company and the Investors identified on
Exhibit A thereto, (ii) that certain Agreement and Plan of Reorganization dated
December 19, 1994, as amended, by and among the Company, STC Acquisition Company
and Merlin Pharmaceutical Company and (iii) those certain Preferred Stock
Purchase Agreements and Common Stock Purchase Agreements all dated of even date
herewith between the Company and the Purchasers identified on Schedule I to such
Purchase Agreements, the Company has not agreed to register the sale of any of
its securities under the Securities Act of 1933, as amended.
Section 4
Representations, Warranties and Covenants of the Purchasers
Each Purchaser hereby severally represents and warrants to the Company,
effective as of the Closing Date, as follows:
4.1 Authorization. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Units to be purchased by it and to carry
out and perform all of its obligations under this Agreement; and (ii) this
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or affecting
the enforcement of creditors' rights generally and (b) as limited by equitable
principles generally.
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Units. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Units.
4.3 Investment Intent. Purchaser is purchasing the Units for its own
account as principal, for investment purposes only, and not with a present view
to, or for, resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Units has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed and delivered to the Company, the
Purchaser Questionnaire attached hereto as Exhibit B for use in preparation of
the Registration Statement. Purchaser has, in connection with its decision to
purchase the number of Units set forth in Schedule I hereto, relied solely upon
the Memorandum and the documents attached as appendices thereto and the
representations and warranties of the Company contained herein. Purchaser will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Units except in compliance with the Securities Act, and the rules
and regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Units may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the Units will be imprinted with a legend
that prohibits the transfer of the Units unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Company shall so request in writing, an
4.
<PAGE> 8
opinion of counsel reasonably satisfactory to the Company is obtained to the
effect that the transaction is so exempt.
4.5 Restriction on Short Sales. Purchaser represents and warrants to
and covenants with the Company that Purchaser has not engaged and will not
engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement (defined in Section 7.2 below),
except to the extent that any such short sale is fully covered by shares of
Common Stock of the Company other than the Units.
4.6 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in the Memorandum, this Agreement or any other materials presented to
Purchaser in connection with the purchase and sale of the Units constitutes
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Units.
Section 5
Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Units at the Closing is, at
the option of such Purchaser, subject to the fulfillment or waiver as of the
Closing Date of the following condition:
5.1 Registration Statement. The Registration Statement (as defined
below) registering the resale of the Shares by the Purchasers shall have been
filed with and declared effective by the SEC.
Section 6
Conditions to Closing of Company
The Company's obligation to sell and issue the Units at the Closing is,
at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations made by the
Purchasers in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 Blue Sky. The Company shall have obtained all necessary blue sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Units.
Section 7
Affirmative Covenants of the Company
The Company hereby covenants and agrees as follows:
5.
<PAGE> 9
7.1 Financial Information. The Company will mail the following reports
to each Purchaser until such Purchaser transfers, assigns or sells the Units
purchased by such Purchaser pursuant to this Agreement:
(a) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of its Annual Report on Form 10-K.
(b) Within sixty (60) days after the end of the first, second
and third quarterly accounting periods of each fiscal year of the Company, a
copy of its Quarterly Report on Form 10-Q.
(c) Within ten (10) days after the Company files any Current
Report on Form 8-K with the SEC, such Current Report on Form 8-K.
7.2 Registration Requirements.
(a) No later than ten (10) days after the date hereof, the
Company shall prepare and file a registration statement with the SEC under the
Securities Act to register the resale of the Shares by the Purchasers (the
"Registration Statement").
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all Selling Expenses (as defined below)
relating to the Shares resold by such Purchaser. "Registration Expenses" shall
mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions herein described, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Shares and all fees
and disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the earlier of (A) the third
anniversary date of the Closing Date, (B) such date as all of the Shares have
been resold or (C) such time as all of the Shares held by the Purchasers can be
sold within a given three-month period without compliance with the registration
requirements of the Securities Act pursuant to Rule 144; (ii) prepare and file
with the SEC such amendments and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by the Registration Statement; (iii)
furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Purchaser from
time to time may reasonably request; (iv) cause all Shares registered as
described herein to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by the Company are then
listed or quoted; (v) provide a transfer agent and registrar for all Shares
registered pursuant to the Registration Statement and a CUSIP number for all
such Shares; (vi) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC; and (vii) file the documents required of the
Company and otherwise use its best efforts to maintain requisite blue sky
clearance in (A) all jurisdictions in which any of the Shares are originally
sold and (B) all other states specified in writing by a Purchaser, provided as
to clause (B), however, that the Company shall not be required to qualify to do
business or consent to service of process in any state in which it is not now so
qualified or has not so consented.
(d) With a view to making available to the Purchasers the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the SEC that may at any time permit a Purchaser to
sell Shares to the public without registration or pursuant to a registration on
Form S-3, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood
6.
<PAGE> 10
and defined in Rule 144, until the earlier of (A) the third anniversary of the
date hereof or (B) such date as all of the Shares shall have been resold; (ii)
file with the SEC in a timely manner all reports and other documents required of
the Company under the Securities Act and Exchange Act; and (iii) furnish to any
Purchaser upon request, as long as the Purchaser owns any Shares, (A) a written
statement by the Company that it has complied with the reporting requirements of
the Securities Act and the Exchange Act, (B) a copy of the most recent annual or
quarterly report of the Company, and (C) such other information as may be
reasonably requested in order to avail any Purchaser of any rule or regulation
of the SEC that permits the selling of any such Shares without registration or
pursuant to such Form S-3.
(e) In the event any holder of Shares intends to sell such
Shares pursuant to the Registration Statement, such holder shall give the
Company three (3) business days' notice of its intent to sell in reliance on
such Registration Statement (the "Notice of Sale"). The Company may refuse to
permit a Purchaser to resell any Shares pursuant to the Registration Statement;
provided, however, that in order to exercise this right, the Company must
deliver a certificate in writing within three (3) business days following the
Notice of Sale to such Purchaser and the Placement Agent (as defined in the
Memorandum) to the effect that withdrawal of such Registration Statement is
necessary because a sale pursuant to the Registration Statement in its
then-current form could constitute a violation of the federal securities laws.
In such an event, the Company shall use its best efforts to amend the
Registration Statement if necessary and take all other actions necessary to
allow such sale under the federal securities laws, and shall notify the
Purchaser and the Placement Agent promptly after it has determined that such
sale has become permissible under the federal securities laws. Notwithstanding
the foregoing, the Company shall not under any circumstances be entitled to
exercise its right to refuse to permit resale of any Shares pursuant to the
Registration Statement more than two (2) times in any twelve (12) month period,
and the period during which such Registration Statement may be withdrawn shall
not exceed thirty (30) days. Each Purchaser hereby covenants and agrees that it
will not sell any Shares pursuant to the Registration Statement during the
periods the Registration Statement is withdrawn as set forth in this Section
7.2(e).
7.3 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Purchaser (for purposes of this Section 7.3(a), including its officers,
directors, agents and employees, each person who controls such holder, within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the officers, directors, agents or employees of such controlling
person) from and against any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) to which such Purchaser may become subject
(under the Securities Act or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, on the effective date thereof, or
arise out of, or are based upon, any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or arise out of any failure by the Company to fulfill any
undertaking included in the Registration Statement, and the Company will, as
incurred, reimburse such Purchaser for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement, (ii) the failure of such Purchaser to
comply with the covenants and agreements contained in Section 8.3 hereof, or
(iii) any untrue statement in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser. If requested, the Company shall also indemnify the
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers, directors,
agents and employees and each person who controls such person (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act)
to the same extent as provided above.
7.
