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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 1997
CELL GENESYS, INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware 0-19986 94-3061375
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification
Incorporation) No.)
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342 Lakeside Drive
Foster City, CA 94404
(Address of principal executive offices, including zip code)
(650) 358-9600
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On November 14, 1997, Cell Genesys, Inc. (the "Registrant") announced
that it had sold and issued 2,000 shares of Series B Convertible Preferred Stock
(the "Series B Stock") at a purchase price of $10,000 per share in the aggregate
amount of $20,000,000 to certain investors (the "Investors"). The Series B Stock
is convertible into Common Stock of the Registrant on certain terms and at a
conversion price to be determined at the time of conversion in accordance with
the Registrant's Certificate of Incorporation. The issuance of the Series B
Stock was made pursuant to Regulation D of the Securities Act of 1933, as
amended (the "Act"), and was therefore was exempt from registration under the
Act.
Under the Securities Purchase Agreement dated November 13, 1997, between
the Registrant and the Investors, the Registrant, subject to certain conditions,
may exercise a put option to sell up to an additional $10 million of the Series
B Stock to the Investors, and the Investors, subject to certain conditions, may
exercise a call option to purchase up to an additional $10 million of the Series
B Stock from the Registrant. After the satisfaction of certain holding periods,
each of the newly issued shares of Series B Stock is convertible, at the option
of the holder, into shares of common stock of the Registrant based upon a
conversion price of $11.02 per share or, if lower, 100% of the average of
specified trading prices during the 10 trading days preceding such date of
conversion. The Series B Stock bears a dividend of 5% payable in kind.
The Registrant has agreed to file a registration statement on Form S-3
for the resale of the shares of common stock issuable on conversion of the
Series B Stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits
4.1 Securities Purchase Agreement dated November 13, 1997, by and between
the Registrant and the Buyers listed thereon.
4.2 Registration Rights Agreement dated November 13, 1997, by and between
the Registrant and the Buyers listed thereon.
4.3 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock of Cell Genesys, Inc. filed with the Office
of the Secretary of State of the State of Delaware on November 13, 1997.
99.1 Press Release, issued November 14, 1997, announcing the closing of the
sale of shares of Series B Convertible Preferred Stock of the Registrant
pursuant to the Securities Purchase Agreement.
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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 hereunto duly authorized.
CELL GENESYS, INC.
Dated: November 20, 1997 By: /s/ Kathleen Sereda Glaub
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Kathleen Sereda Glaub, Senior
Vice President and Chief
Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description
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4.1 Securities Purchase Agreement dated November 13, 1997, by and between the
Registrant and the Buyers listed thereon.
4.2 Registration Rights Agreement dated November 13, 1997, by and between the
Registrant and the Buyers listed thereon.
4.3 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred
Stock of Cell Genesys, Inc. filed with the Office of the Secretary of State of the State
of Delaware on November 13, 1997.
99.1 Press Release issued November 14, 1997 announcing the closing of the Securities
Purchase Agreement and sale of shares of Series B Convertible Preferred Stock of the
Registrant.
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EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of November
13, 1997, by and among Cell Genesys, Inc., a Delaware corporation, with
headquarters located at 342 Lakeside Drive, Foster City, California 94404 (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the following new series of its Preferred
Stock, par value $0.001 per share (the "PREFERRED STOCK"): the Company's Series
B Convertible Preferred Stock (the "PREFERRED SHARES"), which shall be
convertible into shares of the Company's Common Stock, par value $0.001 per
share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Preferred Shares, substantially in the form
attached hereto as Exhibit A (the "CERTIFICATE OF DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, initially an aggregate of 2,000 of the Preferred Shares (the
"INITIAL PREFERRED SHARES") in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers;
D. Subject to the terms and conditions set forth in this Agreement, each
Buyer may have the right to purchase a number of additional Preferred Shares
equal to up to 50% of the number of Preferred Shares held by such Buyer on the
date which is 365 days after the Initial Closing Date (as defined below) (the
"ADDITIONAL PREFERRED SHARES") and the Company may have the right to cause the
Buyers to purchase up to an aggregate of 1,000 Preferred Shares (pro rata based
on the number of Initial Preferred Shares each Buyer purchased in relation to
the total number of Initial Preferred Shares) (the "PUT PREFERRED SHARES") (the
Initial Preferred Shares, the Additional Preferred Shares and the Put Preferred
Shares collectively are referred to in this Agreement as the "PREFERRED
SHARES");
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
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NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the Company
shall issue and sell to the Buyers and the Buyers severally shall purchase from
the Company an aggregate of 2,000 Initial Preferred Shares, in the respective
amounts set forth opposite each Buyer's name on the Schedule of Buyers (the
"INITIAL CLOSING"). Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 1(c), 6(b) and 7(b) below, at the option of each Buyer,
the Company shall issue and sell to each such Buyer and each such Buyer shall
purchase from the Company at multiple closings, if applicable, an aggregate of
up to that number of Additional Preferred Shares equal to 50% of the number of
the Initial Preferred Shares held by such Buyer on the date which is 365 days
after the Initial Closing Date (the "ADDITIONAL CLOSING"). Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 1(d), 1(e),
6(c) and 7(c) below, the Company may require that each Buyer purchase that
number of additional Preferred Shares equal to such Buyer's pro rata portion of
up to 1,000 Preferred Shares (based on the number of Initial Preferred Shares
each Buyer purchased in relation to the total number of Initial Preferred Shares
purchased by the Buyers) (the "PUT CLOSING"). The Initial Closing, the
Additional Closing and the Put Closing collectively are referred to in this
Agreement as the "CLOSINGS." The purchase price (the "PURCHASE PRICE") of each
Preferred Share at each of the Closings shall be $10,000.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time, within
two (2) business days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) below (or such later date as is mutually agreed to by the Company and the
Buyers). The Initial Closing shall occur on the Initial Closing Date at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693.
