<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter ended September 30, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
Commission File No. 0-18549
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GENSIA, INC.
------------
(Exact name of registrant as
specified in its charter)
Delaware 33-0176647
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9360 Towne Centre Drive
San Diego, California 92121
----------------------------
(Address of principal executive offices and zip code)
(619) 546-8300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
---- ----
The number of shares outstanding of each of the issuer's classes of
common stock, was 36,950,792 shares of common stock, par value
$.01,outstanding at September 30, 1996.
<PAGE> 2
GENSIA, INC.
INDEX
Page No.
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets at September 30, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the three
and nine months ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 5
Notes to the Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Results of Operations - for the three and nine
months ended September 30, 1996 and 1995 7
Liquidity and Capital Resources 8
PART II: OTHER INFORMATION
Item 1: Legal Proceedings 10
Item 5: Other Information 10
Item 6: Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
GENSIA, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,194 $ 47,421
Short-term investments 8,828 11,440
Accounts receivable 7,309 9,615
Inventories 13,349 11,562
Other current assets 2,665 3,313
Notes receivable from officers and employees 439 547
---------- ----------
Total current assets 50,784 83,898
Property and equipment, net 30,888 25,749
Deposits and other assets 8,305 8,913
---------- ----------
$ 89,977 $ 118,560
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,072 $ 7,980
Accrued research and development costs 124 533
Accrued payroll and related expenses 2,826 2,356
Other accrued liabilities 3,669 4,962
Current portion of deferred revenue 1,500 --
Current maturities of long-term obligations 134 380
---------- ----------
Total current liabilities 15,325 16,211
Deferred revenue, less current portion 875 --
Long-term obligations, less current maturities 136 46
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, 1,600,000 issued and outstanding at
September 30, 1996 and December 31, 1995,
respectively 16 16
Common stock, $.01 par value, 75,000,000 shares
authorized, 36,950,792 and 34,640,976 shares issued
and outstanding at September 30, 1996 and
December 31, 1995, respectively 370 346
Contingent value rights -- 2,875
Additional paid-in capital 327,474 319,502
Unrealized gain/(loss) on available-
for-sale securities (6) 1
Accumulated deficit (253,993) (219,337)
Unearned compensation (220) (1,100)
---------- ----------
Total stockholders' equity 73,641 102,303
---------- ----------
$ 89,977 $ 118,560
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE> 4
GENSIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 13,699 $ 10,750 $ 39,379 $ 37,749
Contract research and license fees
(including $1,630 from affiliates for the three
months ended September 30, 1995 and $5,570 for
the nine months ended September 30, 1995) 1,688 2,139 2,479 10,456
Interest income 493 279 1,784 1,246
---------- ---------- ---------- ----------
Total revenues 15,880 13,168 43,642 49,451
Costs and expenses:
Cost of sales 10,922 6,984 29,247 23,504
Research and development 7,797 8,621 24,756 28,657
Selling, general and administrative 7,944 7,790 23,663 23,097
Interest and other 281 12 632 777
Restructuring charge -- -- -- 1,092
Litigation settlement -- -- -- 4,000
---------- ---------- ---------- ----------
Total costs and expense 26,944 23,407 78,298 81,127
---------- ---------- ---------- ----------
Net loss before dividends on preferred stock (11,064) (10,239) (34,656) (31,676)
Dividends on preferred stock (1,504) (1,504) (4,496) (4,496)
---------- ---------- ---------- ----------
Net loss applicable to common shares $ (12,568) $ (11,743) $ (39,152) $ (36,172)
========== ========== ========== ==========
Net loss per common share $ (.34) $ (.35) $ (1.08) $ (1.10)
========== ========== ========== ==========
Shares used in computing per share amounts 36,915 33,127 36,196 32,840
========== ========== ========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE> 5
GENSIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
<S> <C> <C>
1996 1995
----------- ----------
Cash flow from operating activities:
Net loss $ (34,656) $ (31,676)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation of property and equipment 2,812 2,835
Amortization of licenses 225 --
Amortization of unearned compensation 880 1,246
Litigation settlement -- 4,000
Loss on disposal of property and equipment 262 --
Change in operating assets and liabilities:
Accounts receivable 2,306 1,866
Inventories (1,787) (6,605)
Other current assets 648 2,725
Accounts payable (908) (968)
Accrued research and development costs (409) (3,181)
Accrued payroll and related expenses 470 27
Other accrued liabilities (1,293) (1,893)
Deferred revenue 2,375 (2,325)
----------- ----------
Net cash used in operating activities (29,075) (33,949)
Cash flows from investing activities:
Proceeds from short-term investments 171,321 90,768
Purchases of short-term investments (168,716) (77,434)
Purchases of property and equipment (8,213) (2,646)
Deposits and other assets 383 6,237
Notes receivable from officers and employees 108 (193)
----------- ----------
Net cash (used in) provided by investing activities (5,117) 16,732
Cash flows from financing activities:
Payments of preferred stock dividends (1,504) (1,488)
Issuance of common stock and warrants, net 6,625 1,959
Issuance of long-term obligations 206 850
Principal payments on long-term obligations (362) (2,466)
----------- ----------
Net cash provided by (used in) financing activities 4,965 (1,145)
----------- ----------
Decrease in cash and cash equivalents (29,227) (18,362)
Cash and cash equivalents at beginning of period 47,421 23,371
----------- ----------
Cash and cash equivalents at end of period $ 18,194 $ 5,009
=========== ==========
Supplemental schedule of noncash financing activities:
Change in unrealized gain/(loss) on
available-for-sale securities $ (7) $ 4,562
<FN>
See accompanying notes.
</TABLE>
<PAGE> 6
GENSIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
ORGANIZATION
Gensia, Inc. ("Gensia" or the "Company"), a Delaware corporation, was
incorporated November 17, 1986. Gensia is a research-based company
focused on the discovery, development, manufacture and marketing of
health care products for the acute care market. Since inception, the
Company has been engaged in activities funded primarily through the sale
of the Company's equity.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its six wholly-owned subsidiaries, Gensia Europe Limited,
Gensia Laboratories, Ltd., Gensia GmbH, Aramed, Inc., Automedics
Development, Inc. and Gensia Development Corporation. All significant
intercompany accounts and transactions have been eliminated.
In the opinion of the Company, all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of the
results for the three and nine-month periods ended September 30, 1996
and 1995 have been made. The results of operations for the three and
nine-month periods ended September 30, 1996 are not necessarily
indicative of the results to be expected for the full fiscal year.
The accompanying consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's 1995 Form 10-K filed with the
Securities and Exchange Commission.
<PAGE> 7
GENSIA, INC.
SEPTEMBER 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Gensia has been unprofitable on an annual basis since its inception
in 1986 and expects to incur additional operating losses at least
through 1996. For the period from its inception to September 30, 1996,
Gensia has incurred a cumulative net loss of $254 million.
When used in this Form 10-Q, the words "expects", "anticipates",
"estimates" and similar expressions are intended to identify forward-
looking statements. Such statements involve risks and uncertainties,
including the timely development, regulatory approval, and successful
marketing of new products and acceptance of new products, the impact of
competitive products, product costs and pricing, changing market
conditions and other risks described in this Form 10-Q and in the
Company's Annual Report on Form 10-K for the year ended December 31,
1995. Actual results may differ materially from those projected. These
forward-looking statements represent the Company's judgment only as of
the date of the filing of this Form 10-Q. The Company disclaims,
however, any intent or obligation to update these forward-looking
statements.
RESULTS OF OPERATIONS
The Company reported a net loss of $12.6 million, or $.34 per common
share (after dividends on preferred stock of $1.5 million), in the third
quarter ended September 30, 1996 compared to a net loss of $11.7
million, or $.35 per common share (after undeclared and unpaid
cumulative dividends on preferred stock of $1.5 million), in the third
quarter of 1995. The Company reported a net loss of $39.2 million, or
$1.08 per common share (after preferred stock dividends of $1.5 million
paid in September 1996 and $3.0 million in undeclared and unpaid
cumulative preferred stock dividends), compared to a net loss of $36.2
million, or $1.10 per common share (after preferred stock dividends of
$1.5 million paid in March 1995 and $3.0 million in undeclared and
unpaid cumulative preferred stock dividends), for the nine months ended
September 30, 1996 and 1995, respectively. The 1995 results for the
first nine months included a restructuring charge of $1.1 million and a
$4.0 million charge related to the settlement of class action
litigation.
Product sales increased in both the three- and nine-month periods of
1996 compared to the similar periods of 1995. However, gross profit
from product sales decreased in both the three- and nine-month periods
of 1996 compared to the similar periods of 1995. Continued increases in
sales of doxorubicin, approved by the U.S. Food and Drug Administration
("FDA") in the third quarter of 1995, and the Laryngeal Mask Airway
("LMA") among other products have contributed to the increased product
sales in the 1996 periods. The decreases in gross profit from product
sales were primarily attributable to increased competition for certain
of Gensia Laboratories' multi-source injectable products, particularly
etoposide. During 1995 and 1994, etoposide was Gensia Laboratories'
largest product in terms of sales and during 1995 and early 1996, a
number of competitors received FDA approval to market injectable
etoposide. These approvals have had and are expected to continue to
have a material adverse impact on the Company's sales and gross profit
from etoposide. The Company believes that while overall product sales
for calendar year 1996 should be maintained at approximately the levels
achieved during 1995, gross margin percentages for 1996 will be
lower than those achieved in the prior year. The Company believes
additional product approvals will be required for gross margins to
improve. While Gensia has a number of products currently under review
for approval at the FDA, there can be no assurance whether or when any
such approvals may be obtained.