<PAGE> 11
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) an untrue statement made in
such Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement, provided,
however, that no Purchaser shall be liable in any such case for any untrue
statement included in any Prospectus which statement has been corrected, in
writing, by such Purchaser and delivered to the Company before the sale from
which such loss occurred, (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 8.3 hereof, or (iii) any untrue
statement in any prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser, and each Purchaser, severally and not jointly, will, as incurred,
reimburse the Company for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the indemnity agreement contained in this
subsection (b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of such Purchaser (which consent shall not be unreasonably withheld).
Notwithstanding the provisions of this subsection (b), no Purchaser shall be
liable for any amount in excess of the amount by which the net amount received
by the Purchaser from the sale of the Shares to which such loss relates exceeds
the amount of any damages which such Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or may exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Purchasers were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a
8.
<PAGE> 12
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Purchaser shall be
required to contribute any amount in excess of the amount by which the net
amount received by the Purchaser from the sale of the Shares to which such loss
relates exceeds the amount of any damages which such Purchaser 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 Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective sales of Shares to
which such loss relates and not joint.
(e) The obligations of the Company and the Purchasers under
this Section 7.3 shall be in addition to any liability which the Company and the
respective Purchasers may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Exchange Act or the Securities Act.
Section 8
Restrictions on Transferability of Units:
Compliance with Securities Act
8.1 Restrictions on Transferability. Neither the Common Stock or
Warrants, nor the Common Stock issuable upon exercise of the Warrants, shall be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Common Stock, Warrants and Common Stock
issuable upon exercise of the Warrant in order to enforce the foregoing
restrictions.
8.2 Instruction Sheet. Each certificate representing the Common Stock
and the Warrants shall bear the Instruction Sheet attached hereto as Exhibit C
(in addition to any legends required under applicable securities laws).
8.3 Transfer of Units After Registration. Each Purchaser hereby
covenants with the Company not to make any sale of the Common Stock, Warrants or
Common Stock issuable upon exercise of the Warrants except either (i) in
accordance with the Registration Statement, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus, or (ii) in
accordance with Rule 144, in which case Purchaser covenants to comply with Rule
144. Purchaser further acknowledges and agrees that such Units are not
transferable on the books of the Company unless the certificate submitted to the
Company's transfer agent evidencing such Units are accompanied by a separate
certificate executed by an officer of, or other person duly authorized by, the
Purchaser in the form attached hereto as Exhibit D.
8.4 Purchaser Information. Each Purchaser covenants that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution."
9.
<PAGE> 13
Section 9
Miscellaneous
9.1 Waivers and Amendments. With the exception of Section 7 hereof, the
terms of this Agreement may be waived or amended with the written consent of the
Company and each Purchaser. With respect to Section 7 hereof, with the written
consent of the Company and the record holders of more than fifty percent (50%)
of the Units then outstanding and held by Purchasers, the terms of the Agreement
may be waived or amended and any such amendment or waiver shall be binding upon
the Company and all holders of Units.
9.2 Broker's Fee. Each Purchaser acknowledges that the Company intends
to pay a fee to Merrill Lynch & Co. in respect of the sale of the Units to the
Purchaser. Each of the parties hereto hereby represents that, on the basis of
any actions and agreements by it, there are no other brokers or finders entitled
to compensation in connection with the sale of the Units to the Purchasers.
9.3 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
9.4 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
no Purchaser shall assign this Agreement without the prior written consent of
the Company.
9.6 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
9.7 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchasers, as the case may be, at their respective addresses set forth at the
beginning of this Agreement or on Schedule I, or at such other address as the
Company or the Purchasers shall have furnished to the other party in writing.
All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such notice or communication shall have
been deposited in the United States mail.
9.8 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements,
10.
<PAGE> 14
certificates, instruments and documents as the other party hereto may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
9.11 Termination. In the event that the Closing shall not have occurred
on or before ninety (90) days from the date hereof, this Agreement shall
terminate at the close of business on such date.
9.12 Expenses. The Company and each such Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
9.13 Currency. All references to "dollars" or "$" in this Agreement
shall be deemed to refer to United States dollars.
9.14 Effectiveness of Agreement. The Company's agreement to sell the
Units to the Purchasers pursuant to the terms of this Agreement will only be
effective upon acceptance of this Agreement by the Company as evidenced by the
Company's execution of this Agreement.
11.
<PAGE> 15
IN WITNESS WHEREOF, the Company and Purchaser have executed this
Purchase Agreement as of the date first above written.
"COMPANY"
SOMATIX THERAPY CORPORATION
a Delaware corporation
By: ______________________________________
Title: ___________________________________
Number of Units Subscribed "PURCHASER"
at $________ per Unit:
__________________________________________
__________________________ Name of Purchaser
Warrant Coverage: ______% __________________________________________
Authorized Signature of Purchaser
Warrant Exercise Price Per
Share: $_________________ __________________________________________
Title
12.
<PAGE> 16
Schedule I
SCHEDULE OF PURCHASERS
(Common Units)
<TABLE>
<CAPTION>
Warrant to
Shares of Purchase Shares Aggregate
Purchaser Units Common Stock of Common Stock Purchase Price
--------- ----- ------------ --------------- --------------
<S> <C> <C> <C> <C>
Armen Partners L.P. 150,000 150,000 84,000 $552,000
Orefund 680,000 680,000 380,800 $2,502,400
Strategic Healthcare Investment 27,174 27,174 15,217 $100,000
Fund
Pharmaceutical/Medical Technology 68,000 68,000 38,080 $250,240
Fund
Legg Mason Special Investment 271,740 271,740 152,174 $1,000,003
Trust, Inc.
Lombard Odier & Cie, Geneva 350,000 350,000 196,000 $1,288,000
Stuart T. Weisbrod 6,800 6,800 3,808 $25,024
Quasar International Partners, 54,000 54,000 30,240 $198,720
C.V.
Oracle Institutional Partners, 14,000 14,000 7,840 $51,520
L.P.
Oracle Partners, L.P. 350,000 350,000 196,000 $1,288,000
Sam Oracle Fund, Inc. 91,678 91,678 51,340 $337,375
Larry N. Feinberg 27,000 27,000 15,120 $99,360
GFL Advantage Fund Limited 679,500 679,500 380,520 $2,500,560
-------------------------------------------------------------------------------
TOTAL 2,769,892 2,769,892 1,551,139 $10,193,202
</TABLE>
<PAGE> 17
EXHIBIT A
FORM OF WARRANT
(see Exhibit 10.22)
<PAGE> 18
Exhibit B
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on
the signature page. The Agreement must be executed by an
individual authorized to bind the Purchaser.
2. Exhibit B-1 - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire;
3. Exhibit B-2 - Registration Statement Questionnaire:
Provide the information requested by the Registration Statement
Questionnaire.
4. Exhibit B-3 - Purchaser Certificate:
Provide the information requested by the Certificate for
Individual Purchasers or the Certificate for Corporate,
Partnership, Trust, Foundation and Joint Purchasers, as
applicable.
5. Return the signed Purchase Agreement including the properly
completed Exhibit 4.2 to:
Merrill Lynch & Co.
101 California Street
Suite 1420
San Francisco, CA 94111
B. Instructions regarding the transfer of funds for the purchase of Units
will be telecopied to the Purchaser by the Placement Agent at a later
date.
C. Upon the resale of the Shares by the Purchaser after the Registration
Statement covering the Shares is effective, as described in the
Purchase Agreement, the Purchaser:
(i) must deliver a current prospectus, and annual and
quarterly reports of the Company to the buyer
(prospectuses, and annual and quarterly reports may be
obtained from the Company at the Purchaser's request);
and
(ii) must send a letter in the form of Exhibit D to the
Company so that the Shares may be properly
transferred.