c. The Additional Closing Date. The date and time of each of the
Additional Closings (the "ADDITIONAL CLOSING DATES") shall be 10:00 a.m. Central
Time, on the date specified in a Buyer's Additional Share Notice (as defined
below), subject to satisfaction (or waiver) of the conditions to the Additional
Closing set forth in Sections 6(b) and 7(b) and the conditions set forth in this
paragraph (or such later date as is mutually agreed to by the Company and the
Buyers). During the period beginning on and including the date which is 365 days
after the Initial Closing Date and ending on the date which is four years after
the Initial Closing Date, subject to earlier termination as provided below (the
"ADDITIONAL NOTICE PERIOD"), but subject to the requirements of Sections 6(b)
and 7(b), each Buyer may purchase Additional Preferred Shares by delivering
written notice to the Company (an "ADDITIONAL SHARE NOTICE") at least seven days
but not more than 20 days prior (an "ADDITIONAL SHARE NOTICE DATE") to the
Additional Closing Date set forth in such Buyer's Additional Share Notice. Each
Additional Share Notice shall set forth (i) the number of Additional Preferred
Shares to be purchased by such Buyer at such Additional Closing, (ii) the
aggregate Purchase Price for such Additional Preferred Shares and (iii) the date
selected by such Buyer for the Additional Closing Date. Notwithstanding the
foregoing, no Buyer shall be entitled to deliver an
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Additional Share Notice unless on the date of the delivery of the Additional
Share Notice the Market Price (as defined in the Certificate of Designations) of
the Common Stock is greater than the Fixed Conversion Price (as defined in the
Certificate of Designations) then in effect of the Initial Preferred Shares. In
the event that for any period of 20 consecutive trading days during the period
beginning on and including the date which is two years after the Initial Closing
Date and ending on the date which is three years after the Initial Closing Date
the Closing Bid Price (as defined in the Certificate of Designations) of the
Common Stock is greater than 125% of the Fixed Conversion Price of the Initial
Preferred Shares, then the Additional Notice Period shall end on the date which
is three years after the Initial Closing Date. Each Additional Closing shall
occur on the Additional Closing Date at the offices of Katten Muchin & Zavis,
525 West Monroe Street, Suite 1600, Chicago, Illinois 60661- 3693.
d. The Put Closing Date. The date and time of the Put Closing
(the "PUT CLOSING DATE") shall be 10:00 a.m. Central Time, on the date specified
in the Company's Put Share Notice (as defined below), subject to satisfaction
(or waiver) of the conditions to the Put Closing set forth in Sections 6(c) and
7(c) and the conditions set forth in Section 1(e), (or such later date as is
mutually agreed to by the Company and the Buyers). During the period beginning
on and including the date which is 360 days after the Initial Closing Date and
ending on the date which is 540 days after the Initial Closing Date (the "PUT
NOTICE PERIOD"), but subject to the requirements of Sections 6(c) and 7(c) and
satisfaction of the Put Notice Conditions (as defined in Section 1(e) below),
the Company on only one occasion may require each Buyer to purchase Put
Preferred Shares by delivering written notice to each of the Buyers (a "PUT
SHARE NOTICE") during the Put Notice Period at least 30 days but not more than
45 days (the "PUT SHARE NOTICE DATE") prior to the Put Closing Date set forth in
the Company's Put Share Notice. The Company's Put Share Notice shall set forth
(i) each Buyer's pro rata portion (based on the number of Initial Preferred
Shares each Buyer purchased in relation to the total number of Initial Preferred
Shares purchased by the Buyers) of the aggregate number of Put Preferred Shares,
which aggregate number shall not exceed 1,000 Preferred Shares, which the
Company is requiring each Buyer to purchase at the Put Closing, (ii) the
aggregate Purchase Price for each such Buyer's Put Preferred Shares and (iii)
the date selected by the Company for the Put Closing Date. The Put Closing shall
occur on the Put Closing Date at the offices of Katten Muchin & Zavis, 525 West
Monroe Street, Suite 1600, Chicago, Illinois 60661-3693. The Initial Closing
Date, the Additional Closing Dates and the Put Closing Date collectively are
referred to in this Agreement as the "CLOSING DATES."