Contract research and license fees revenues were lower in both the
three- and nine-month periods of 1996 as compared to the similar periods
of 1995. The decreases were primarily a result of the termination of
contract research agreements upon the Company's acquisition of Aramed,
Inc. ("Aramed") in the fourth quarter of 1995 and because of research
and development payments received in 1995 from a collaboration with
Boehringer Mannheim Pharmaceuticals Corporation. Gensia recorded
contract research and license fees during the second and third quarters
of 1996 primarily as a result of a research collaboration with Pfizer
Inc. ("Pfizer") which closed in the second quarter of 1996. Contract
research and license fees revenues in 1996 are expected to be lower than
in 1995 although the amount will depend on the degree to which Gensia is
able to enter into additional collaborations. The Company is engaged in
discussions with pharmaceutical companies concerning additional
collaborations under
<PAGE> 8
GENSIA, INC.
SEPTEMBER 30, 1996
which these companies would fund a portion of Gensia's research and
development efforts. There can be no assurance that any additional
agreements will be reached.
Gensia's research and development expenses decreased $0.8 million in
the 1996 third quarter compared to the 1995 third quarter, and decreased
$3.9 million for the nine months ended September 30, 1996 compared to
the same period of 1995. These decreases are primarily a result of
ongoing expense reduction efforts related to the Company's research and
development programs. The level of spending in research and development
will in part depend on the Company's ability to complete additional
collaborations with corporate partners to fund its research and
development programs.
Selling, general and administrative expenses increased slightly in
the third quarter of 1996 compared to the third quarter of 1995.
Selling, general and administrative expenses were $23.7 million as
opposed to $23.1 million for the nine months ended September 30, 1996
and 1995, respectively. These increases primarily result from the
expansion of sales and marketing activities and an increase in advisory
fees over the same period of 1995. Selling, general and administrative
expenses may continue to grow as Gensia builds its sales and marketing
organization for activities related to Gensia Laboratories, the LMA and
Brevibloc (registered trademark) and to support the GenESA (registered
trademark) System in Europe and potentially North America.
Interest income for the third quarter and first nine-months of 1996
increased from the 1995 levels due to higher average cash and investment
balances in 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, Gensia had cash, cash equivalents and short-
term investments of $27.0 million compared to $58.9 million at December
31, 1995. The decrease reflects the impact of operating losses for the
nine month period and capital expenditures related to the development of
new production capabilities at Gensia Laboratories. These items were
partially offset by a cash infusion from Pfizer of $8.8 million,
discussed below, and equipment lease financing of $1.8 million for the
expansion of new production capabilities at Gensia Laboratories.
Additional funding was received from a research collaboration with
Pfizer for the development of drugs for the treatment of pain using
Gensia's adenosine regulating agent (ARA) technology. Pfizer made an
up-front licensing payment of $3.0 million and provided up-front
research funding of $.8 million. Additional funding will be paid
quarterly for a period of at least two years. In conjunction with this
research collaboration, Pfizer also purchased 792,293 shares of the
Company's common stock through a $5.0 million equity investment. Gensia
may also receive certain payments upon the achievement of specified
milestones and royalties on any product sales that result from the
collaboration. There can be no assurance that any milestones will be
achieved, that any compound will be successfully developed under this
collaboration or that any sales or royalty payments will result from a
developed compound.
Gensia believes that expense levels in the future will be dependent
upon a number of factors, including the potential cost of expanding its
sales and marketing organization to support product launches and
increased emphasis on commercial activities and costs associated with
preclinical studies and clinical trials for products under development.
The amount of such costs, as well as the spending necessary for working
capital and capital requirements, will depend on numerous factors
including the ability of Gensia Laboratories to gain additional product
approvals from the FDA, the timing and outcome of further regulatory
actions related to the GenESA System, and the Company's ability to
successfully market the GenESA System in and Europe and, if appropriate
regulatory approvals are obtained, in North America. As previously disclosed,
in April 1996, the Company was informed by the FDA in an action letter
that the New Drug Application ("NDA") for the GenESA System is not
currently approvable. The Company has recently filed an amendment to
its NDA for the GenESA System. Gensia Clinical Partners, L.P. owns
certain rights to the GenESA System technology which are subject to a
purchase option by Gensia.
<PAGE> 9
GENSIA, INC.
SEPTEMBER 30, 1996
Funding requirements will also depend on the progress of the
Company's research and development programs as well as its ability to
establish additional collaborations with other pharmaceutical companies
to fund these programs. In addition, Gensia Laboratories is undertaking
a significant capital expenditure program during 1996 and 1997. The
Company expects to finance this expansion largely through new lease or
debt financing secured against certain assets of Gensia Laboratories. A
commitment for lease financing for a significant portion of the proposed
expansion was issued by a third party in May 1996, some of which has
been utilized. There can be no assurance that any additional financing
will be available on attractive terms, if at all.
The Company anticipates that its current capital resources,
commitments from third parties and continued efforts to reduce expenses
will enable it to maintain its current and planned operations into 1997.
Gensia will need to raise additional funds in order to maintain its
planned operations through 1997. The Company is exploring a number of
options to raise these additional funds, including additional
collaborative research and development arrangements with pharmaceutical
companies, the licensing of product rights to third parties and private
placements of the Company's equity. There can be no assurance that
additional funds will be available on favorable terms, if at all.
If the Company is unable to raise additional funds, it may be forced
to take other significant measures to reduce its cash expenditures,
including significant reductions in its operations. These reductions
may include significant reductions of work force in addition to those
implemented in the first quarter of 1995. The Company may also be
forced to delay, restrict or eliminate certain research and development
programs. Other possible measures include the sale of certain
noncurrent assets. These actions, if taken, could have a material
adverse effect on the Company.
Significant changes in operating assets and liabilities during the
first nine months of 1996 were a $2.3 million decrease in accounts
receivable, a $1.8 million decrease in inventories and a $2.4 million
increase in deferred revenue. The decrease in accounts receivable is
largely due to collection of receivables resulting from sales in the
fourth quarter of 1995, which were higher than in the third quarter of
1996. The increase in inventories results from lower product sales and
higher purchases of raw materials in the third quarter of 1996 than in
the fourth quarter of 1995. Deferred revenue has increased in 1996 as a
result of the research collaboration with Pfizer. Net cash used in
investing activities in the first nine months of 1996 reflected net
purchases of $2.6 million in short-term investments as a result of
normal treasury activities of the Company. Additionally, the Company
invested $8.2 million in property and equipment in the first nine months
of 1996, primarily as part of the expansion at Gensia Laboratories. The
Company expects a significant portion of its property and equipment
requirements for 1996 to be financed through leasing arrangements with
third parties. The Company's principal cash flow from financing
activities in the first nine months of 1996 was receipt of $6.6 million
from the issuance of common stock, $5.0 million of which was issued to
Pfizer. The remaining balance was primarily from the exercise of common
stock options.
Gensia made quarterly cash dividend payments of approximately $1.5
million per quarter on its outstanding preferred stock from June 1, 1993
through March 1, 1995. Subsequent to March 1995, as a measure to reduce
cash outflows, the Company's Board of Directors suspended quarterly cash
dividend payments on its outstanding preferred stock. The Company's
Board of Directors voted to declare and the Company paid the quarterly
dividend for the quarter ending August 31, 1996 on September 1, 1996.
Through September 1996, Gensia has approximately $7.5 million in
undeclared cumulative preferred dividends. The Company's Board of
Directors voted to declare the quarterly dividend for the quarter ending
November 30, 1996, payable on December 1, 1996. If Gensia chooses to
not declare dividends for six cumulative quarters, the holders of this
preferred stock, voting separately as a class, will be entitled to elect
two additional directors until the dividend in arrears has been paid.
<PAGE> 10
GENSIA, INC.
SEPTEMBER 30, 1996
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
There have been no material developments in legal proceedings during
the quarter ended September 30, 1996. Please refer to the Company's
quarterly report on Form 10-Q for the quarter ended June 30, 1996.
ITEM 5: OTHER INFORMATION
Gensia announced on November 12, 1996 that it had entered into a
definitive agreement with Rakepoll Finance, N.V. to create a vertically-
integrated specialty pharmaceutical company focusing on the worldwide
oncology and injectable pharmaceutical markets.
Under the terms of the agreement, Gensia will issue 29.5 million new
shares of Gensia common stock to Rakepoll Finance to acquire three
pharmaceutical companies: SICOR S.p.A. of Milan, Italy, a prominent
worldwide supplier of specialty bulk pharmaceuticals with a primary
emphasis on oncological compounds which also offers a broad range of
corticosteroids for dermatologic diseases and asthma, and cyclosporine,
an important immunosuppresive drug; Sintesis Lerma S.A. de C.V., a
supplier of specialty bulk pharmaceuticals based in Mexico; and Lemery
S.A. de C.V., a multisource pharmaceutical company also based in Mexico
with product sales in Mexico and sales to certain Central and South
American and Eastern European countries.