<PAGE> 19
EXHIBIT B-1
SOMATIX THERAPY CORPORATION
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4.3 of the Agreement, please provide us with the
following information:
1. The exact name that the Units are to be
registered in (this is the name that will
appear on the stock certificate(s)). You
may use a nominee name if appropriate:
___________________________________
2. The relationship between the Purchaser of
the Units and the Registered Holder listed
in response to item 1 above:
___________________________________
3. The mailing address of the Registered
Holder listed in response to item 1 above:
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
4. The Tax Identification Number of the
Registered Holder listed in response
to item 1 above:
___________________________________
<PAGE> 20
Exhibit B-2
SOMATIX THERAPY CORPORATION
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration
Statement, please provide us with the following information regarding the
Purchaser.
1. Please state your organization's name exactly as it should
appear in the Registration Statement:
2. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Prospectus included in the
Registration Statement?
____ Yes ____ No
If yes, please indicate the nature of any such relationships below:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 21
Exhibit B-3
SOMATIX THERAPY CORPORATION
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple)
the Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true
and accurate:
In order for the Company to offer and sell the Units in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor status. Please initial each category applicable
to you as an investor in the Company.
___ (1) A natural person whose net worth, either individually
or jointly with such person's spouse exceeds $1,000,000;
___ (2) A natural person who had an income in excess of
$200,000, or joint income with that person's spouse in excess of $300,000, in
1990, 1991 and 1992, and reasonably expects to have individual income reaching
the same level in 1993;
___ (3) An executive officer or director of the Company.
Dated:___________________________
_____________________________
Name(s) of Purchaser
_____________________________
Signature
_____________________________
Signature
<PAGE> 22
Exhibit B-3
SOMATIX THERAPY CORPORATION
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension
plan, foundation, joint purchaser (other than a married couple) or other entity,
an authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and
responses below are true and accurate:
(a) The investor has been duly formed and is validly existing
and has full power and authority to invest in the Company. The person signing on
behalf of the undersigned has the authority to execute and deliver the Common
Stock Purchase Agreement on behalf of the Purchaser and to take other actions
with respect thereto.
(b) Indicate the form of entity of the undersigned:
___ Limited Partnership
___ General Partnership
___ Corporation
___ Revocable Trust (identify each grantor and
indicate under what circumstances the trust is
revocable by the grantor: ________________________
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
________________. (Continue on a separate piece of
paper, if necessary.)
___ Other Type of Trust (indicate type of trust and,
and, for trusts other than pension trusts, name
the grantors and beneficiaries: __________________
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
________________. (Continue on a separate piece of
paper, if necessary.)
___ Other form of organization (indicate form of
organization (_______________________).
(c) Indicate the approximate date the undersigned entity was
formed: __________________________.
<PAGE> 23
(d) In order for the Company to offer and sell the Units in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.
___ 1. A bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity;
___ 2. A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934;
___ 3. An insurance company as defined in Section 2(13) of the
securities Act;
___ 4. An investment company registered under the Investment
Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act;
___ 5. A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958;
___ 6. A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000;
___ 7. An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors;
___ 8. A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
___ 9. An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the Shares, with total assets in excess of
$5,000,000;
___ 10. A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Shares, whose
purchase is directed by a sophisticated person who has such
knowledge and experience in financial and business matters that
such person is capable of evaluating the merits and risks of
investing in the Company;
2.
<PAGE> 24
___ 11. An entity in which all of the equity owners qualify
under any of the above subparagraphs. If the undersigned
belongs to this investor category only, list the equity owners
of the undersigned, and the investor category which each such
equity owner satisfies:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
(Continue on a separate piece of paper, if necessary.)
Dated: _______________________, 19___
________________________________________________________
Name of investor
________________________________________________________
Signature and title of authorized
officer, partner or trustee
3.
<PAGE> 25
Exhibit C
SOMATIX THERAPY CORPORATION
IMPORTANT - DO NOT REMOVE THIS INSTRUCTION SHEET FROM THE
ATTACHED SHARE CERTIFICATE UNLESS AND UNTIL THE SHARES ARE SOLD AS FOLLOWS:
(1) THE SHARES ARE RESOLD PURSUANT TO THE REGISTRATION
STATEMENT ON FORM S-3 (NO. 33-60365), AND, IN CONNECTION WITH
SUCH RESALE, THE HOLDER HAS DELIVERED TO THE PURCHASER OF THE
SHARES A CURRENT PROSPECTUS AND HAS PROVIDED TO THE COMPANY A
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE; OR
(2) THE SHARES ARE RESOLD IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, PROVIDED THAT, PRIOR TO SUCH RESALE, THE HOLDER HAS
NOTIFIED THE COMPANY OF SUCH DISPOSITION AND PROVIDED THE
COMPANY WITH WRITTEN ASSURANCES, IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH THE REQUIREMENTS
OF SUCH EXEMPTION.
DO NOT REMOVE THIS INSTRUCTION SHEET FROM
THE ATTACHED SHARE CERTIFICATE
EXCEPT IN ACCORDANCE WITH
THE INSTRUCTIONS SET FORTH ABOVE.
<PAGE> 26
EXHIBIT D
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: First National Bank of Boston
150 Royale Street
Canton, Mass. 02021
Attention: Neil Bergman
The undersigned, the Purchaser or an officer of, or other
person duly authorized by the Purchaser, hereby certifies that
_____________________________________________________________________________
[fill in name of Purchaser]
institution was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about
_____________________________________
[date]
either (i) in accordance with the registration statement, file number ________
in which case the Purchaser certifies that the requirement of delivering a
current prospectus has been complied with or will be complied with in
connection with such sale, or (ii) in accordance with Rule 144 under the
Securities Act of 1933 ("Rule 144"), in which case the Purchaser certifies
that it has complied with or will comply with the requirements of Rule 144.
Print or type:
Name of Purchaser: __________________________________________________
Name of Individual
representing
Purchaser (if an
Institution): __________________________________________________
Title of Individual
representing
Purchaser (if an
Institution): __________________________________________________
Signature by:
Purchaser or
Individual repre-
senting Purchaser: __________________________________________________
<PAGE> 1
----------------------------------------
SOMATIX THERAPY CORPORATION
PREFERRED STOCK PURCHASE AGREEMENT
JUNE 17, 1995
----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1 Authorization and Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 Closing Date; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . 1
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Corporate Power; Authorization . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Issuance and Delivery of the Units . . . . . . . . . . . . . . . . . . . . 2
3.4 Private Placement Offering Memorandum; SEC Documents; Financial Statement . 2
3.5 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.9 No Liens, Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.10 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4 Representations, Warranties and Covenants of the Purchasers . . . . . . . . . . . 4
4.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Investment Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Registration or Exemption Requirements . . . . . . . . . . . . . . . . . . 4
4.5 Restriction on Short Sales . . . . . . . . . . . . . . . . . . . . . . . . 4
4.6 No Legal, Tax or Investment Advice . . . . . . . . . . . . . . . . . . . . 5
Section 5 Conditions to Closing of Purchasers . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.6 Other Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6 Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5 Other Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7 Affirmative Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . 6
7.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.2 Registration Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.4 Board Observance Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8 Restrictions on Transferability of Units: Compliance with Securities Act . . . . . 10
8.1 Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . 10
8.2 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Transfer of Registrable Securities After Registration . . . . . . . . . . . 11
Section 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Broker's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.7 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.8 Severability of this Agreement . . . . . . . . . . . . . . . . . . . . . . 12
9.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.11 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.13 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
Schedule I -- Schedule of Purchasers
Exhibit A -- Certificate of Designation of Preferred Stock
Exhibit B -- Form of Warrant
Exhibit C -- Form of Purchaser's Questionnaire
<PAGE> 4
SOMATIX THERAPY CORPORATION
PREFERRED STOCK PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of June 17, 1995,
by and among Somatix Therapy Corporation, a Delaware corporation (the "Company")
with its principal office at 950 Marina Village Parkway, Alameda, California
94501, and the persons listed on the Schedule of Purchasers attached hereto as
Schedule I (the "Purchasers").