e. The Put Notice Conditions. Notwithstanding anything in this
agreement to the contrary, the Company shall not be entitled to deliver a Put
Share Notice and require the Buyers to purchase the Put Preferred Shares unless,
in addition to the satisfaction of the requirements of Sections 6(c) and 7(c),
all of the following conditions (the "PUT NOTICE CONDITIONS") are satisfied: (i)
the Company's stockholders shall have approved the issuance of the Securities
(as defined below) on or prior to the Put Share Notice Date, unless the Company
shall have been advised in writing by The Nasdaq Stock Market, Inc. (or The New
York Stock Exchange, Inc. or The American Stock Exchange, Inc., if the Common
Stock is then listed on such exchange) that the rules of such exchange would not
require the approval of the stockholders of the Company for the issuance of a
number of Conversion Shares equal to at least 20% of the number of shares of
Common Stock issued and outstanding on the Initial Issuance Date; (ii) during
the period beginning 90 days prior to the Put
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Closing Date and ending on and including the Put Closing Date, the Registration
Statement (as defined in the Registration Rights Agreement) at all times shall
be effective and available for the sale of no less than 125% of the sum of (A)
the number of Conversion Shares then issuable upon the conversion of all
outstanding Preferred Shares and the Put Preferred Shares to be issued by the
Company, and (B) number of Conversion Shares then held by the Buyers; (iii)
during the period beginning 90 days prior to the Put Share Closing Date and
ending on and including the Put Closing Date, the Common Stock is designated for
quotation on the Nasdaq National Market, The New York Stock Exchange, Inc. or
The American Stock Exchange, Inc. and is not suspended from trading on such
exchange; (iv) no event constituting a Major Business Event (as defined below),
including an agreement to consummate a Major Business Event, or a Triggering
Event set forth in Section 3(d)(iv) of the Certificate of Designations shall
have occurred from the period beginning on the Initial Issuance Date and ending
on and including the Put Closing Date; (v) on each day during the period
beginning 60 days prior to the Put Closing Date and ending on and including the
Put Closing Date, the Market Price of the Common Stock is not less than the
Fixed Conversion Price of the Initial Preferred Shares; (vi) during the period
beginning on and including the Put Share Notice Date and ending on and including
the Put Closing Date, the Market Price of the Common Stock is not less than 90%
of the Market Price on the Put Share Notice Date; (vii) during the period
beginning on the Initial Issuance Date and ending on and including the Put
Closing Date, the Company shall have delivered Conversion Shares upon conversion
of the Preferred Shares on a timely basis as set forth in Section 2(f)(ii) of
the Certificate of Designations and otherwise shall have been in compliance with
and shall not have breached the provisions of the Transaction Documents (as
defined below) and the Certificate of Designations; and (viii) the Company shall
not have previously delivered a Put Share Notice. For purposes of this Section
1(e) "MAJOR BUSINESS EVENT" means (x) consolidation, merger or other business
combination of the Company with another entity (other than pursuant to a
migratory merger effected solely for the purpose of changing the Company's
jurisdiction of incorporation, (y) the sale or transfer of all or substantially
all of the Company's assets or (z) a purchase, tender or exchange offer made to
and accepted by the holders of more than 50% of the outstanding shares of Common
Stock.
f. Form of Payment. On each of the Closing Dates, (i) each Buyer
shall pay the Purchase Price to the Company for the Preferred Shares to be
issued and sold to such Buyer at the respective Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer, stock
certificates (in the denominations as such Buyer shall request) (the "STOCK
CERTIFICATES") representing such number of the Preferred Shares which such Buyer
is then purchasing (as indicated opposite such Buyer's name on the Schedule of
Buyers), duly executed on behalf of the Company and registered in the name of
such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Preferred
Shares and (ii) upon conversion of the Preferred Shares, will acquire the
Conversion Shares then issuable (the Preferred Shares and the Conversion Shares
collectively are referred to herein as the "SECURITIES"),
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for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer, including all SEC Documents (as defined
below). Such Buyer and its advisors, if any, have been afforded the opportunity
to review materials, including the "Risk Factors" sections in the Company's Form
10-K filed as an SEC Document, and to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto)("RULE 144"); (ii) any sale of the Securities
made in reliance on Rule 144
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may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and, until such time as the sale
of the Conversion Shares have been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the stock certificates representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Each Buyer acknowledges, covenants and agrees to sell the
Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the 1933
Act, or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity
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and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country specified
in the Schedule of Buyers.
j. Section 9 of the Securities Exchange Act. So long as a Buyer
holds any Preferred Shares, such Buyer will comply at all times with the
provisions of Section 9 of the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), and the rules promulgated thereunder with respect to transactions
involving the securities of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5) and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents and the
Certificate of Designations by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Preferred Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion thereof, have been
duly authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to each of the Closing Dates, the
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Certificate of Designations has been filed with the Secretary of State of the
State of Delaware and will be in full force and effect, enforceable against the
Company in accordance with its terms.
c. Capitalization. As of November 7, 1997, the authorized capital
stock of the Company consists of (i) 75,000,000 shares of Common Stock, of
which 28,144,250 shares were issued and outstanding, 4,611,537 shares are
reserved and available for issuance pursuant to the Company's stock option and
purchase plans, 1,666,667 shares are reserved and available for issuance upon
conversion of the Convertible Note dated March 27, 1997 in the original
principal amount of $15,000,000 held by GenPharm (the "GENPHARM NOTE"),
1,487,902 shares are reserved and available for issuance upon exercise of the
warrants to purchase Common Stock and at the exercise prices set forth in
Schedule 3(c) (the "WARRANTS"), and no shares are reserved for issuance pursuant
to securities (other than the Preferred Shares, the Warrants and the GenPharm
Note) exercisable or exchangeable for, or convertible into, shares of Common
Stock and (ii) 5,000,000 shares of Preferred Stock, of which 200,000 shares have
been designated Series A Participating Preferred Stock and of which, as of the
date hereof, none were issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of Common Stock
or Preferred Stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities, (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement) and (iv) there are no outstanding securities of
the Company or any of its subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to redeem a security of the Company or any of its subsidiaries. Except as
disclosed in Schedule 3(c), there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement. The Company has furnished to the
Buyers true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designations. 5,624,000 shares
of Common Stock (subject to adjustment pursuant to the Company's covenant set
forth in Section 4(f)
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<PAGE> 9
below) have been duly authorized and reserved for issuance upon conversion of
the Preferred Shares. Upon conversion in accordance with the Certificate of
Designations, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Conversion Shares) will not (i) result in a violation of the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of Preferred Stock of the Company or the
By-laws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected, except to the extent
that matters within clauses (ii) and (iii) immediately above would not have a
Material Adverse Effect. Except as disclosed in Schedule 3(e), neither the
Company nor its subsidiaries is in violation of any term of or in default under
(i) the Certificate of Incorporation, any Certificate of Designation,
Preferences and Rights of any outstanding series of Preferred Stock or the
By-laws or their organizational charter or by-laws, respectively, or (ii) any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its subsidiaries, except to the extent that such violation or default would not
have a Material Adverse Effect. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents or the Certificate of Designations in accordance with the
terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company is not in violation of the listing requirements of the Nasdaq National
Market as in effect on the date hereof and on each of the Closing Dates and is
not aware of any facts which would reasonably lead to delisting of the Common
Stock by the Nasdaq National Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since December 31, 1995,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
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<PAGE> 10
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has made available to each
Buyer or its respective representatives true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its subsidiaries or any of their officers, directors,
employees or agents have provided the Buyers with any material, nonpublic
information.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since December 31, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition or results of operations of the Company or its subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's subsidiaries or any of the Company's or
the Company's subsidiaries' officers or directors in their capacities as such,
except as expressly set forth in Schedule 3(h).