The combined company will be called Gensia Sicor Inc. and will be
headquartered in San Diego. Gensia Sicor will be one of the few
independent, vertically-integrated suppliers of chemotherapeutic drugs
for the oncology market in the world. SICOR, Lerma and Lemery recorded
aggregate sales of $60.7 million in 1995 and $36.4 million for the six
months ending June 30, 1996. Gensia had sales of $53.5 million and
$25.7 million for the comparable periods.
Consummation of the proposed transaction is subject to various
conditions including Gensia shareholder approval and obtaining necessary
regulatory approvals. There can be no assurance that the proposed
transaction will be consummated.
SICOR and Lerma will continue to produce and sell bulk specialty
pharmaceuticals to pharmaceutical companies throughout the world.
Lemery and Gensia Laboratories, Ltd., a wholly-owned subsidiary of
Gensia will perform formulation, filling, packaging and marketing of
multisource injectable drugs. In addition, Gensia Laboratories will
continue to focus on the development of key specialty pharmaceuticals
and to provide contract manufacturing support and services to other
pharmaceutical and biotechnology companies.
Gensia, and following the combination, Gensia Sicor intend to seek
additional financing to increase capital available and to fund expanded
operations. There can be no assurance that such financing will be
available on favorable terms if at all.
As part of the transaction, subject to certain consents and
availability of funding, Gensia plans to spin off certain of its San
Diego-based pharmaceutical research and development programs into a
newly formed public company to be called Metabasis Therapeutics, Inc.,
whose stock would be distributed to Gensia shareholders immediately
prior to completion of the proposed transaction. Gensia expects that
Metabasis Therapeutics may be supported in part by payments from outside
research collaborations and from potential additional financings. There
can be no assurance that Gensia can successfully finance and spin-off
Metabasis Therapeutics or whether, if spun off, Metabasis Therapeutics
will be successful in raising additional financing or developing
products. Gensia's collaboration with Pfizer Inc. on novel drugs for
the treatment of pain may be contributed to Metabasis, subject to
Pfizer's approval.
Gensia is also planning to transfer all of its medical device assets
including the Laryngeal Mask Airway, the GenESA System and the Feedback
Controlled Heparin System into a wholly- owned subsidiary to be called
Gensia Automedics, Inc. Gensia plans to explore private and public
financing for Gensia Automedics, subject to certain third party
consents. There can be no assurance that such financing will be
available on favorable terms, if at all.
<PAGE> 11
GENSIA, INC.
SEPTEMBER 30, 1996
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Warrant to purchase 50,000 shares of common stock issued
to.Domain partners III, L.P. dated April 10, 1996.
4.2 Warrant to purchase 70,000 shares of common stock issued to
MMC/GATX Partnership No. 1, dated July 22, 1996.
10.1 Gensia Key Employees Incentive Compensation Plan.
(A management compensation plan)
(b) Reports on Form 8-K during the third quarter.
None
<PAGE> 12
GENSIA, INC.
SEPTEMBER 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENSIA, INC.
Date: November 13, 1996 By: /s/ David F. Hale
---------------------------------------
David F. Hale
Chairman, President and Chief Executive Officer
Date: November 13, 1996 By: /s/ Daniel D. Burgess
---------------------------------------
Daniel D. Burgess
Vice President - Finance, Chief Financial
Officer and Treasurer
<PAGE> 1
Exhibit 4.1
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
Gensia, Inc.
COMMON STOCK PURCHASE WARRANT
This certifies that, for good and valuable consideration, Gensia,
Inc., a Delaware corporation (the "Company"), grants to Domain Partners III,
L.P., a Delaware limited partnership ("Domain"), or its registered,
permitted assigns (together with Domain, the "Warrantholder"), the right to
subscribe for and purchase from the Company 50,000 validly issued, fully
paid and nonassessable shares (the "Warrant Shares") of the Company's Common
Stock, $.01 par value (the "Common Stock"), at the purchase price per share
of $4.00 (the "Exercise Price"), exercisable at any time and from time to
time during the period (the "Exercise Period") commencing on the date hereof
and ending on the fifth anniversary of the date hereof, all subject to the
terms, conditions and adjustments herein set forth.
<PAGE> 2
1. DURATION AND EXERCISE OF WARRANT; LIMITATION ON EXERCISE; PAYMENT OF
TAXES.
1.1 DURATION AND EXERCISE OF WARRANT.
(a) CASH EXERCISE. This Warrant may be exercised by the
Warrantholder by (i) the surrender of this Warrant to the Company, with a
duly executed Exercise Form specifying the number of Warrant Shares to be
purchased, during normal business hours on any Business Day during the
Exercise Period and (ii) the delivery of payment to the Company, for the
account of the Company, by cash, wire transfer of immediately available
funds to a bank account specified by the Company, or by certified or bank
cashier's check, of the Exercise Price for the number of Warrant Shares
specified in the Exercise Form in lawful money of the United States of
America. The Company agrees that such Warrant Shares shall be deemed to be
issued to the Warrantholder as the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable, and
in any event within 10 days, thereafter. The stock certificate or
certificates so delivered shall be in denominations of 100 shares each or
such lesser or greater denominations as may be reasonably specified by the
Warrantholder in the Exercise Form. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the
stock certificate or certificates, deliver to the Warrantholder a new
Warrant evidencing the rights to purchase the remaining Warrant Shares,
which new Warrant shall in all other respects be identical with this
Warrant. No adjustments shall be made on Warrant Shares issuable on the
exercise of this Warrant for any cash dividends paid or payable to holders
of record of Common Stock prior to the date as of which the Warrantholder
shall be deemed to be the record holder of such Warrant Shares.
(b) NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant
to Section 1.1(a), this Warrant may be exercised by the Warrantholder by the
surrender of this Warrant to the Company, with a duly executed Exercise Form
marked to reflect Net Issue Exercise and specifying the number of Warrant
Shares to be purchased, during normal business hours on any Business Day
during the Exercise Period. The Company agrees that such Warrant Shares
shall be deemed to be issued to the Warrantholder as the record holder of
such Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered as aforesaid. Upon such exercise, the
Warrantholder shall be entitled to receive shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant
to the Company together with notice of such election in which event the
Company shall issue to Warrantholder a number of shares of the Company's
Common Stock computed as of the date of surrender of this Warrant to the
Company using the following formula:
X = (Y x (A-B))/ A
Where X = the number of shares of Common Stock to be issued to
Warrantholder under this Section 1.1(b);
Y = the number of shares of Common Stock otherwise purchasable under
this Warrant (at the date of such calculation);
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation);
B = the Exercise Price (as adjusted to the date of such
calculation).
(c) FAIR MARKET VALUE. For purposes of Section 1.1(b) fair market
value of one share of the Company's Common Stock shall mean:
(i) the closing price per share of the Company's Common Stock
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or,
(ii) if not listed or traded on any such exchange, the last reported
sales price per share on the Nasdaq National Market or the Nasdaq Small-Cap
Market (collectively, "Nasdaq") or,
(iii) if not listed or traded on any such exchange or Nasdaq,
the average of the bid and asked price per share as reported in the "pink
sheets" published by the National Quotation Bureau, Inc. (the "pink sheets")
or,
(iv) if such quotations are not available, the fair market
value per share of the Company's Common Stock on the date such notice was
received by the Company as reasonably determined by the Board of Directors
of the Company.
1.2 PAYMENT OF TAXES. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; PROVIDED, HOWEVER, that
the Warrantholder shall be required to pay any and all taxes which may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then Warrantholder as
reflected upon the books of the Company.
<PAGE> 3
1.3 DIVISIBILITY OF WARRANT. This Warrant may be divided into
warrants exercisable for 5000 Warrant Shares or multiples thereof (or such
lesser or greater denominations as may be reasonably requested by the
Warrantholder), upon surrender at the principal office of the Company,
without charge to any Warrantholder. Upon such division, subject to the
restrictions on transfer referred to in Section 2, the Warrants may be
transferred of record as the then Warrantholder may specify without charge
to such Warrantholder (other than any applicable transfer taxes).
1.4 INFORMATION. Upon receipt of a written request from a
Warrantholder, the Company agrees to deliver promptly to such Warrantholder
a copy of its current financial statements and to provide such other
publicly available information concerning the business and operations of the
Company as such Warrantholder may reasonably request in order to assist the
Warrantholder in evaluating the merits and risks of exercising the Warrant
and to make an informed investment decision in connection with such
exercise.
2. RESTRICTIONS ON TRANSFER; RESTRICTIVE LEGENDS.
2.1 RESTRICTIONS ON TRANSFER; COMPLIANCE WITH SECURITIES Laws. This
Warrant and the Warrant Shares issued upon the exercise of the Warrant may
not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if such are requested
by the Company). The Warrantholder, by acceptance hereof, acknowledges that
this Warrant and the Warrant Shares to be issued upon exercise hereof are
being acquired solely for the Warrantholder's own account and not as a
nominee for any other party, and for investment, and that the Warrantholder
will not offer, sell or otherwise dispose of this Warrant or any Warrant
Shares to be issued upon exercise hereof except under circumstances that
will not result in a violation of the Securities Act or any state securities
laws. Upon exercise of this Warrant, the Warrantholder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company,
that the Warrant Shares so purchased are being acquired solely for the
Warrantholder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
2.2 RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 2, each Warrant shall (and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant issued pursuant to
Section 4 shall) be stamped or otherwise imprinted with a legend in
substantially the following form:
<PAGE> 4
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
Except as otherwise permitted by this Section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in
each case without a legend, if (i) such Warrant or such Warrant Shares, as
the case may be, have been registered for resale under the Securities Act or
sold pursuant to Rule 144 under the Securities Act (or a successor rule
thereto) or (ii) the Warrantholder has received an opinion of counsel
reasonably satisfactory to the Company that such registration is not
required with respect to such Warrant or such Warrant Shares, as the case
may be.