Section 1
Authorization and Sale of Units
1.1 Authorization. The Company has authorized the sale and issuance
pursuant to this Agreement of 254,000 Units (the "Units") consisting of the
following immediately separable securities: (i) 254,000 shares of its Series A-1
Preferred Stock (the "Preferred Stock") and (ii) Warrants to purchase 889,000
shares of Common Stock (the "Warrants"). The Preferred Stock shall have the
rights, privileges and preferences set forth in the Certificate of Designation
attached hereto as Exhibit A (the "Certificate of Designation"). The Warrants
shall have the terms, and be exercisable in the manner, set forth in the form of
Warrant attached hereto as Exhibit B.
1.2 Sale of Units. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company the number of Units,
consisting of the number of shares of Preferred Stock and Warrants to purchase
the number of shares of Common Stock, set forth opposite each Purchaser's name
on Schedule I for $25.00 per Unit.
Section 2
Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of the Units
hereunder (the "Closing") shall be held at the offices of Brobeck, Phleger &
Harrison, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California at 10:00
a.m. Pacific Daylight Time, on June 28, 1995 or at such other time and place
upon which the Company and the Purchasers purchasing the majority of the Units
shall agree. The date of the Closing is hereinafter referred to as the "Closing
Date".
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser certificates, registered in the Purchaser's name as shown on Schedule
I, representing the number of shares of Preferred Stock and Warrants to be
purchased by the Purchaser. Such delivery shall be against payment of the
purchase price therefor by wire transfer to the Company's bank account in the
amount set forth on Schedule I.
Section 3
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as of the Closing
Date as follows:
<PAGE> 5
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state with all requisite corporate power and authority to own, operate and
lease its properties and conduct its business as presently conducted. The
Company is qualified to do business as a foreign corporation and is in good
standing in the States of California and North Carolina and in each other state
of the United States where its failure to do so would have a material adverse
effect on its business as presently conducted. The Company holds all licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
business.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement and the Warrants, to sell and issue the Units and to
carry out and perform all of its obligations under this Agreement and the
Warrants. This Agreement and the Warrants constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) as limited by equitable principles
generally. The execution and delivery of this Agreement and the Warrants do not,
and the performance of this Agreement and the Warrants and the compliance with
the provisions hereof and thereof, and the issuance, sale and delivery of the
Units by the Company will not materially conflict with, or result in a material
breach or violation of the terms, conditions or provisions of, or constitute a
material default under, or result in the creation or imposition of any material
lien pursuant to the terms of, the Certificate of Incorporation or Bylaws of the
Company or any statute, law, rule or regulation or any state or federal order,
judgment or decree or any indenture, mortgage, lease or other material agreement
or instrument which the Company is required to file as an Exhibit to its Form
10-K.
3.3 Issuance and Delivery of the Units. The Units, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. The issuance and delivery of the Units is not subject to
preemptive or any other similar rights of the stockholders of the Company or any
liens or encumbrances.
3.4 Private Placement Offering Memorandum; SEC Documents; Financial
Statement. Each complete or partial statement, report, or proxy statement
included as an Exhibit to the Company's Private Placement Offering Memorandum
dated April 28, 1995 (the "Memorandum") is a true and complete copy of or
excerpt from such document as filed by the Company with the Securities and
Exchange Commission (the "SEC"). The Company has filed in a timely manner all
documents that the Company was required to file with the SEC under Sections 13,
14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), during the twelve (12) months preceding the date of this
Agreement, and all of such documents conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations thereunder as of
their respective filing dates. As of their respective filing dates, all
documents filed by the Company with the SEC (the "SEC Documents") complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as applicable.
Neither the Memorandum nor any of the SEC Documents as of their respective dates
contained any untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents or the Memorandum (the "Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied and fairly present the consolidated financial
position of the Company and any subsidiaries at the dates thereof and the
consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring adjustments that are not in the aggregate material).
2.
<PAGE> 6
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for (a) compliance with the securities and blue sky laws
in the states in which Units are offered and/or sold, which compliance will be
effected in accordance with such laws, (b) the filing of the Nasdaq National
Market Notification Form with the Nasdaq National Market, (c) the filing of Form
10-C with the SEC, and (d) a determination by the Nasdaq National Market that
stockholder approval of this Agreement and the transactions contemplated hereby
is not required under the provisions of the Nasdaq National Market's
Non-Quantitative Requirements.
3.6 No Material Adverse Change. Except as otherwise disclosed herein,
since March 31, 1995, there have not been:
(a) Any changes in the financial condition or results of operations
of the Company from that reflected in the Financial Statements except changes in
the ordinary course of business which have not been, either individually or in
the aggregate, materially adverse;
(b) Any material increase in indebtedness for borrowed money,
current liabilities or total liabilities (whether absolute, accrued, contingent
or otherwise) incurred by the Company, except for liabilities, commitments and
obligations incurred in the ordinary course of business;
(c) Any sale, assignment, transfer or other disposition of any
material tangible or intangible asset of the Company, except in the ordinary
course of business;
(d) Any extraordinary transaction; and
(e) Any material agreement that the Company would be required to
file with the SEC.
3.7 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 40,000,000 shares of Common Stock, $.01 par value, of
which, as of May 31, 1995, 18,112,056 shares were outstanding, and (ii)
1,000,000 shares of Preferred Stock, $.01 par value, none of which were
outstanding immediately prior to the Closing. As of May 31, 1995, an aggregate
of 3,200,000 shares of Common Stock were reserved for issuance pursuant to stock
option, employee stock purchase, 401(k) savings, stock incentive and restricted
stock plans.
3.8 Litigation. There are no actions, suits proceedings or
investigations pending or, to the best of the Company's knowledge, threatened
against the Company or any of its properties before or by any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood (in the judgment of the Company) of an adverse decision
that (a) could have a material adverse effect on the Company's properties or
assets or the business of the Company as presently conducted or proposed to be
conducted or (b) could impair the ability of the Company to perform in any
material respect its obligations under this Agreement.
3.9 No Liens, Encumbrances. Except as reflected in the Financial
Statements, all tangible and intangible personal property of the Company is free
and clear of all material liens, pledges, charges, security interests, prior
assignments and encumbrances.
3.10 Registration Rights. Except for the registration rights granted in
connection with (i) that certain Amended and Restated Registration Rights
Agreement dated May 12, 1994 between the Company and the Investors identified on
Exhibit A thereto, (ii) that certain Agreement and Plan of Reorganization dated
December 19, 1994, as amended, by and among the Company, STC Acquisition Company
and Merlin Pharmaceutical Company and (iii) those certain Preferred Stock
Purchase Agreements and Common Stock
3.
<PAGE> 7
Purchase Agreements all dated of even date herewith between the Company and the
Purchasers identified on Schedule I to such Purchase Agreements, the Company has
not agreed to register the sale of any of its securities under the Securities
Act of 1933, as amended.
Section 4
Representations, Warranties and Covenants of the Purchasers
Each Purchaser hereby severally represents and warrants to the Company,
effective as of the Closing Date, as follows:
4.1 Authorization. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Units to be purchased by it and to carry
out and perform all of its obligations under this Agreement; and (ii) this
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or affecting
the enforcement of creditors' rights generally and (b) as limited by equitable
principles generally.
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Units. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Units.
4.3 Investment Intent. Purchaser is purchasing the Units for its own
account as principal, for investment purposes only, and not with a present view
to, or for, resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Units has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed and delivered to the Company, the
Purchaser Questionnaire attached hereto as Exhibit C. Purchaser has, in
connection with its decision to purchase the number of Units set forth in
Schedule I hereto, relied solely upon the Memorandum and the documents attached
as appendices thereto and the representations and warranties of the Company
contained herein. Purchaser will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Units except in compliance
with the Securities Act, and the rules and regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Units may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Purchaser understands
that the certificate(s) evidencing the Units will be imprinted with a legend
that prohibits the transfer of the Units unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt.