i. Acknowledgment Regarding Buyers' Purchase of Preferred Shares.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
each Buyer is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and
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<PAGE> 11
the transactions contemplated thereby and any advice given by any of the Buyers
or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No material event, liability, development or circumstance has
occurred or exists, with respect to the Company or its subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement (including by way of incorporation
by reference) filed with the SEC relating to an issuance and sale by the Company
of its Common Stock and which has not been publicly announced.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the Nasdaq National Market, nor will the
Company or any of its subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. Neither the
Company nor any of its subsidiaries is a party to a collective bargaining
agreement, and the Company and its subsidiaries believe that relations with
their employees are good.
n. Intellectual Property Rights. To the knowledge of the Company,
the Company and its subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights to conduct
their respective businesses as now conducted for the purposes of conducting
research and clinical trials, except to the extent that the failure to possess
such rights or licenses would not have a Material Adverse Effect, and except
further to the extent that the Company or its subsidiaries lack such rights or
licenses, they are using or shall use commercially reasonable efforts to secure
such rights or licenses. The Company and its subsidiaries do not have any
knowledge of any infringement by the
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<PAGE> 12
Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and, except as set forth on Schedule 3(n), there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing, except for such
facts and circumstances which would not have a Material Adverse Effect.
o. Environmental Laws. The Company and its subsidiaries (i) are
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except to the extent that
the matters within clauses (i), (ii) and (iii) above would not have a Material
Adverse Effect.
p. Title. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them, except to the extent that the
failure to have good and marketable title would not have a Material Adverse
Effect, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(p) or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its subsidiaries.
Any real property and facilities held under lease by the Company or any of its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
q. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any of its subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its subsidiaries,
taken as a whole.
r. Regulatory Permits. The Company and its subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except to the extent that the failure to possess such certificates,
authorizations and permits would not have a Material Adverse Effect; and neither
the
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<PAGE> 13
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
s. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
t. No Materially Adverse Contracts, Etc. Neither the Company nor
any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect.
u. Tax Status. Except as set forth on Schedule 3(u), the Company
and each of its subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
v. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
issuable will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with this Agreement and the Certificate of
Designations is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company.
w. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
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<PAGE> 14
b. Form D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before each of
the Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Investors shall have sold all the Conversion Shares and
(B) none of the Preferred Shares is outstanding (the "REGISTRATION PERIOD"), the
Company shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within two (2) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its subsidiaries and (iii) copies of any notices
and other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares.
g. Right of First Refusal. So long as at least an aggregate of
10% of the Preferred Shares issued at the Closings remain outstanding, but
subject to the exceptions described below, the Company shall not enter into a
binding agreement or otherwise agree with any party for any equity financing
(including any debt financing with an equity component) or issue any equity
securities of the Company or securities convertible or exchangeable into or for
equity securities of the Company (including debt securities with an equity
component) in any form ("FUTURE OFFERINGS") during the period beginning on the
Initial Closing Date and ending on and including the date which is 365 days
after the Initial Closing Date, unless it shall have first delivered to each
Buyer or a designee appointed by such Buyer written notice (the "FUTURE OFFERING
NOTICE") describing the proposed Future Offering, including the terms and
conditions thereof, and providing each Buyer an
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<PAGE> 15
option to purchase up to its Aggregate Percentage (as defined below), as of the
date of delivery of the Future Offering Notice, in the Future Offering on the
same terms and conditions set forth in the Future Offering Notice (the
limitations referred to in this sentence are collectively referred to as the
"CAPITAL RAISING LIMITATION"). For purposes of this Section 4(g), "AGGREGATE
PERCENTAGE" at any time with respect to any Buyer shall mean the percentage
obtained by dividing (i) the aggregate number of Conversion Shares issued or
issuable, as if a conversion occurred on such date, upon conversion of the
Preferred Shares held by such Buyer (without giving effect to the limitations on
conversion contained herein or in the Certificate of Designations) by (ii) the
aggregate number of Conversion Shares issued or issuable, as if a conversion
occurred on such date, upon conversion of the Preferred Shares held by the
Buyers. A Buyer can exercise its option to participate in a Future Offering by
delivering written notice thereof to participate to the Company within ten (10)
business days of receipt of a Future Offering Notice, which notice shall state
the quantity of securities being offered in the Future Offering that such Buyer
will purchase, up to its Aggregate Percentage, and that number of securities it
is willing to purchase in excess of its Aggregate Percentage. In the event that
one or more Buyers fail to elect to purchase up to each such Buyer's Aggregate
Percentage then each Buyer which has indicated that it is willing to purchase a
number of securities in excess of its Aggregate Percentage shall be entitled to
purchase its pro rata portion (determined in the same manner as described in the
preceding sentence) of the securities in the Future Offering which one or more