3. RESERVATION AND REGISTRATION OF SHARES, ETC.
The Company covenants and agrees that all Warrant Shares which are
issued upon the exercise of this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens,
security interests, charges and other encumbrances with respect to the issue
thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue. The Company further covenants and agrees
that, during the Exercise Period, the Company will at all times have
authorized and reserved, and keep available free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of
the rights represented by this Warrant and will, at its expense, upon each
such reservation of shares, procure such listing of such shares of Common
Stock (subject to issuance or notice of issuance) as then may be required on
all stock exchanges on which the Common Stock is then listed or on Nasdaq.
<PAGE> 5
4. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
Subject to the terms and conditions hereof, including the restrictions
on transfer in Section 2, upon surrender of this Warrant to the Company with
a duly executed Assignment Form and funds sufficient to pay any transfer
tax, the Company shall, without charge, execute and deliver a new Warrant or
Warrants of like tenor in the name of the assignee named in such Assignment
Form and this Warrant shall promptly be canceled. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new
Warrant of like tenor. The term "Warrant" as used in this Agreement shall
be deemed to include any Warrants issued in substitution or exchange for
this Warrant.
5. OWNERSHIP OF WARRANT.
The Company may deem and treat the person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations
of ownership or writing hereon made by anyone other than the Company) for
all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
Section 4.
6. CERTAIN ADJUSTMENTS.
6.1 The number of Warrant Shares purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment as
follows:
(a) STOCK DIVIDENDS. If at any time prior to the exercise of this
Warrant in full (i) the Company shall fix a record date for the issuance of
any stock dividend payable in shares of Common Stock or (ii) the number of
shares of Common Stock shall have been increased by a subdivision or split-up
of shares of Common Stock, then, on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend
or immediately after the effective date of subdivision or split-up, as the
case may be, the number of shares of Common Stock to be delivered upon
exercise of this Warrant will increased so that the Warrantholder will be
entitled to receive the number of shares of Common Stock that such
Warrantholder would have owned immediately following such action had this
Warrant been exercised immediately prior thereto, and the Exercise Price
will be adjusted as provided below in paragraph (f).
<PAGE> 6
(b) COMBINATION OF STOCK. If at any time prior to the exercise of
this Warrant in full the number of shares of Common Stock outstanding shall
have been decreased by a combination of the outstanding shares of Common
Stock, then, immediately after the effective date of such combination, the
number of shares of Common Stock to be delivered upon exercise of this
Warrant will be decreased so that the Warrantholder thereafter will be
entitled to receive the number of shares of Common Stock that such
Warrantholder would have owned immediately following such action had this
Warrant been exercised immediately prior thereto, and the Exercise Price
will be adjusted as provided below in paragraph (f).
(c) REORGANIZATION, ETC. If at any time prior to the exercise of
this Warrant in full any capital reorganization of the Company, or any
reclassification of the Common Stock, or any consolidation of the Company
with or merger of the Company with or into any other person or any sale,
lease or other transfer of all or substantially all of the assets of the
Company to any other person, shall be effected in such a way that the
holders of Common Stock shall be entitled to receive stock, other securities
or assets (whether such stock, other securities or assets are issued or
distributed by the Company or another person) with respect to or in exchange
for Common Stock, then, upon exercise of this Warrant the Warrantholder
shall have the right to receive the kind and amount of stock, other
securities or assets receivable upon such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer by a holder of the
number of shares of Common Stock that such Warrantholder would have been
entitled to receive upon exercise of this Warrant had this Warrant been
exercised immediately before such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer, subject to
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.
(d) FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip shall be issued to any Warrantholder in connection with the exercise
of this Warrant. Instead of any fractional shares of Common Stock that
would otherwise be issuable to such Warrantholder, the Company will pay to
such Warrantholder a cash adjustment in respect of such fractional interest
in an amount equal to that fractional interest of the then current Closing
Price per share of Common Stock.
(e) CARRYOVER. Notwithstanding any other provision of this
Section 6, no adjustment shall be made to the number of shares of Common
Stock to be delivered to the Warrantholder (or to the Exercise Price) if
such adjustment represents less than 1% of the number of shares to be so
delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to 1% or more
of the number of shares to be so delivered.
<PAGE> 7
(f) EXERCISE PRICE ADJUSTMENT. Whenever the number of Warrant
Shares purchasable upon the exercise of the 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
Warrant 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 purchasable immediately thereafter.
(g) NO DUPLICATE ADJUSTMENTS. Notwithstanding anything else to the
contrary contained herein, in no event will an adjustment be made under the
provisions of this Section 6 to the number of Warrant Shares issuable upon
exercise of this Warrant or the Exercise Price for any event if an
adjustment having substantially the same effect to the Warrantholder as any
adjustment that otherwise would be made under the provisions of this
Section 6 is made by the Company for any such event to the number of shares
of Common Stock (or other securities) issuable upon exercise of this
Warrant.
6.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 6.1,
no adjustment in respect of any dividends shall be made during the term of
the Warrant or upon the exercise of this Warrant.
6.3 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
the Exercise Price of such Warrant Shares is adjusted, as herein provided,
the Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of
the chief financial officer of the Company setting forth the number of
Warrant Shares and the Exercise Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
7. REGISTRATION RIGHTS.
<PAGE> 8
7.1 REGISTRATION.
(a) Upon the request made after the first anniversary of the date
hereof and prior to the second anniversary of such date by the holders of
60% of the Warrant Shares originally issued to Domain pursuant to this
Warrant, the Company shall prepare and file a registration statement with
the SEC under the Securities Act to register the resale of the Warrant
Shares by the Warrantholder (the "Registration Statement") and shall use
commercially reasonable efforts, including the filing of one or more
amendments or supplements to the Registration Statement, to obtain
effectiveness of the Registration Statement under the Securities Act. The
Company is obligated to effect only one such registration pursuant to the
terms of this Warrant. If the Company shall furnish to the holders of
Warrant Shares initiating such request for registration a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company it would be seriously detrimental to
the Company and its stockholders for such registration to be effected at
such time, the Company shall have the right to defer the filing of the
Registration Statement for a period of not more than 180 days after receipt
of the request of such holders.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
under this Section 7.1, and the Warrantholder shall pay all Selling Expenses
(as defined below) and other expenses that are not Registration Expenses
relating to the Warrant Shares resold by the Warrantholder. "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 Warrant Shares, fees and disbursements of counsel
for the Warrantholder, and all other expenses incurred by Warrantholder or
any transferee of Warrantholder in connection with sales of the Warrant
Shares.
(c) In the case of the registration effected by the Company pursuant
to these registration provisions, the Company shall use its commercially
reasonable efforts to: (i) keep the Registration Statement effective for a
period of 90 days (or, if earlier, until such date as all of the Warrant
Shares have been resold); (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 of the Warrant Shares 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
Warrantholder from time to time may reasonably request; (iv) provide a
transfer agent and registrar for all of the Warrant Shares registered
pursuant to the Registration Statement; and (v) file the documents required
of the Company and otherwise use its commercially reasonable efforts to
maintain requisite blue sky clearance in all United States jurisdictions
specified in writing by the Warrantholder; provided, 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.
<PAGE> 9
(d) The Company shall furnish to the Warrantholder upon request a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or
other disposition of all or any of the Shares held by the Warrantholder.
(e) With a view to making available to the Warrantholder 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 the
Warrantholder to sell Warrant Shares to the public pursuant to a
registration statement, 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 earlier of (A) the third anniversary of the date
hereof or (B) such date as all of the Warrant 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 the Warrantholder upon request, as long as the
Warrantholder owns any Warrant 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 the Warrantholder of any rule or regulation of
the SEC that permits the selling of any such Warrant Shares pursuant to
Rule 144.
The Company may require the Warrantholder to furnish to the Company
such information regarding the distribution of the Warrant Shares and such
other information as may otherwise be required by the Securities Act to be
included in the Registration Statement.
7.2 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Warrantholder from and against any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) to which the Warrantholder
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 of a material
fact contained in the Registration Statement, on the effective date thereof,
or in any amendment or supplement thereto, or arise out of any failure by
the Company to fulfill any undertaking included in the Registration
Statement or any amendment or supplement thereto, and the Company will,
except as provided below, as incurred, reimburse the Warrantholder 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 or any amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Warrantholder
specifically for use in preparation of the Registration Statement; or
(ii) an untrue statement which is subsequently corrected in a supplement or
amendment to the Registration Statement and which supplement or amendment
has been delivered by the Company to the Warrantholder via overnight courier
at least three trading days prior to the consummation of the transaction out
of which arose such claim, damage or liability.
(b) The Warrantholder 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 an untrue statement made in such
Registration Statement or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of the Warrantholder specifically for use in preparation of the
Registration Statement or any amendment or supplement thereto.