4.5 Restriction on Short Sales. Purchaser represents and warrants to
and covenants with the Company that Purchaser has not engaged and will not
engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement (defined in Section 7.2 below),
except to the extent
4.
<PAGE> 8
that any such short sale is fully covered by shares of Common Stock of the
Company other than the Units. Purchaser further represents and warrants to and
covenants with the Company that during the Measurement Period (as defined in
Section 6(D)(i) of the Certificate of Designation), Purchaser shall not (i) sell
"short" the Company's Common Stock and (ii) sell any shares of Common Stock held
by such Purchaser, unless on the date the Measurement Period commences, the
closing price of the Common Stock of the Company is greater than $4.00 per share
as reported by the Nasdaq National Market, and Purchaser's sale is made at a
price of not less than $4.00 per share.
4.6 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in the Memorandum, this Agreement or any other materials presented to
Purchaser in connection with the purchase and sale of the Units constitutes
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Units.
Section 5
Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Units at the Closing is, at
the option of such Purchaser, subject to the fulfillment or waiver as of the
Closing Date of the following conditions:
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date. Purchasers shall have received a certificate to
such effect, dated the Closing Date and executed by the Chief Financial Officer
of the Company.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects. Purchasers shall
have received a certificate to such effect, dated the Closing Date and executed
by the Chief Financial Officer of the Company.
5.3 Blue Sky. The Company shall have obtained all necessary blue sky
law permits and qualifications, or secured exemptions therefrom, required by any
state or foreign or other jurisdiction for the offer and sale of the Units.
5.4 Legal Opinion. The receipt by the Purchasers of a legal opinion of
Brobeck, Phleger & Harrison, counsel to the Company, regarding the matters
referred to in Sections 3.1, 3.2 and 3.3.
5.5 Approvals. All authorizations, consents, orders or approvals of, or
declaration or filings with, any governmental entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or obtained, other than filings or approvals which the failure
to make or obtain would not be materially adverse to the Company or Purchasers.
5.6 Other Documentation. The Company shall have delivered to Purchasers
such other usual and customary closing certificates, instruments and documents
as Purchasers and their counsel may reasonably request.
5.
<PAGE> 9
Section 6
Conditions to Closing of Company
The Company's obligation to sell and issue the Units at the Closing is,
at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations made by the
Purchasers in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 Blue Sky. The Company shall have obtained all necessary blue sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Units.
6.4 Approvals. All authorizations, consents, orders or approvals of, or
declaration or filings with, any governmental entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or obtained, other than filings or approvals which the failure
to make or obtain would not be materially adverse to the Purchasers or Company.
6.5 Other Documentation. The Purchasers shall have delivered to the
Company such other usual and customary closing certificates, instruments and
documents as the Company and their counsel may reasonably request.
Section 7
Affirmative Covenants of the Company
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to each Purchaser until such Purchaser transfers, assigns or sells the Units
purchased by such Purchaser pursuant to this Agreement:
(a) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of its Annual Report on Form 10-K.
(b) Within sixty (60) days after the end of the first, second
and third quarterly accounting periods of each fiscal year of the Company, a
copy of its Quarterly Report on Form 10-Q.
(c) Within ten (10) days after the Company files any Current
Report on Form 8-K with the SEC, such Current Report on Form 8-K.
(d) Any other report or materials sent to holders of Common
Stock of the Company.
6.
<PAGE> 10
7.2 Registration Requirements.
(a) (i) The Company shall use its best efforts to have declared
effective, as soon as reasonably practicable, and in any event no later than
sixty (60) days following the Closing Date, a registration statement with the
SEC under the Securities Act to be made on a continuous basis pursuant to Rule
415 (or similar rule that may be adopted by the SEC) to register the resale by
the Purchasers of the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants (the "Registrable Securities").
(ii) If the conversion price of the Preferred Stock is
reset on the last day of the thirteenth month following the date of this
Agreement (the "Reset Date") such that additional shares of Common Stock are
issuable upon conversion of the Preferred Stock (the "Additional Common Stock"),
then the Company shall use its best efforts to effect, as soon as reasonably
practicable, and in any event no later than sixty (60) days following the Reset
Date, a registration statement with the SEC under the Securities Act to register
the Additional Common Stock (the "Additional Registrable Securities").
The registration statements effected by the Company pursuant to this Section
7.2(a) shall be collectively referred to herein as the "Registration
Statements."
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all Selling Expenses (as defined below)
relating to the Registrable Securities and Additional Registrable Securities, if
any, resold by such Purchaser. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Registrable
Securities and Additional Registrable Securities, if any, and all fees and
disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the third anniversary of the date
hereof or ninety (90) days following the final issuance of Additional
Registrable Securities, if later, (ii) prepare and file with the SEC such
amendments and supplements to the Registration Statements and the prospectus
used in connection with the Registration Statements as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by the Registration Statements; (iii) furnish such
number of prospectuses and other documents incident thereto, including any
amendment of or supplement to the prospectus, as a Purchaser from time to time
may reasonably request; (iv) cause all Registrable Securities and Additional
Registrable Securities, if any, registered as described herein to be listed on
each securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; (v) provide a
transfer agent and registrar for all Registrable Securities and Additional
Registrable Securities, if any, registered pursuant to the Registration
Statements and a CUSIP number for all such Registrable Securities and Additional
Registrable Securities, if any; (vi) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC; and (vii) file the
documents required of the Company and otherwise use its best efforts to maintain
requisite blue sky clearance in (A) all jurisdictions in which any of the
Registrable Securities and Additional Registrable Securities, if any, are
originally sold and (B) all other states specified in writing by a Purchaser,
provided as to clause (B), however, that the Company shall not be required to
qualify to do business or consent to service of process in any state in which it
is not now so qualified or has not so consented.
(d) With a view to making available to the Purchasers the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the SEC that may at any time permit a
7.
<PAGE> 11
Purchaser to sell shares of Common Stock to the public without registration or
pursuant to a registration on Form S-3, the Company covenants and agrees to: (i)
make and keep public information available, as those terms are understood and
defined in Rule 144, until the third anniversary of the date hereof or ninety
(90) days following the final issuance of Additional Registrable Securities, if
later; (ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and Exchange Act; and (iii)
furnish to any Purchaser upon request, as long as the Purchaser owns any
Registrable Securities or Additional Registrable Securities, if any, (A) a
written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of the most
recent annual or quarterly report of the Company, and (C) such other information
as may be reasonably requested in order to avail any Purchaser of any rule or
regulation of the SEC that permits the selling of any such Registrable
Securities and Additional Registrable Securities, if any, without registration
or pursuant to such Form S-3.
(e) In the event any holder of Registrable Securities or
Additional Registrable Securities, if any, intends to sell such Registrable
Securities or Additional Registrable Securities pursuant to the applicable
Registration Statement, such holder shall give the Company three (3) business
days' notice of its intent to sell in reliance on such Registration Statement
(the "Notice of Sale"). The Company may refuse to permit a Purchaser to resell
any Registrable Securities or Additional Registrable Securities, if any,
pursuant to the Registration Statements; provided, however, that in order to
exercise this right, the Company must deliver a certificate in writing within
three (3) business days following the Notice of Sale to such Purchaser and the
Placement Agent (as defined in the Memorandum) to the effect that withdrawal of
such Registration Statements is necessary because a sale pursuant to the
Registration Statements in its then-current form could constitute a violation of
the federal securities laws. In such an event, the Company shall use its best
efforts to amend the Registration Statements if necessary and take all other
actions necessary to allow such sale under the federal securities laws, and
shall notify the Purchaser and the Placement Agent promptly after it has
determined that such sale has become permissible under the federal securities
laws. Notwithstanding the foregoing, the Company shall not under any
circumstances be entitled to exercise its right to refuse to permit resale of
any Registrable Securities and Additional Registrable Securities pursuant to the
Registration Statements more than two (2) times in any twelve (12) month period,
and the period during which such Registration Statements may be withdrawn shall
not exceed thirty (30) days. Each Purchaser hereby covenants and agrees that it
will not sell any Registrable Securities or Additional Registrable Securities,
if any, pursuant to the Registration Statements during the periods the
Registration Statements are withdrawn as set forth in this Section 7.2(e).