Buyers have not elected to purchase. In the event the Buyers fail to elect to
fully participate in the Future Offering within the periods described in this
Section 4(g), the Company shall have 30 days thereafter to sell the securities
of the Future Offering respecting which such Buyer's rights were not exercised,
upon terms and conditions, no more favorable to the purchasers thereof than
specified in the Future Offering Notice. In the event the Company has not sold
such securities of the Future Offering within such 30 day period, the Company
shall not thereafter issue or sell such securities without first offering such
securities to the Buyers in the manner provided in this Section 4(g). The
Capital Raising Limitation shall not apply to (i) a loan from a commercial bank,
(ii) any transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or (C) as consideration for the acquisition of a business,
product or license by the Company, (iii) the issuance of Common Stock in an
underwritten public offering, (iv) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (v) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees,
directors or consultants, (vi) the issuance by Abgenix, Inc., a wholly-owned
subsidiary of the Company, of any securities of Abgenix, Inc., or (vii) a single
issuance by the Company consisting solely of Common Stock provided that the
consideration received by the Company for each such share of Common Stock issued
is not less than the lesser of (A) the Closing Bid Price (as defined in the
Certificate of Designations) on the date of issuance of such shares and (B) the
average of the Closing Bid Prices for the Common Stock for the 20 consecutive
trading days immediately preceding the date of issuance of such shares. The
Buyers shall not be required to participate or exercise their right of first
refusal with respect to a particular Future Offering in order to exercise their
right of first refusal with respect to later Future Offerings.
h. Listing. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon the Nasdaq National
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Market, The New York Stock Exchange, Inc. ("NYSE") or The American Stock
Exchange, Inc. ("AMEX"), upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on the Nasdaq National Market, NYSE or AMEX. Neither the Company nor
any of its subsidiaries shall take any action which may result in the delisting
or suspension of the Common Stock on the Nasdaq National Market, NYSE or AMEX.
The Company shall promptly provide to each Buyer copies of any notices it
receives from the Nasdaq National Market, NYSE or AMEX regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, following the Initial
Closing, the Company shall reimburse the Buyers for the Buyers' reasonable
expenses (including attorneys fees and expenses) in connection with negotiating
and preparing the Transaction Documents and consummating the transactions
contemplated thereby up to an aggregate of $35,000.
j. Filing of Form 8-K. On or before the tenth (10th) day
following each of the Closing Dates, the Company shall file a Form 8-K with the
SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
k. Underwriting Lock-Up Agreements. At any time during the period
beginning on and including the Initial Closing Date and ending on the date which
is four years after the Initial Closing Date, the Company may require that all,
but not less than all, of the holders of the Preferred Shares agree to sign a
"lock-up" agreement with the underwriters of a public offering of the Common
Stock pursuant to which the holders would agree not to sell any Conversion
Shares issued to the holders pursuant to a Conversion Notice delivered to the
Company during the period beginning on the date designated by the Company, which
date shall be not less than 10 days after the holders' receipt of such notice,
and ending on the date which is the earlier of the closing date of such offering
and 60 days after the beginning of the lock-up period as designated by the
Company (the "UNDERWRITING LOCK-UP PERIOD"). The Company shall exercise this
right by delivering written notice (the "LOCK-UP REQUEST NOTICE") of such
request to all of the holders of the Preferred Shares then outstanding at least
10 days prior to the date on which the Underwriting Lock-Up Period will begin,
but in no event prior to the filing of the registration statement for such
proposed offering. The Lock-up Request Notice shall state (i) that the
underwriters of such offering have requested that the holders of the Preferred
Shares enter into "lock-up" agreements, (ii) the date on which the Underwriting
Lock-Up Period will begin and (iii) the name of the managing underwriters of the
proposed offering. Notwithstanding the foregoing, the Company shall not be
entitled to require the holders to enter into lock-up agreements unless (A) the
Underwriting Lock-Up Period is not more than 60 days, (B) the Underwriting
Lock-Up Period shall terminate immediately upon the termination or abandonment
or indefinite delay of the underwritten offering, (C) the managing underwriters
for such proposed offering are included on the Schedule of Underwriters attached
to this Agreement, (D) the preliminary prospectus for such underwritten public
offering reflects a price
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per share to the public of not less than $5.00 per share and an aggregate gross
proceeds to the Company of at least $15,000,000, (E) there has been no other
Underwriting Lock-Up Period in the 365 days prior to the date of the Lock-Up
Request Notice, and (F) there has been no Grace Period (as defined in the
Registration Rights Agreement) during the period beginning on and including the
date which is ten days prior to the filing of the registration statement for the
proposed offering and ending on and including the first day of the Underwriting
Lock-Up Period. In the event the Company requires an Underwriting Lock-Up
Period, the Mandatory Conversion Date (as defined in the Certificate of
Designations) shall be delayed two days for each day in the Underwriting Lock-Up
Period as provided in Section 2(g) of the Certificate of Designations. If the
Company delivers a Lock-Up Request Notice and the underwritten public offering
is not consummated within 90 days of the first day of the Underwriting Lock-Up
Period, then the Company may require an Underwriting Lock-Up Period pursuant to
this Section 4(k) on only one other occasion.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the Conversion Shares
under the 1933 Act) will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
each Buyer's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel,
reasonably satisfactory in form and substance to the Company, that registration
of a resale by such Buyer of any of such Securities is not required under the
1933 Act, the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyers shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
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6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company hereunder
to issue and sell the Initial Preferred Shares to each Buyer at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware.