(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 7.2, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action. No indemnification provided
for in Section 7.2(a) or 7.2(b) shall be available to any party who shall
fail to give notice as provided in this Section 7.2(c) if the party to whom
notice was not given was unaware of the proceeding to which such notice
would have related and was prejudiced by the failure to give such notice,
but the omission so to notify such indemnifying party of any such action,
suit or proceeding shall not relieve it from any liability that it may have
to any indemnified party for contribution otherwise than under this Section
7.2. 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 shall 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 one law firm at the expense of such indemnifying person.
<PAGE> 11
(d) If the indemnification provided for in this Section 7.2 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 a 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 Warrantholder on the other in connection with the matters that
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 the Warrantholder on the other
and the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Warrantholder agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation 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. 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.
(e) The obligations of the Company and the Warrantholder under this
Section 7.2 shall be in addition to any liability which the Company and the
Warrantholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company or the
Warrantholder within the meaning of the Securities Act.
7.3 TRANSFERABILITY. The rights and obligations under this
Section 7 shall be binding upon and available to subsequent permitted
transferees of this Warrant and the Warrant Shares.
<PAGE> 12
8. NOTICES OF CORPORATE ACTION.
In the event of
(a) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other party, including without
limitation, any Change of Control, or
(b) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the Company will mail to the Warrantholder a
notice specifying (i) the date or expected 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 any such dividend, distribution or right, (ii) the
date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, Change of Control, dissolution,
liquidation or winding-up is to take place and the time, if any such time is
to be fixed, as of which the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
Change of Control, dissolution, liquidation or winding-up and (iii) that in
the event of a Change of Control, the Warrants are exercisable immediately
prior to the consummation of such Change of Control. Such notice shall be
mailed at least 20 days prior to the date therein specified, in the case of
any date referred to in the foregoing subdivision (i), and at least 20 days
prior to the date therein specified, in the case of the date referred to in
the foregoing subdivision (ii).
9. DEFINITIONS.
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
ASSIGNMENT FORM: an Assignment Form in the form annexed hereto as
Exhibit B.
BUSINESS DAY: any day other than a Saturday, Sunday or a day on which
national banks are authorized by law to close in the City of New York, State
of New York.
CHANGE OF CONTROL: shall mean (i) the consolidation of the Company
with or merger of the Company with or into any other person in which the
Company is not the surviving corporation, (ii) the sale of all or
substantially all of the assets of the Company to any other person or
(iii) any sale or transfer of any capital stock of the Company after the
date of this Agreement, following which 60% of the combined voting power of
the Company becomes beneficially owned by one person or group acting
together. For purposes of this definition, "group" shall have the meaning
as such term is used in Section 13(d)(1) under the Exchange Act.
<PAGE> 13
COMPANY: Gensia, Inc., a Delaware corporation.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to a comparable section, if any, of any successor
federal statute.
EXERCISE FORM: an Exercise Form in the form annexed hereto as
Exhibit A.
EXERCISE PRICE: the meaning specified on the cover of this Warrant,
as such price may be adjusted pursuant to Section 6 hereof.
Nasdaq: the meaning specified in Section 1.1(c)(ii).
SEC: the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
SECURITIES ACT: the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act of 1933, as amended, shall include
a reference to the comparable section, if any, of any successor federal
statute.
WARRANTHOLDER: the meaning specified on the cover of this Warrant.
WARRANT SHARES: the meaning specified on the cover of this Warrant,
subject to the provisions of Section 6.
10. MISCELLANEOUS.
10.1 ENTIRE AGREEMENT. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to this Warrant.
10.2 BINDING EFFECTS; BENEFITS. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and
their respective heirs, legal representatives, successors and assigns.
Nothing in this Warrant, expressed or implied, is intended to or shall
confer on any person other than the Company and the Warrantholder, or their
respective heirs, legal representatives, successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Warrant.
<PAGE> 14
10.3 AMENDMENTS AND WAIVERS. This Warrant may not be modified or
amended except by an instrument or instruments in writing signed by the
Company and the Warrantholder. Either the Company or the Warrantholder may,
by an instrument in writing, waive compliance by the other party with any
term or provision of this Warrant on the part of such other party hereto to
be performed or complied with. The waiver by any such party of a breach of
any term or provision of this Warrant shall not be construed as a waiver of
any subsequent breach.
10.4 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
10.5 FURTHER ASSURANCES. Each of the Company and the Warrantholder
shall do and perform all such further acts and things and execute and
deliver all such other certificates, instruments and documents as the
Company or the Warrantholder may, at any time and from time to time,
reasonably request in connection with the performance of any of the
provisions of this Agreement.
10.6 NOTICES. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by United
States mail, postage prepaid, to the parties hereto at the following
addresses or to such other address as any party hereto shall hereafter
specify by notice to the other party hereto:
(a) if to the Company, addressed to:
Gensia, Inc.
9360 Towne Centre Drive
San Diego, California 92121
Attention: General Counsel
Telecopier: (619) 453-0095
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Telecopier: (415) 983-7396
Attention: Thomas E. Sparks, Jr., Esq.
(b) if to the Warrantholder, addressed to the address of such
Warrantholder appearing on the books of the Company.
Except as otherwise provided herein, all such notices and communications
shall be deemed to have been received on the date of delivery thereof, if
delivered personally, or on the third Business Day after the mailing
thereof.
<PAGE> 15
10.7 SEPARABILITY. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant
or affecting the validity or enforceability of any of the terms or
provisions of this Warrant in any other jurisdiction.
10.8 GOVERNING LAW. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to agreements made and to be performed entirely within such
State.
10.9 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in
this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
Dated: April __, 1996.
GENSIA, INC.
By _____________________________
Title __________________________ EXHIBIT A
<PAGE> A-1
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
____ herewith tenders payment for _______ of the Warrant Shares to
the order of Gensia, Inc. in the amount of $_________ in
accordance with the terms of this Warrant; or
____ herewith tenders this Warrant for _______ Warrant Shares
pursuant to the Net Issue Exercise provisions of Section 1.1(b)
of the Warrant.
The undersigned requests that a certificate (or certificates) for such
Warrant Shares be registered in the name of the undersigned and that such
certificate (or certificates) be delivered to the undersigned's address
below.
In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the Warrant Shares are being acquired solely for the
account of the undersigned and not as a nominee for any other party, or for
investment, and that the undersigned will not offer, sell or otherwise
dispose of any such Warrant Shares except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.
Dated: ___________________.
Signature
--------------------------------
(Print Name)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder.
<PAGE> B-1
EXHIBIT B
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
ASSIGNMENT FORM
(To be executed only upon transfer of this Warrant)
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ____________________ (the
"Assignee") the right represented by such Warrant to purchase __________
Warrant Shares and all other rights of the Warrantholder with respect
thereto under the within Warrant, and appoints _________________ as Attorney
to make such transfer on the books of Gensia, Inc. maintained for such
purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the Warrant Shares to be issued
upon exercise hereof are being acquired for investment and that the Assignee
will not offer, sell or otherwise dispose of this Warrant or any Warrant
Shares to be issued upon exercise hereof except under circumstances that
will not result in a violation of the Securities Act of 1933, as amended, or
any state securities laws. Further, the Assignee has acknowledged that upon
exercise of this Warrant, the Assignee shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the Warrant
Shares so purchased are being acquired for investment and not with a view
toward distribution or resale.
Dated: ____________________.
Signature ______________________________
______________________________
(Print Name)
______________________________
(Street Address)
______________________________
(City) (State)(Zip Code)
<PAGE 1>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
GENSIA, INC.
WARRANT TO PURCHASE 70,000 SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, MMC/GATX Partnership No.
I (the "Partnership") is entitled to subscribe for and purchase 70,000
shares of the fully paid and nonassessable Common Stock (as adjusted
pursuant to Section 4 hereof, the "Shares") of Gensia Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), at the price of $5.25 per
share (such price and such other price as shall result, from time to
time, from the adjustments specified in Section 4 hereof is herein
referred to as the "Warrant Price"), subject to the provisions and upon
the terms and conditions hereinafter set forth. As used herein, (a) the
term "Common Stock" shall mean the Company's presently authorized Common
Stock, and any stock for which such Common Stock may hereafter be
converted or exchanged, (b) the term "Date of Grant" shall mean July 22,
1996, and (c) the term "Other Warrants" shall mean any other warrants
issued by the Company in connection with the transaction with respect to
which this Warrant was issued, and any warrant issued upon transfer or
partial exercise of this Warrant.