7.3 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Purchaser (for purposes of this Section 7.3(a), including its officers,
directors, agents and employees, each person who controls such holder, within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the officers, directors, agents or employees of such controlling
person) from and against any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) to which such Purchaser may become subject
(under the Securities Act or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statements, on the effective date thereof, or
arise out of, or are based upon, any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or arise out of any failure by the Company to fulfill any
undertaking included in the Registration Statements, and the Company will, as
incurred, reimburse such Purchaser for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement made in such Registration
Statements in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statements, (ii) the failure of such Purchaser
to comply with the covenants and agreements contained in Section 8.3 hereof, or
(iii) any untrue
8.
<PAGE> 12
statement in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser. If requested, the Company shall also indemnify the underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents and
employees and each person who controls such person (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act) to the same
extent as provided above.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) an untrue statement made in
such Registration Statements in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statements, provided,
however, that no Purchaser shall be liable in any such case for any untrue
statement included in any Prospectus which statement has been corrected, in
writing, by such Purchaser and delivered to the Company before the sale from
which such loss occurred, (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 8.3 hereof, or (iii) any untrue
statement in any prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser, and each Purchaser, severally and not jointly, will, as incurred,
reimburse the Company for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the indemnity agreement contained in this
subsection (b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of such Purchaser (which consent shall not be unreasonably withheld).
Notwithstanding the provisions of this subsection (b), no Purchaser shall be
liable for any amount in excess of the amount by which the net amount received
by the Purchaser from the sale of the Shares to which such loss relates exceeds
the amount of any damages which such Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or may exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the
9.
<PAGE> 13
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or a Purchaser on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the net amount received by the
Purchaser from the sale of Registrable Securities or Additional Registrable
Securities to which such loss relates exceeds the amount of any damages which
such Purchaser 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 Purchasers' obligations in this
subsection (d) to contribute are several in proportion to their respective sales
of Registrable Securities to which such loss relates and not joint.
(e) The obligations of the Company and the Purchasers under
this Section 7.3 shall be in addition to any liability which the Company and the
respective Purchasers may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Exchange Act or the Securities Act.
7.4 Board Observance Rights. The holders of Preferred Stock shall have
the right to designate one representative to attend meetings of the Board of
Directors of the Company in a nonvoting observer capacity, to receive notice of
such meetings and to receive the information provided by the Company to the
Board of Directors; provided, however, that the Company may require as a
condition precedent to the rights under this Section 7.4, that the designee
attending any meeting of the Board of Directors and each person having access to
any of the information provided by the Company to the Board of Directors shall
agree to hold in confidence all information so received during such meetings or
otherwise; and provided further, that the Company reserves the right not to
provide information and to exclude such designee from any meeting if such
designee is a direct competitor of the Company. The Company shall pay the
out-of-pocket expenses of, and a reasonable hourly fee for, the observer at
these meetings.
Section 8
Restrictions on Transferability of Units:
Compliance with Securities Act
8.1 Restrictions on Transferability. Neither the Preferred Stock or
Warrants, nor the Common Stock issuable upon conversion of the Preferred Stock
and exercise of the Warrants, shall be transferable in the absence of a
registration under the Securities Act or an exemption therefrom or in the
absence of compliance with any term of this Agreement. The Company shall be
entitled to give stop transfer instructions to its transfer agent with respect
to the Preferred Stock, Warrants and Common Stock issuable upon conversion or
exercise thereof in order to enforce the foregoing restrictions.
8.2 Restrictive Legend. (a) Each certificate representing the Preferred
Stock and the Warrants shall bear substantially the following legends (in
addition to any legends required under applicable securities laws):
10.
<PAGE> 14
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE
PURCHASE AGREEMENT DATED JUNE 17, 1995 BETWEEN THE COMPANY AND THE
ORIGINAL PURCHASER, AND NO TRANSFER OF SECURITIES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 7.2 AND 8.3 OF THE
AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY.
(b) Upon conversion of any of the Preferred Stock and issuance
of the Common Stock prior to the time a registration statement registering the
sale of the Common Stock is declared effective by the Securities and Exchange
Commission, all certificates representing such shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
California law, as well as any other legends necessary to comply with applicable
state and federal laws for the issuance of such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED
HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON
STATUTORY EXEMPTIONS UNDER THE 1933 ACT, AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, TRANSFERRED OR ASSIGNED, EXCEPT IN A TRANSACTION
WHICH IS EXEMPT UNDER PROVISIONS OF THE 1933 ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION; ONLY
IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF ANY SUCH SECURITIES.
8.3 Transfer of Registrable Securities After Registration. Each
Purchaser hereby covenants with the Company not to make any sale of the
Registrable Securities or Additional Registrable Securities, if any, except
either (i) in accordance with the Registration Statements, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
Section 9
Miscellaneous
9.1 Waivers and Amendments. With the exception of Section 7 hereof, the
terms of this Agreement may be waived or amended with the written consent of the
Company and each Purchaser. With respect to Section 7 hereof, with the written
consent of the Company and the record holders of more than fifty percent
11.
<PAGE> 15
(50%) of the Units then outstanding and held by Purchasers, the terms of the
Agreement may be waived or amended and any such amendment or waiver shall be
binding upon the Company and all holders of Units.
9.2 Broker's Fee. Each Purchaser acknowledges that the Company intends
to pay a fee to Merrill Lynch & Co. in respect of the sale of the Units to the
Purchaser. Each of the parties hereto hereby represents that, on the basis of
any actions and agreements by it, there are no other brokers or finders entitled
to compensation in connection with the sale of the Units to the Purchasers.
9.3 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
9.4 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
no Purchaser shall assign this Agreement without the prior written consent of
the Company.
9.6 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
9.7 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchasers, as the case may be, at their respective addresses set forth at the
beginning of this Agreement or on Schedule I, or at such other address as the
Company or the Purchasers shall have furnished to the other party in writing.
All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such notice or communication shall have
been deposited in the United States mail.
9.8 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.11 Termination. In the event that the Closing shall not have occurred
on or before ninety (90) days from the date hereof, this Agreement shall
terminate at the close of business on such date.
12.
<PAGE> 16
9.12 Expenses. The Company and each such Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
9.13 Currency. All references to "dollars" or "$" in this Agreement
shall be deemed to refer to United States dollars.
9.14 Effectiveness of Agreement. The Company's agreement to sell the
Units to the Purchasers pursuant to the terms of this Agreement will only be
effective upon acceptance of this Agreement by the Company as evidenced by the
Company's execution of this Agreement.
13.
<PAGE> 17
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Purchase Agreement as of the date first above written.
"COMPANY"
Number of Units Subscribed
at $25.00 per Unit: SOMATIX THERAPY CORPORATION
_______________________________ a Delaware corporation
Conversion Price of By:______________________________
Preferred Stock:
$______________________________ Title:___________________________
Warrant Coverage: ____________ % "PURCHASER"
Warrant Exercise Price Per Share:
$______________________________ _________________________________
Name of Purchaser
_________________________________
Authorized Signature of Purchaser
_________________________________
Title
14.