(iii) Such Buyer shall have delivered to the Company the Purchase
Price for the Preferred Shares being purchased by such Buyer at the
Initial Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(iv) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and
as of the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by
such Buyer at or prior to the Initial Closing Date.
b. Additional Closing Dates. The obligation of the Company
hereunder to issue and sell the Additional Preferred Shares to each Buyer at
each of the Additional Closings is subject to the satisfaction, at or before the
respective Additional Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing each Buyer
with prior written notice thereof:
(i) Such Buyer shall have complied with the requirements of
Section 1(c).
(ii) Such Buyer shall have delivered to the Company the Purchase
Price for the Additional Preferred Shares being purchased by such Buyer
at the Additional Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and
as of the Additional Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date),
and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required
by the Transaction Documents to be
-22-
<PAGE> 19
performed, satisfied or complied with by such Buyer at or prior to the
Additional Closing Date.
c. Put Closing Date. The obligation of the Company hereunder to
issue and sell the Put Preferred Shares to each Buyer at the Put Closing is
subject to the satisfaction, at or before the Put Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have delivered to the Company the Purchase
Price for the Put Preferred Shares being purchased by such Buyer at the
Put Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and
as of the Put Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by
such Buyer at or prior to the Put Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer hereunder
to purchase the Initial Preferred Shares at the Initial Closing is subject to
the satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to
counsel for such Buyer.
(iii) The Common Stock shall be authorized for quotation on the
Nasdaq National Market, NYSE or AMEX, trading in the Common Stock
issuable upon conversion of the Initial Preferred Shares to be traded on
the Nasdaq National Market, NYSE or AMEX shall not have been suspended
by the SEC, The Nasdaq Stock Market, Inc., NYSE or AMEX and all of the
Conversion Shares issuable upon conversion of the Initial Preferred
Shares to be sold at the Initial Closing shall be listed upon the Nasdaq
National Market, NYSE or AMEX.
(iv) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as
of the date when made
-23-
<PAGE> 20
and as of the Initial Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Initial Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Initial Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such
Buyer including, without limitation, an update as of the Initial Closing
Date regarding the representation contained in Section 3(c) above.
(v) Such Buyer shall have received the opinion of the Company's
counsel dated as of the Initial Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the
form of Exhibit C attached hereto.
(vi) The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall
request) for the Initial Preferred Shares being purchased by such Buyer
at the Initial Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, at least
5,624,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10
days of the Initial Closing.
(xi) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (a) the resolutions, (b) the Certificate of
Incorporation and (c) Bylaws, each as in effect at the Initial Closing.
(xii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
b. Additional Closing Dates. The obligation of each Buyer
hereunder to purchase the Additional Preferred Shares at each of the Additional
Closings is subject to the
-24-
<PAGE> 21
satisfaction, at or before the Additional Closing Dates, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
(i) The Certificate of Designations shall be in full force and
effect and shall not have been amended since the Initial Closing Date,
and a copy thereof certified by the Secretary of State of the State of
Delaware shall have been delivered to such Buyer.
(ii) The Common Stock shall be authorized for quotation on the
Nasdaq National Market, NYSE or AMEX, trading in the Common Stock
issuable upon conversion of the Additional Preferred Shares to be traded
on the Nasdaq National Market, NYSE or AMEX shall not have been
suspended by the SEC, The Nasdaq Stock Market, Inc., NYSE or AMEX and
all of the Conversion Shares issuable upon conversion of the Additional
Preferred Shares to be sold at such Additional Closing shall be listed
upon the Nasdaq National Market, NYSE or AMEX.
(iii) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as
of the date when made and as of the respective Additional Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
respective Additional Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of such Additional Closing Date, to the foregoing effect and as
to such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of such Additional Closing
Date regarding the representation contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of the Company's
counsel dated as of such Additional Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the
form of Exhibit C attached hereto.
(v) The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall
request) for the Additional Preferred Shares being purchased by such
Buyer at such Additional Closing.
(vi) The Board of Directors of the Company shall have adopted,
and shall not have amended, the Resolutions in a form reasonably
acceptable to such Buyer.
(vii) As of such Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, a number of
shares of Common Stock equal to at least 150% of the number of shares of
Common Stock which would be issuable upon conversion
-25-
<PAGE> 22
in full of the then outstanding Preferred Shares, including for such
purposes any Preferred Shares to be issued at such Additional Closing.
(viii) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10
days of such Additional Closing.
(x) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (a) the resolutions, (b) the Certificate of
Incorporation and (c) Bylaws, each as in effect at the Additional
Closing.
(xi) During the period beginning on the Additional Share Notice
Date and ending on and including the Additional Closing Date, the
Company shall have delivered Conversion Shares upon conversion of the
Preferred Shares on a timely basis as set forth in Section 2(f)(ii) of
the Certificate of Designations.
(xii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
c. Put Closing Date. The obligation of each Buyer hereunder to
purchase the Put Preferred Shares at the Put Closing is subject to the
satisfaction, at or before the Put Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have complied with the requirements of
Section 1(d) and all of the Put Notice Conditions set forth in Section
1(e) shall have been satisfied.