1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from
the Date of Grant through ten (10) years after the Date of Grant.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
Subject to Section 1 hereof, the purchase right represented by this
Warrant may be exercised by the holder hereof, in whole or in part and
from time to time, by either, at the election of the holder hereof, (a)
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 the payment to the Company, by check, of an amount equal
to the then applicable Warrant Price multiplied by the number of Shares
then being purchased, or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A-1 duly
executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the
Company either by check or from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the
then applicable Warrant Price per share multiplied by the number of
Shares then being purchased. The person or persons in whose name(s) any
certificates)
<PAGE 2>
representing shares of Common Stock shall be issuable upon exercise of
this Warrant shall be deemed to have become the holder(s) of record of,
and shall be treated for all purposes as the record holder(s) of, the
shares represented thereby (and such shares shall be deemed to have been
issued) immediately prior to the close of business on the date or dates
upon which this Warrant is exercised. In the event of any exercise of
the rights represented by this Warrant, certificates for the shares of
stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty days after such exercise, and,
unless this Warrant has been fully exercised or expired, a new 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
the holder hereof as soon as possible and in any event within such
thirty day period.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that
may br issued upon the exercise of the rights represented by this
Warrant will, upon issuance pursuant to the terms and conditions herein,
be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within
which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized, and reserved for the purpose
of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The
number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the occurrence of certain events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any
reclassification, change or conversion of securities of the class
issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of
any merger of the Company with or into another corporation (other than
in which the Company is the acquiring and the surviving corporation and
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of any
sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may
be, shall duly execute and deliver to the holder of this Warrant a new
Warrant (in form and substance satisfactory to the holder of this
Warrant), so that the holder of this Warrant shall have the right to
receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the
shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification, change or merger a
holder of the number of shares of Common Stock then purchasable under
this Warrant. Such new Warrant shall provide for adjustments that shall
be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4 and shall provide for antidilution
protection that shall be as nearly equivalent as may be practicable to
the antidilution provisions applicable to the Common Stock on the Date
of Grant. The provisions of this Subsection (a) shall similarly apply
to successive reclassifications, changes, mergers and transfers.
<PAGE 3>
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its outstanding shares of Common Stock, the Warrant
Price shall be proportionately decreased in the case of a subdivision or
increased in the case of a combination, effective at the close of
business on the date the subdivision or combination becomes effective.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the
Company at any time while this Warrant is outstanding and unexpired
shall (i) pay a dividend with respect to Common Stock payable in Common
Stock, or (ii) make any other distribution with respect to Common Stock
(except any distribution specifically provided for in the foregoing Sub
Sections (a) and (b)) of Common Stock, then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders
entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior
to such date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment
in the Warrant Price, the number of Shares of Common Stock purchasable
hereunder shall be adjusted, to the nearest whole share, to the product
obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
(e) ANTIDILUTION RIGHTS. The relative rights applicable
to the Shares of the Company are set forth the Company's Restated
Certificate of Incorporation (the "Charter"), a true and complete copy
of which is attached hereto as Exhibit B. The Company shall promptly
provide the holder hereof with any restatement, amendment or
modification to the Charter promptly after the same has been made.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to
Section 4 hereof, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price and the
number of Shares purchasable hereunder after giving effect to such
adjustment, shall be mailed (without regard to Section 13 hereof, by
first class mail, postage prepaid) to the holder of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder, but in lieu of
such fractional shares the Company shall make a cash payment therefor
based on the fair market value of the Common Stock on the date of
exercise as reasonably determined in good faith by the Company's Board
of Directors.
<PAGE 4>
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR
SHARES OF COMMON STOCK.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant and the shares
of Common Stock to be issued upon exercise hereof are being acquired for
investment and that such holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Common Stock to be issued upon
exercise hereof except under circumstances which will not result in a
violation of the Act. Upon exercise of this Warrant, the holder hereof
shall confirm in writing, by executing the form attached as Schedule 1
to Exhibit A hereto, that the shares of Common Stock so purchased are
being acquired for investment and not with a view toward distribution or
resale. This Warrant and all shares of Common Stock issued upon
exercise of this Warrant (unless registered under the Act) shall be
stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO
ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR
(iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE
WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR
INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this
Warrant as follows:
(1) The holder is aware of the Company's business
affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to
acquire this Warrant. The holder is acquiring this Warrant for its own
account for investment purposes only and not with a view to, or for the
resale in connection with, any "distribution" thereof for purposes of
the Act.
(2) The holder understands that this Warrant has not
been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of the holder's investment intent as expressed herein. In
this connection, the holder understands that, in the view of the SEC,
the statutory basis for such exemption may be unavailable if the
holder's representation was predicated solely upon a present intention
to hold the Warrant for the minimum capital gains period specified under
tax statutes, for a deferred sale, for or until an increase or decrease
in the market price of the Warrant, or for a period of one year or any
other fixed period in the future.
<PAGE 5>
(3) The holder further understands that this Warrant
must be held indefinitely unless subsequently registered under the Act
and any applicable state securities laws, or unless exemptions from
registration are otherwise available. Moreover, the holder understands
that except as provided in Section 9 hereof, the Company is under no
obligation to register this Warrant or the shares issuable upon exercise
of this Warrant.
(4) The holder is aware of the provisions of Rule
144, promulgated under the Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such
issuer), in a non-public offering subject to the satisfaction of certain
conditions, if applicable, including, among other things: The
availability of certain public information about the Company, the resale
occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in
an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated
therein.
(5) The holder further understands that at the time
it wishes to sell this Warrant there may be no public market upon which
to make such a sale, and that, even if such a public market then exists,
the Company may not be satisfying the current public information
requirements of Rule 144, and that, in such event, the holder may be
precluded from selling this Warrant under Rule 144 even if the two-year
minimum holding period had been satisfied.
(6) The holder further understands that in the event
all of the requirements of Rule 144 are not satisfied, registration
under the Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule
144 is not exclusive, the Staff of the SEC has expressed its opinion
that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rule 144 will
have a substantial burden of proof in establishing that an exemption
from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such
transactions do so at their own risk.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Common
Stock acquired pursuant to the exercise of this Warrant prior to
registration of such Warrant or shares, the holder hereof and each
subsequent holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together
with a written opinion of such holder's counsel, if reasonably requested
by the Company, to the effect that such offer, sale or other disposition
may be effected without registration or qualification (under the Act as
then in effect or any federal or state law then in effect) of this
Warrant or such shares of Common Stock and indicating whether or not
under the Act certificates for this Warrant or such shares of Common
Stock to be sold or otherwise disposed of require any restrictive legend
as to applicable restrictions on transferability in order to ensure
compliance with such law. Promptly upon receiving such written notice
and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such holder that such holder may
sell or otherwise dispose of this
<PAGE 6>
warrant or such shares of Common Stock, all in accordance with the terms
of the notice delivered to the Company. If a determination has been
made pursuant to this Subsection (b) that the opinion of counsel for the
holder is not reasonably satisfactory to the Company, the Company shall
so notify the holder promptly after such determination has been made.
Notwithstanding the foregoing, this Warrant or such shares of Common
Stock may, as to such federal laws, be offered, sold or otherwise
disposed of in accordance with Rule 144 under the Act, provided that the
Company shall have been furnished with such information as the Company
may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate
representing this Warrant or the shares of Common Stock thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance
with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with
such laws. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
(c) Neither any restrictions of any legend described in
this Warrant nor the requirements of Section 7(b) above shall apply to
any transfer without any additional consideration of, or grant of a
security interest in, this Warrant or any part hereof (i) to a partner
of the holder if the holder is a partnership, (ii) by the holder to a
partnership of which the holder is a general partner, or (iii) to any
affiliate of the holder if the holder is a corporation; PROVIDED,
HOWEVER, in any such transfer, the transferee shall deliver a
certificate reasonably acceptable to the Company that such transferee is
a sophisticated or "accredited" investor within the federal securities
laws; and on the Company's request, such transferee shall agree in
writing to be bound by the terms of this Warrant as if an original
signatory hereto.
8. RIGHTS AS SHAREHOLDERS; INFORMATION. No holder of this
Warrant, as such, shall 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
the holder of this Warrant, as such, any of the rights of a shareholder
of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders 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. Notwithstanding the foregoing, the
Company will transmit to the holder of this Warrant such information,
documents and reports as are generally distributed to the holders of any
class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders in the manner the same are
distributed to stockholders.
9. REGISTRATION RIGHTS. The Company covenants and agrees to
the registration rights set forth in Schedule 2 hereto as if such rights
were set forth at length herein.
10. RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE.
<PAGE 7>
(a) RIGHT TO CONVERT. In addition to and without limiting
the rights of the holder under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion thereof (the
"Conversion Right") into shares of Common Stock as provided in this
Section 10 at any time or from time to time during the term of this
Warrant. Upon exercise of the Conversion Right with respect to a
particular number of shares subject to this Warrant (the "Converted
Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable
Common Stock equal to the quotient obtained by dividing the value of
this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in Subsection (b) hereof), which value shall be determined
by subtracting (A) the aggregate Warrant Price of the Converted Warrant
Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares
issuable upon exercise of this Warrant (or the specified portion hereof)
on the Conversion Date (as herein defined) by (Y) the fair market value
of one share of Common Stock on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as
follows:
X = (B - A) / Y
Where: X = the number of shares of Common Stock that
may be issued to holder
Y = the fair market value (FMV) of one share
of Common Stock
A = the aggregate Warrant Price (i.e.,
Converted Warrant Shares x Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted
Warrant Shares)
No fractional shares shall be issuable upon exercise of the
Conversion 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 Conversion Date
(as hereinafter defined). For purposes of Section 9 of this Warrant,
shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the
principal office of the Company together with a written statement
specifying that the holder thereby intends to exercise the Conversion
Right and indicating the number of shares subject to this Warrant which
are being surrendered (referred to in Subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon
<PAGE 8>
receipt by the Company of this Warrant together with the aforesaid
written statement, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be
made contingent upon the closing of the sale of the Company's Common
Stock to the public in a public offering pursuant to a Registration
Statement under the Act (a "Public Offering"). Certificates for the
shares issuable upon exercise of the Conversion Right and, if
applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within thirty (30) days following the
Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of
this Section 10, "fair market values, of a share of Common Stock as of
the Conversion Date shall mean:
(i) If the Conversion Right is exercised in
connection with and contingent upon a Public Offering, and if the
Company's Registration Statement relating to such Public Offering -
("Registration Statement") has been declared effective by the SEC, then
the initial "Price to Public" specified in the final prospectus with
respect to such offering.