<PAGE> 18
SCHEDULE I
SCHEDULE OF PURCHASERS
(Preferred Units)
<TABLE>
<CAPTION>
Series A-1 Warrant to
Shares of Purchase Shares Aggregate
Purchaser Units Preferred Stock of Common Stock Purchase Price
--------- ----- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Robert S. Birch 4,000 4,000 14,000 $100,000
Aeneas Venture Corporation 60,000 60,000 210,000 $1,500,000
Phoenix Partners, L.P. 20,400 20,400 71,400 $510,000
Betje Partners, L.P. 6,400 6,400 22,400 $160,000
Morgens, Waterfall, Vintiadis Investments 13,200 13,200 46,200 $330,000
Olin Nisbet 10,000 10,000 35,000 $250,000
SBSF Biotechnology Fund, L.P. 30,000 30,000 105,000 $750,000
Counsellors Emerging Growth Fund 60,000 60,000 210,000 $1,500,000
WHI Somatix Partners 20,000 20,000 70,000 $500,000
WPG-Farber Partners Fund, L.P. 21,400 21,400 74,900 $535,000
WPG-Farber Overseas Partners, Ltd. 8,600 8,600 30,100 $215,000
----------------------------------------------------------------------------
TOTAL: 254,000 254,000 889,000 $6,350,000
</TABLE>
<PAGE> 19
EXHIBIT A
CERTIFICATE OF DESIGNATION OF PREFERRED STOCK
(see Exhibit 3.3)
<PAGE> 20
EXHIBIT B
FORM OF WARRANT
(see Exhibit 10.22)
<PAGE> 21
Exhibit C
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Purchase Agreement)
A. Complete the following items in the Purchase Agreement:
1. Provide the information regarding the Purchaser requested on
the signature page. The Agreement must be executed by an
individual authorized to bind the Purchaser.
2. Exhibit C-1 - Securities Certificate Questionnaire:
Provide the information requested by the Securities Certificate
Questionnaire;
3. Exhibit C-2 - Purchaser Certificate:
Provide the information requested by the Certificate for
Individual Purchasers or the Certificate for Corporate,
Partnership, Trust, Foundation and Joint Purchasers, as
applicable.
4. Return the signed Purchase Agreement including the properly
completed Exhibit 4.2 to:
Merrill Lynch & Co.
101 California Street
Suite 1420
San Francisco, CA 94111
B. Instructions regarding the transfer of funds for the purchase of
Securities will be telecopied to the Purchaser by the Placement Agent
at a later date.
<PAGE> 22
EXHIBIT C-1
SOMATIX THERAPY CORPORATION
SECURITIES CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4.3 of the Agreement, please provide us with the
following information:
1. The exact name that the Shares of
Preferred Stock and Warrants are to
be registered in (this is the name
that will appear on the stock
certificate(s) and warrant
certificate(s)). You may use a
nominee name if appropriate:
___________________________________
2. The relationship between the Purchaser
of the Securities and the Registered
Holder listed in esponse to item 1 above:
___________________________________
3. The mailing address of the Registered
Holder listed in response to item 1 above:
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
4. The Tax Identification Number of the
Registered Holder listed in response
to item 1 above:
___________________________________
<PAGE> 23
Exhibit C-2
SOMATIX THERAPY CORPORATION
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple)
the Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true
and accurate:
In order for the Company to offer and sell the Securities in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.
___ (1) A natural person whose net worth, either individually
or jointly with such person's spouse exceeds $1,000,000;
___ (2) A natural person who had an income in excess of
$200,000, or joint income with that person's spouse in excess of $300,000, in
1992, 1993 and 1994, and reasonably expects to have individual income reaching
the same level in 1995;
___ (3) An executive officer or director of the Company.
Dated: _____________
_________________________________
Name(s) of Purchaser
_________________________________
Signature
_________________________________
Signature
<PAGE> 24
EXHIBIT C-2
SOMATIX THERAPY CORPORATION
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension
plan, foundation, joint purchaser (other than a married couple) or other entity,
an authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and
responses below are true and accurate:
(a) The investor has been duly formed and is validly existing
and has full power and authority to invest in the Company. The person signing on
behalf of the undersigned has the authority to execute and deliver the Purchase
Agreement on behalf of the Purchaser and to take other actions with respect
thereto.
(b) Indicate the form of entity of the undersigned:
___ Limited Partnership
___ General Partnership
___ Corporation
___ Revocable Trust (identify each grantor and
indicate under what circumstances the trust is
revocable by the grantor: ______________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________. (Continue on a separate piece
of paper, if necessary.)
___ Other Type of Trust (indicate type of trust
and, for trusts other than pension trusts,
name the grantors and beneficiaries: ___________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________. (Continue on a separate piece
of paper, if necessary.)
___ Other form of organization (indicate form of
organization (___________________________).
(c) Indicate the approximate date the undersigned entity was
formed: _______________________.
(d) In order for the Company to offer and sell the Securities
in conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.
<PAGE> 25
___ 1. A bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities
Act whether acting in its individual or fiduciary capacity;
___ 2. A broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934;
___ 3. An insurance company as defined in Section
2(13) of the securities Act;
___ 4. An investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act;
___ 5. A Small Business Investment Company licensed
by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958;
___ 6. A plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of
a state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000;
___ 7. An employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors;
___ 8. A private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of
1940;
___ 9. An organization described in Section 501(c)(3)
of the Internal Revenue Code, a corporation, Massachusetts or
similar business trust, or partnership, not formed for the
specific purpose of acquiring the Securities, with total assets
in excess of $5,000,000;
___ 10. A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Securities, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the
merits and risks of investing in the Company;
<PAGE> 26
___ 11. An entity in which all of the equity owners
qualify under any of the above subparagraphs. If the
undersigned belongs to this investor category only, list the
equity owners of the undersigned, and the investor category
which each such equity owner satisfies:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
(Continue on a separate piece of paper, if necessary.)
Dated: _______________________, 19___
____________________________________________
Name of investor
____________________________________________
Signature and title of authorized
officer, partner or trustee
<PAGE> 1
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
SOMATIX THERAPY CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
Void after June ___, 1998
THIS CERTIFIES THAT, for value received,
_______________________ ("Holder") is entitled to purchase, on the terms hereof,
_________________ (_______________) shares of Common Stock (as adjusted pursuant
to Section 4 hereof, the "Shares") of Somatix Therapy Corporation, a Delaware
corporation (the "Company"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term "Common Stock" shall
mean the Company's presently authorized Common Stock, par value $.01 per share,
and any stock into or for which such Common Stock may hereafter be converted or
exchanged. The term "Warrant" as used herein shall include this Warrant, and any
warrants delivered in substitution or exchange therefor as provided herein.
The following terms shall apply to this Warrant:
1. Term of Warrant. Subject to the terms and conditions set
forth herein, the term of this Warrant shall commence, this Warrant shall be
exercisable for the Shares, commencing August ___, 1995 and expiring at 5:00
p.m. Pacific Daylight Time on June ___, 1998.
2. Exercise Price; Number of Shares. The exercise price per
share ("Exercise Price") at which this Warrant may be exercised shall be Four
Dollars ($4.00), as adjusted from time to time pursuant to Section 4 hereof. The
number of shares of Common Stock for which this Warrant is initially exercisable
is ____________________ (____________________) shares of Common Stock, which
number is subject to adjustment pursuant to Section 4 of this Warrant.
3. Exercise of Warrant.
3.1 Method of Exercise. Subject to the terms of Section 1
hereof, the purchase rights represented by this Warrant are exercisable by
Holder during the term hereof, in whole or in part and from time to time, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A duly executed) at the principal office of the Company and by payment
to the Company, by check or wire transfer of an amount equal to the then
applicable Exercise Price multiplied by the number of Shares then being
purchased or exercise of the right to credit the Exercise Price against the fair
market value of the Shares at the time of exercise (the "Net Exercise Right")
pursuant to Section 3.2. In the event of any exercise of the rights represented
by this Warrant, certificates for the Shares so purchased shall be delivered to
Holder hereof as soon as possible and, unless this Warrant has been fully
exercised or expired, a new
<PAGE> 2
Warrant representing the portion of the Shares, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to Holder
hereof as soon as possible.