(ii) The Certificate of Designations shall be in full force and
effect and shall not have been amended since the Put Closing Date, and a
copy thereof certified by the Secretary of State of the State of
Delaware shall have been delivered to such Buyer.
(iii) The Common Stock shall be authorized for quotation on the
Nasdaq National Market, NYSE or AMEX, trading in the Common Stock
issuable upon conversion of the Put Preferred Shares to be traded on the
Nasdaq National Market, NYSE or AMEX shall not have been suspended by
the SEC, The Nasdaq Stock Market, Inc., NYSE or AMEX and all of the
Conversion Shares issuable upon conversion of the Put Preferred Shares
to be sold at the Put Closing shall be listed upon the Nasdaq National
Market, NYSE or AMEX.
-26-
<PAGE> 23
(iv) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as
of the date when made and as of the Put Closing Date as though made at
that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Put Closing
Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Put Closing
Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, without limitation, an
update as of the Put Closing Date regarding the representation contained
in Section 3(c) above.
(v) Such Buyer shall have received the opinion of the Company's
counsel dated as of the Put Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of
Exhibit C attached hereto.
(vi) The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall
request) for the Put Preferred Shares being purchased by such Buyer at
the Put Closing.
(vii) The Board of Directors of the Company shall have adopted,
and shall not have amended, the Resolutions in a form reasonably
acceptable to such Buyer.
(viii) As of the Put Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Share, a number of
shares of Common Stock equal to at least 150% of the number of shares of
Common Stock which would be issuable upon conversion of the then
outstanding Preferred Shares, including for such purposes any Preferred
Shares to be issued at such Put Closing.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10
days of the Put Closing.
(xi) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (a) the resolutions, (b) the Certificate of
Incorporation and (c) Bylaws, each as in effect at the Put Closing.
-27-
<PAGE> 24
(xii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents, the
Certificate of Designations or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents, the
Certificate of Designations or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Indemnitees, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
the status of such Buyer or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts sitting the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability
-28-
<PAGE> 25
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding.
f. Notices. Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically generated and kept on file by the
sending party); (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
-29-
<PAGE> 26
If to the Company:
Cell Genesys, Inc.
342 Lakeside Drive
Foster City, California 94404
Telephone: 650-425-4400
Facsimile: 650-358-0230
Attention: Chief Financial Officer
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: 650-493-9300
Facsimile: 650-493-6811
Attention: Trevor J. Chaplick, Esq.
If to the Transfer Agent:
Boston Equiserve
150 Royall Street
Canton, Massachusetts 02021
Telephone: 781-545-2000
Facsimile: 781-545-2548
Attention: Greg Bartek, Mail Stop 450262
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of two-thirds (2/3) of the Preferred Shares then
outstanding including by merger or consolidation, except pursuant to a Major
Transaction (as defined in Section 3(c) of the Certificate of Designations) in
compliance with Section 3 of the Certificate of Designations. A Buyer may assign
some or all of its rights hereunder to affiliates or associates of such Buyer,
without the consent of the Company, and to others, with the consent of the
Company; provided, however, that any such assignment shall not release such
Buyer from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption.
-30-
<PAGE> 27
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive each
of the Closings. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and one representative selected by the
Buyers shall have the right to approve before issuance any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although each Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall not
have occurred with respect to a Buyer on or before three (3) business days from
the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(i) above.
m. Placement Agent. Each of the Company and the Buyers, on their
own behalf, acknowledges that it has not engaged a placement agent in connection
with the sale of the Preferred Shares.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
-31-
<PAGE> 28
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
CELL GENESYS, INC. NELSON PARTNERS
By: /s/ KATHLEEN SEREDA GLAUB By: /s/ NITIN AGGARWAL
---------------------------- --------------------------
Name: Kathleen Sereda Glaub Name: Anne Dupuy
--------------------------
Its: Senior V.P. and C.F.O. Its: Officer
--------------------------
OLYMPUS SECURITIES, LTD.
By: /s/ NITIN AGGARWAL
----------------------------------------
Name: Anne Dupuy
Its: Alternate Director
THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: /s/ JAMES F. O'BRIEN, JR.
----------------------------------------
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: /s/ JAMES F. O'BRIEN, JR.
----------------------------------------
Name: James F. O'Brien, Jr.
Its: President
<PAGE> 29
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
----------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Its: Investment Advisor
By: /s/ Michael L. Gordon
----------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
----------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: /s/ Michael L. Gordon
----------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE> 30
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: /s/ Michael L. Gordon
----------------------------------------
Name: Michael L. Gordon
Its: Managing Officer
HALIFAX FUND, L.P.
By: The Palladin Group
Its: Investment Manager
By: Palladin Capital Management LLC
Its: General Partner
By: /s/ Andrew Kaplan
----------------------------------------
Name: Andrew Kaplan
Its: Authorized Representative
COLONIAL PENN LIFE INSURANCE
COMPANY
By: The Palladin Group
Its: Investment Manager
By: Palladin Capital Management LLC
Its: General Partner
By: /s/ Andrew Kaplan
----------------------------------------
Name: Andrew Kaplan
Its: Authorized Representative
<PAGE> 31
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
NUMBER OF
INITIAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
- ------------------- ------------------------------ --------- ------------------------------------
<S> <C> <C> <C>
Nelson Partners c/o Leeds Management Services 247 Citadel Investment Group, L.L.C.
129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Benjamin Kopin
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-4347
Olympus Securities, c/o Leeds Management Services 303 Citadel Investment Group, L.L.C.