(ii) If the Conversion Right is not
exercised in connection with and contingent upon a Public Offering, then
as follows:
(A) If traded on a securities exchange,
the fair market value of the Common Stock shall be deemed to be the
average of the closing prices of the Common Stock on such exchange over
the 30-day period ending five business days prior to the Conversion
Date;
(B) If traded over-the-counter, the fair
market value of the Common Stock shall be deemed to be the average of
the closing bid prices of the Common Stock over the 30-day period ending
five business days prior to the Conversion Date; and
(C) If there is no public market for the
Common Stock, then fair market value shall be determined by mutual
agreement of the holder of this Warrant and the Company, and if the
holder and the Company are unable to so agree, at the Company's sole
expense, by an investment banker of national reputation selected by the
Company and reasonably acceptable to the holder of this Warrant.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors
and the rules of law or principles at equity governing specific
performance, injunctive relief and other equitable remedies;
<PAGE 9>
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid. and nonassessable;
(c) A true and complete copy of the Charter, as amended to
the Date of the Grant, has been delivered to the original holder of this
Warrant and is attached hereto as Exhibit B;
(d) The execution and delivery of this Warrant are not,
and the issuance of the Shares upon exercise of this Warrant in
accordance with the terms hereof will not be, inconsistent with the
Company's Charter or by-laws, do not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do
not and will not conflict with or contravene any provision of, or
constitute a material default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is
bound or require the consent or approval of, the giving of notice to,
the registration or filing with or the taking of any action in respect
of or by, any Federal, state or local government authority or agency or
other person, except for actions required to be taken to comply with
federal and state securities laws, all of which actions have been taken.
(e) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened
against the Company in any court or before any governmental commission,
board or authority which, if adversely determined, will have a material
adverse effect on the ability of the Company to perform its obligations
under this Warrant.
12. MODIFICATION AND WAIVER. 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.
13. NOTICES. Any notice, request, communication or other
document required or permitted to be given or delivered to the holder
hereof or the Company shall be delivered, or shall be sent by certified
or registered mail, postage prepaid, or overnight express mail or
courier service or by confirmed facsimile transmission to each such
holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this
Warrant or at such other address as Holder or the Company may designate
by ten days advance written notice to the other.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all
of the obligations of the Company relating to the Common Stock issuable
upon the exercise or conversion of this Warrant shall survive the
exercise, conversion and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of
the successors and assigns of the holder hereof.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants
to the holder hereof that, upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate and, in the case of
any such loss, theft
<PAGE 10>
or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make
and deliver a new Warrant or stock certificate, of like tenor, in lieu
of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by,
the laws of the State of California.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof
contained herein shall survive the Date of Grant. All agreements of the
Company and the holder hereof contained herein shall survive
indefinitely until, by their respective terms, they are no longer
operative.
19. REMEDIES. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the
holders hereof (in the case of a breach by the Company), or the Company
(in the case of a breach by a holder), may proceed to protect and
enforce their or its rights either by suit in equity and/or by action at
law, including, but not limited to, an action for damages as a result of
any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Warrant.
20. ACCEPTANCE. Receipt of this Warrant by the holder hereof
shall constitute acceptance of and agreement to the foregoing terms and
conditions.
21. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment
of its Charter or through any other means, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of this Warrant against
impairment.
22. VALUE. The holder of this Warrant by acceptance hereof
agrees with the Company that the value of this Warrant as of the Date of
Grant is $100.00.
GENSIA, INC.
By: ________________________________
Name: _________________________
Title: __________________________
9360 Towne Centre Drive
San Diego, California 92121
<PAGE 11>
EXHIBIT A
NOTICE OF EXERCISE
To: Gensia, Inc.
1. The undersigned hereby elects to purchase _________ shares of
Common Stock of Gensia Pharmaceuticals, Inc. pursuant to the terms of the
attached Warrant., and tenders herewith payment of the purchase price of
such shares in full.
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. In support thereof, the undersigned has executed
an Investment Representation Statement attached hereto as Schedule 1.
_______________________________
(Signature)
__________________
(Date)
<PAGE 12>
EXHIBIT A-1
NOTICE OF EXERCISE
To: Gensia, Inc. (the "Company")
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement of Form S-______, filed _____________________,
19__, the undersigned hereby elects to purchase _____ shares of Common
Stock of the Company (or such lesser number of shares as may be sold on
behalf of the undersigned at the Closing) pursuant to the terms of the
attached Warrant.
2. Please deliver to the custodian for the selling shareholders
a stock certificate representing such shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $___________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid
public offering. If such net proceeds are less than the purchase price
for such shares, the undersigned agrees to deliver the difference to the
Company prior to the Closing.
_______________________________
(Signature)
____________________
(Date)
<PAGE 13>
SCHEDULE 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser :
Company : Gensia, Inc.
Security Common Stock
Amount :
Date :
In connection with the purchase of the above listed securities and
underlying Common Stock (the "Securities"), the undersigned (the
"Purchaser") represents to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. The Purchaser is purchasing the Securities for its own
account for investment purposes only and not with a view to, or for the
resale in connection with, any "distribution" thereof for purposes of the
Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Securities
and Exchange Commission ("SEC"), the statutory basis for such exemption
may be unavailable if the Purchaser's representation was predicated solely
upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or
until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
(c) The Purchaser further understands that the Securities must be
held indefinitely unless subsequently registered under the Act or unless
an exemption from registration is otherwise available. Moreover, the
Purchaser understands that the Company is under no obligation to register
the Securities. In addition, the Purchaser understands that the
certificate evidencing the Securities will be imprinted with the legend
referred to in the Warrant under which the Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144,
promulgated under the Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions, if applicable,
including, among other things: The availability of certain public
<PAGE 14>
information about the Company, the resale occurring not less than two
years after the party has purchased and paid for the securities to be
sold; the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term
is defined under the Securities Exchange Act of 1934, as amended) and the
amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes
to sell the Securities there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information requirements
of Rule 144, and that, in such event, the Purchaser may be precluded from
selling the Securities under Rule 144 even if the two-year minimum holding
period had been satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not
exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk.
Purchaser:
________________________________
Date: ________________, _______
<PAGE 15>
SCHEDULE 2
The following provisions constitute the "Registration Rights"
referred to in Section 9 of the Warrant for 70,000 Shares of Common Stock
with the Date of Grant. Unless otherwise defined herein, capitalized
terms shall have the meaning set forth in said Warrant
9.1 DEFINITIONS. For purposes of this Section 9:
(a) The terms "Register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon exercise or conversion of this Warrant or
upon exercise or conversion of the Other Warrants, and (ii) any Common
Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to or in exchange for or in
replacement of, such Common Stock; excluding in all cases, however, any
Registrable Securities sold or transferred by a person in a transaction in
which his rights under this Section 9 are not assigned in accordance with
Section 9.7 hereof;
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in
accordance with Section 9.7 hereof; and
(d) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission ("SEC") in
lieu of or as a replacement for such form and which similarly permits
inclusion or incorporation of substantial information by. reference to
other documents filed by the Company with the SEC.
9.2 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 9 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up
to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
<PAGE 16>
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, PROVIDED that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdiction.
(e) In the event of any underwritten public offering enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 9, on the
date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Section 9, if
such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective,
(i) an opinion, dated such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter, dated such date,
from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities; such a letter to the Holders shall be paid by the
Holders.
9.3 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 9.2 or
9.6 hereof that the selling Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them,
and the intended method of disposition of such securities as shall be
reasonably required to effect the registration of their Registrable
Securities.
<PAGE 17>
9.4 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors and
employees or partners of each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act
of 1934, as amended (the 111934 Act"), against any losses, claims, damages
or liabilities (joint or several) to which they may become subject,
regardless of the legal theory upon which the same may be based, under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities law; and
the Company will reimburse each such Holder, officer or director or
partner, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, HOWEVER,
that the indemnity agreement contained in this Section 9.4(a) 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
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or partners or any person
who controls such Holder, against any losses, claims, damages, or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, or underwriter or controlling person or other
such Holder or director, officer or partner or controlling person may
become subject, regardless of the legal theory upon which the same may be
based, under the Act, the 1934 Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter
or controlling person, other Holder, officer, director or partner, or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action;
<PAGE 18>
PROVIDED, however, that the indemnity agreement contained in this
Section 9.4(b) shall be limited to an amount equal to the gross proceeds
to each Holder of shares sold pursuant to the registration statement to
which such loss, claim, damage, liability or action relates and 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
the Holder, officer, director, partner, which consent shall not be
unreasonably withheld.
(c) Promptly after receipt by an indemnified party under
this Section 9.4 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 9.4, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
Jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel selected by it and reasonably satisfactory to
the other party; PROVIDED, however,. that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due
to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to
its ability to defend such action, shall relieve such indemnifying party
of any liability to the indemnified party under this Section 9.4, but the
omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 9.4.