3.2 Net Exercise Right. If the Company shall receive written
notice from Holder at the time of exercise of this Warrant that Holder elects to
exercise Holder's Net Exercise Right, the Company shall deliver to the Holder
(without payment by the Holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable Common
Stock equal to the quotient obtained by dividing (x) the value of this Warrant
(or the specified portion hereof) on the date of exercise, which value shall be
determined by subtracting (1) the aggregate Exercise Price of the Shares
immediately prior to the exercise of this Warrant from (2) the aggregate fair
market value of the Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the date of exercise by (y) the fair market value
of one share of Common Stock on the date of exercise. For purposes of this
Section 3.2, "fair market value" of a share of Common Stock shall mean the
closing price of the Common Stock on the business day prior to the date of
exercise as reported by the Nasdaq National Market or such other principal
exchange or quotation system on which the Common Stock is then traded, or in the
event that the Common Stock is not then traded on an exchange or quotation
system, then as determined in good faith by the Board of Directors. No
fractional shares shall be issuable upon exercise of the Net Exercise Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
Holder an amount in cash equal to the fair market value of the resulting
fractional share on the date of exercise. For purposes of Section 3 of this
Warrant, shares issued pursuant to the Net Exercise Right shall be treated as if
they were issued upon the exercise of this Warrant.
4. Certain Adjustments.
4.1. Adjustments for Splits, Subdivisions, Recapitalizations
and other Combinations. In case the Company shall (i) pay a dividend in Common
Stock or make a distribution in the form of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, (iv) issue by
reclassification of its Common Stock other securities of the Company, or (v)
take any other action, the effect of which is to reclassify or reorganize the
outstanding shares of Common Stock into a different number of shares or class of
securities, the number of shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder shall be entitled
to receive the kind and number of shares or other securities of the Company
which it would have owned or would have been entitled to receive immediately
after the happening of any of the events described above, had the Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made with respect to this Section 4.1 shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event. Whenever the number of Shares
purchasable upon the exercise of this Warrant is adjusted, as herein provided,
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Shares purchasable upon
the exercise of the Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant shares so purchasable immediately
thereafter. Except as provided above, no adjustment in respect of any dividends
or distributions out of earnings shall be made during the term of this Warrant
or upon the exercise of this Warrant.
4.2. Mergers, Consolidations or Sale of Assets. If at any time
there shall be a capital reorganization (other than a combination or subdivision
of Shares otherwise provided for herein), or a merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the Holder shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified in this
Warrant and upon payment of the purchase price, the number of shares of stock or
other securities or property of the
2.
<PAGE> 3
Company or the successor corporation resulting from such reorganization, merger,
consolidation or sale, to which a holder of Common Stock deliverable upon
exercise of this Warrant would have been entitled under the provisions of the
agreement in such reorganization, merger, consolidation or sale if this Warrant
had been exercised immediately before that reorganization, merger, consolidation
or sale. In any such case, appropriate adjustment (as determined in good faith
by the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the reorganization, merger, consolidation or sale to the end that
the provisions of this Warrant (including adjustment of the purchase price then
in effect and the number of the Shares) shall be applicable after that event, as
near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant; provided, however,
that the aggregate purchase price shall not be adjusted.
4.3. Certificate as to Adjustments. In the case of each
adjustment or readjustment of the purchase price pursuant to this Section 4, the
Company will promptly compute such adjustment or readjustment in accordance with
the terms hereof and cause a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based to be delivered to the Holder of this Warrant. The Company
will, upon the written request at any time of the Holder of this Warrant,
furnish or cause to be furnished to such Holder a certificate setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of Shares and the amount, if any, of other
property at the time receivable upon the exercise of the Warrant.
4.4. Notice of Record Date. In the event of any taking by the
Company of a record of its stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
share of any class or any other securities or property, or to receive any other
right, or for the purpose of determining stockholders who are entitled to vote
in connection with any proposed merger or consolidation of the Company with or
into any other corporation, or any proposed sale, lease or conveyance of all or
substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail a notice to
Holder, at least ten (10) days prior to the date specified therein, the date on
which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and the amount and character of such
dividend, distribution, right or other event.
5. Fractional Stock. No fractional shares shall be issued in
connection with any exercise of this Warrant. In lieu of the issuance of such
fractional share, the Company shall make a cash payment equal to the then fair
market value of such fractional share as determined in good faith by the
Company's Board of Directors.
6. Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the exercise of this Warrant, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the exercise of this Warrant.
7. Restrictions on Transfer.
Unless the issuance of the Shares has been registered under the
Securities Act of 1933, as amended (the "1933 Act"):
3.
<PAGE> 4
(a) this Warrant and any Shares may not be sold, transferred,
pledged, hypothecated or otherwise disposed of except: (i) to a person who, in
the opinion of counsel to the Company, is a person to whom this Warrant or the
Shares may legally be transferred without registration and without the delivery
of a current prospectus under the 1933 Act with respect thereto and then only
against receipt of an agreement of such person to comply with the provisions of
this Section 6 with respect to any resale or other disposition of such
securities; or (ii) to any person upon the delivery of a prospectus then meeting
the requirements of the 1933 Act relating to such securities and the offering
thereof for such sale or disposition, and thereafter to all successive
assignees;
(b) upon exercise of any of the Warrants and the issuance of
any of the Shares prior to the time a registration statement registering the
Shares issuable upon exercise hereof is declared effective by the Securities and
Exchange Commission, all certificates representing such shares shall bear on the
face thereof substantially the following legend, insofar as is consistent with
California law, as well as any other legends necessary to comply with applicable
state and federal laws for the issuance of such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED
HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON
STATUTORY EXEMPTIONS UNDER THE 1933 ACT, AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, TRANSFERRED OR ASSIGNED, EXCEPT IN A TRANSACTION
WHICH IS EXEMPT UNDER PROVISIONS OF THE 1933 ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION; ONLY
IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF ANY SUCH SECURITIES.
8. Rights as Stockholders; Information. Holder shall not be
entitled to vote or receive dividends or be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon Holder any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders or at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
9. Transfers and Exchanges. Subject to the terms and conditions
of the applicable Federal and state securities laws, this Warrant is
transferable in whole or in part by the Holder. All new warrants issued in
connection with transfers or exchanges shall be identical in form and provision
to this Warrant except as to the number of shares.
10. Successors and Assigns. The terms and provisions of this
Warrant shall be binding upon the Company and the Holder and their respective
successors and assigns.
11. Amendments. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
4.
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12. Registration Rights. Upon exercise of this Warrant, the
Holder shall have and be entitled to exercise the rights of registration as
provided in that certain Purchase Agreement dated of even date herewith between
the Company and Holder.
13. Loss, Theft, Destruction or Mutilation of Warrant. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
14. Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or Sunday or shall be a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
15. Governing Law. The terms and conditions of this Warrant
shall be governed by and construed in accordance with California law as such
laws are applied to agreements which are entered into solely between California
residents and are to be performed entirely within that state.
Dated: ___________________ SOMATIX THERAPY CORPORATION
By:________________________________________
Its:_______________________________________
Dated: ___________________ HOLDER
By:________________________________________
Name:______________________________________
Its:_______________________________________
5.
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE
To: Somatix Therapy Corporation
1. The undersigned hereby elects to purchase __________ shares of
Common Stock of Somatix Therapy Corporation pursuant to the terms of the
attached Warrant, and
______ tenders herewith payment of the purchase price of such
shares in full.
______ exercises Holder's Net Exercise Right
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
________________________________
(Name)
________________________________
________________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
HOLDER
By: ____________________________________
Name: ___________________________________
Its: ____________________________________
Dated: __________________________
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated July 29, 1994, except Note 8 as to which the
date is June 28, 1995 in the Registration Statement (Form S-3) and related
Prospectus of Somatix Therapy Corporation for the registration of 2,476,500
shares of its common stock.
ERNST & YOUNG LLP
San Francisco, California
July 5, 1995