9.5 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees
to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC
Rule 144 the Act and the 1934 Act or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it
so qualifies), (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which permits
the selling of any such securities without registration or pursuant to
such form.
<PAGE 19>
9.6 FORM S-3 REGISTRATION. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
such Holder' s or Holders, Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities
of any other Holder or Holders joining in such request as are specified in
a written request given within twenty (20) days after receipt of such
written notice from the Company; PROVIDED, HOWEVER, that the Company shall
not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 9.6: (1) if Form S-3 is not available
for such offering by the Holders; (2) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such Form S-3 Registration to be effected at such
time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than sixty
(60) days after receipt of the request of the Holder or Holders under this
Section 9.6; PROVIDED, further, however, that the Company shall not
utilize this right more than once in any twelve-month period; (4) if the
Company has within the twelve-month period preceding the date of such
request, already effected two registrations on Form S-3 for the Holders
pursuant to this Section 9.6; or (5) if such registration could be
declared effective within the one hundred twenty (120) day period
following the effective date of any registration effected by the Company
pursuant to the request of stockholders of the Company under this
Section 9.6; or (6) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable. after
receipt of the request or requests of the Holders. All expenses incurred
in connection with a registration requested pursuant to this Section 9.6,
including without limitation, all registration, filing, qualification,
underwriting discounts and commissions, printer's and accounting fees and
the reasonable fees and disbursements of counsel for the selling Holder or
Holders and counsel for the Company shall be borne pro rata by the selling
Holders; PROVIDED, HOWEVER, that such Holders shall pay an aggregate
amount of such expenses up to $15,000 plus 50% of such expenses in excess
of $15,000 up to a maximum of $30,000; and the Company shall pay all other
such expenses.
<PAGE 20>
9.7 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 9 may
be assigned by a Holder to a transferee or assignee of such securities;
PROVIDED that the same number of such Holders, shares relating to the
rights being so transferred shall also be transferred to such assignee;
and the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration
rights are being assigned; and provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.
9.8 NO CONFLICTING AGREEMENTS. The Company represents and
warrants to the Holders that the Company is not a party to any agreement
that conflicts in any manner with the Holders, rights to cause the Company
to register Registrable Securities pursuant to this Section 9. The
Company covenants and agrees that it shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder
of any securities of the Company that would allow such holder to include
such securities in any registration if the inclusion of such holder's
securities would reduce on other than a pro-rata basis (based on the
number of shares owned) the amount of the Registrable Securities of the
holders that may be included in such registration.
9.9 RIGHTS AND OBLIGATIONS SURVIVE EXERCISE AND EXPIRATION OF
WARRANTS. The rights and obligations of the Company, of the Holder of
this Warrant and of the Holder of shares of Common Stock issued upon
exercise or conversion of this Warrant, contained in this Section 9 shall
survive the exercise, the conversion and the expiration of this Warrant,
provided that the term of the registration rights shall survive for a
period of ten (10) years from the Date of Grant.
<PAGE> 1
Exhibit 10.1
Gensia Key Employees Incentive
Compensation Plan
The Gensia Incentive Compensation Plan is designed to offer incentive
compensation to key employees by rewarding the achievement of corporate
goals and specifically measured individual goals that are consistent with and
support overall corporate goals. The Key Employees Incentive Compensation
Plan will create an environment whichwill focus key employees on the
achievement of objectives. Since cooperation between departments and
employees will be required to achieve corporate objectives which will
represent a significant portion of the Compensation Plan, the Plan should
help foster improved team work and a more cohesive management team. The
Company reserves the right to revise or discontinue the Plan at any time.
Key employees who may be eligible to participate in the Plan shall be
selected in the sole descretion of the Company.
PURPOSE OF THE PLAN
The Gensia Key Employees Incentive Compensation Plan (the "Plan") is designed
to:
Provide an incentive program to achieve overall corporate objectives and to
enhance shareholder value
Encourage increased team work among all disciplines within the Company
Reward those individuals who significantly impact corporate results
Incorporate an incentive program in Gensia's overall compensation
program to help attract and retain key employees
PLAN GOVERNANCE
The overall Plan will be governed by the Compensation Committee of the Board
of Directors. The President and CEO of Gensia will be responsible for
administration of the Plan. The Compensation Committee of the Board will be
responsible for approving any incentive awards to officers of the Company and
for determining and approving any incentive awards to the President and CEO.
<PAGE> 2
CORPORATE AND INDIVIDUAL PERFORMANCE
Prior to the beginning of the Plan year, the President and CEO will present to
the Board a list of the overall corporate objectives for the coming year, which
are subject to approval by the Board. All participants in the Plan will then
develop a list of key individual objectives which will be approved by the
responsible VP and by the President and CEO.
The Plan will call for incentive awards based on the achievement of annual
corporate and individual objectives that have been approved as indicated above.
The relative weight between corporate and individual performance factors will
vary based on levels within the organization. The weighting will be reviewed
annually and be adjusted as necessary or appropriate. The weighting for 1996
will be as follows:
CORPORATE INDIVIDUAL
President and CEO 100%
Vice-Presidents/
Executive Directors 75% 25%
Directors 50% 50%
TARGET AWARDS MULTIPLIER
Incentive awards will be determined by applying an "achievement multiplier" to
the base salary of employees in the Plan. The following target award
multipliers will be used in implementing the Plan:
POSITION TARGET AWARD MULTIPLIER
President and CEO 35%
Vice-President/Officers 30%
Division Vice-President/
Executive Directors 20%
Directors 15%
<PAGE> 3
The target award multiplier will be used to establish the target cash award at
the beginning of each year. The target award multiplier will be equal to the
actual award multiplier used at year end in situations where corporate and
individual objectives have been met for the year.
PERFORMANCE MEASUREMENT
The following scale will be used to determine the actual award multiplier
based upon measurement of corporate and individual performance. Separate
payment multipliers will be established for both the individual and the
corporate components of the annualaward. The same payment multiplier for the
corporate component of each participant's annual award shall be used for all
Plan participants in any given year.
PERFORMANCE CATEGORY AWARD MULTIPLIER
1) Performance for the year met or exceeded
objectives or was excellent in view of prevailing
conditions 100% to 125%
2) Performance generally met the year's
objectives or was very acceptable in view
of prevailing conditions 75% to 100%
3) Performance for the year met some but
not all objectives 25% to 75%
4) Performance for the year was not acceptable
in view of prevailing conditions 0%
CALCULATION OF AWARD
Example I shows a sample cash award calculation under the Gensia Incentive
Compensation Plan. First, a total target award is calculated by multiplying
the employee's base salary by the target award multiplier. This dollar
figure is then divided between its corporate component and its individual
component based on the performance factor mix for that specific position. This
calculation establishes specific dollar target awards for the performance
period for both the individual and corporate components of the award.
<PAGE> 4
At the end of the performance period, corporate and individual award
multipliers will be established using the criteria described above. The
corporate award multiplier, which is based on overall corporate performance,
is used to calculate actual corporateperformance awards for all Plan
participants. This is done by multiplying the target corporate award
established for each individual at the beginning of the performance period by
the actual award multiplier. The individual award multiplier, which is based
on an individual's performance against his objectives, is used in the same
way to calculate the actual individual performance award.
EXAMPLE I: CASH AWARD CALCULATION
Position Executive Director
Base Salary $120,000
1994 Target Award Multiplier 20%
1994 Target Award $ $24,000
Target Award Components (based on Performance Factor Mix):
Target award based on Corporate performance (75%) $18,000
Target award based on Individual performanc (25%) $6,000
ACTUAL 1996 CASH AWARD CALCULATION:
Assumed Payment Multipliers Based on
Assessment of Corporate and Individual Performance
Corporate multiplier 75% - Performance generally met year's objectives
Individual multiplier 125% - Performance generally exceeded objectives
1994 Cash Award:
Corporate component - $13,500 ($18,000 x 75%)
Individual component - 7,500 ($6,000 x 125%)
--------
Total 1994 Cash Award $21,000
========
PAYMENT OF THE AWARD
Annual performance reviews will be completed by December 15 and payment of the
Award will be made no later than January 31 after review and approval by the
President and CEO and the Compensation Committee of the Board of Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Consolidated
Balance Sheets at September 30, 1996 (unaudited) and the Consolidated Statements
of Operations for the nine months ended September 30, 1996 (unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 18,194
<SECURITIES> 8,828
<RECEIVABLES> 7,309
<ALLOWANCES> 0
<INVENTORY> 13,349
<CURRENT-ASSETS> 50,784
<PP&E> 47,097
<DEPRECIATION> 16,209
<TOTAL-ASSETS> 89,977
<CURRENT-LIABILITIES> 15,325
<BONDS> 0
0
16
<COMMON> 370
<OTHER-SE> 73,255
<TOTAL-LIABILITY-AND-EQUITY> 89,977
<SALES> 39,379
<TOTAL-REVENUES> 43,642
<CGS> 29,247
<TOTAL-COSTS> 29,247
<OTHER-EXPENSES> 49,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (39,152)<F1>
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,152)<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,152)<F1>
<EPS-PRIMARY> (1.08)
<EPS-DILUTED> (1.08)
<FN>
<F1>INCLUDES UNDECLARED AND UNPAID DIVIDENDS ON PREFERRED STOCK OF 2,992
</FN>
</TABLE>