Ltd. 129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Benjamin Kopin
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-4347
Themis Partners L.P. c/o Promethean Investment Group,
L.L.C 175 Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520 40 West 57th Street, Suite 1520
New York, New York 10019 New York, New York 10019
Attn: James F. O'Brien, Jr. Attn: James F. O'Brien, Jr.
Facsimile: 212-698-0505 Thomas Lumsden
Facsimile: 212-698-0505
Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Heracles Fund Bank of Bermuda (Cayman) Limited 175 Promethean Investment Group, L.L.C.
P.O. Box 513 40 West 57th Street, Suite 1520
3rd Floor British American Center New York, New York 10019
Dr. Roy's Drive Attn: James F. O'Brien, Jr.
Georgetown, Grand Cayman Thomas Lumsden
Cayman Island, BWI Facsimile: 212-698-0505
Attn: Allen J. Bernardo
Facsimile: 809-949-7802 Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. 365 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
NUMBER OF
INITIAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
- -------------------- ------------------------------ --------- --------------------------------------
<S> <C> <C> <C>
GAM Arbitrage c/o Angelo, Gordon & Co., L.P. 25 Angelo, Gordon & Co., L.P.
Investments, Inc. 245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
AG Super Fund c/o Angelo, Gordon & Co., L.P. 25
International 245 Park Avenue - 26th Floor
Partners, L.P. New York, New York 10167
Attn: Gary Wolf
Facsimile: 212-867-6449
Raphael, L.P. c/o Angelo, Gordon & Co., L.P. 50 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Ramius Fund, Ltd. c/o Angelo, Gordon & Co., L.P. 85 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Halifax Fund, L.P. c/o CITCO Fund Services, Ltd. 500 The Palladin Group
Corporate Center, West Bay Road 40 West 57th Street
P.O. Box 31106 Suite 1500
SMB New York, New York 10019
Grand Cayman, Cayman Islands Attn: Andrew Kaplan
Attn: Patrick Agemian Facsimile: 212-698-0599
Facsimile: (809) 949-3877
Colonial Penn Life c/o The Palladin Group 50 The Palladin Group
Insurance Company 40 West 57th Street 40 West 57th Street
Suite 1520 Suite 1500
New York, New York 10019 New York, New York 10019
Attn: Andrew Kaplan Attn: Andrew Kaplan
Facsimile: 212-698-0599 Facsimile: 212-698-0599
</TABLE>
<PAGE> 33
SCHEDULE OF UNDERWRITERS
ABN AMRO
A.G. Edwards & Sons Inc.
Bancamerica Robertson
BT Alex Brown
Cowen & Co.
Cruttendon Roth Incorporated
CS First Boston
Dain Bosworth Incorporated
Dean Witter
Deutsche Morgan Grenfell
Donaldson Lufkin & Jenrette
Fahnestock & Co. Inc.
Furman Selz Incorporated
Genesis Merchant Securities
Goldman Sachs & Co.
Hambrecht & Quist
Invermed Associates
Jeffries & Company, Inc.
J.P. Morgan & Company
Lehman Brothers
Merrill Lynch
Montgomery Securities
Morgan Stanley Co., Inc.
Needham & Company, Inc.
Oppenheimer & Co.
Pacific Growth Equities Inc.
Paine Webber
Piper Jaffray Inc.
Prudential Bache Securities
Punk Ziegel & Knoll
Raymond James & Associates, Inc.
Salomon Brothers
SBC Warburg/Dillon Read
Smith Barney
SoundView Financial Group, Inc.
Sutro & Co. Incorporated
UBS Securities, Inc.
Unterberg Harris
Vector Securities
Volpe, Welty & Company
Wedbush Morgan Securities
<PAGE> 34
SCHEDULES
SCHEDULE 3(a) ORGANIZATION AND QUALIFICATION
Cell Genesys, Inc.
Abgenix, Inc.
Somatix Therapy Corporation
SCHEDULE 3(c) CAPITALIZATION
CELL GENESYS, INC.
Included in outstanding shares are 2 million shares owned by Hoechst Marion
Roussel; under the October 1995 collaboration agreement, registration rights are
triggered for these shares and the 750,000 share warrant at the earlier of
signing two additional collaboration agreements, or October 2000, and upon the
filing of an S1, S2 or S3 registration statement.
GenPharm Convertible Note $15,000,000
-Convertible at $9.00 per share
-Reset provision after 2/28/98 at 115% of average closing price
30 days preceding
-Registration rights (including piggyback rights)
-Notice requirement under piggyback rights
<TABLE>
<CAPTION>
WARRANTS OUTSTANDING: WARRANTS STRIKE PRICE
- --------------------- -------- ------------
<S> <C> <C>
Hoechst Marion Roussel 750,000 13.00
Legg Mason Special Investment Trust, Inc. 58,587 10.39
Westcoast & Co. 146,608 10.39
Stuart T. Weisbrod 1,466 10.39
Quasar International Partners, C.V. 11,642 10.39
Oracle Institutional Partners, L.P. 3,018 10.39
Oracle Partners, L.P. 75,460 10.39
Sam Oracle Fund, Inc. 19,766 10.39
Larry N. Feinberg 5,975 10.39
Robert S. Birch 5,390 10.39
Aeneas Venture Corporation 80,850 10.39
Phoenix Partners, L.P. 27,489 10.39
Betje Partners, L.P. 8,624 10.39
Morgens, Waterfall, Vintidiadis Investments 17,787 10.39
Kingsley & Co. 13,475 10.39
SBSF Biotechnology Fund, L.P. 40,425 10.39
Warburg Pincus Emerging Growth Fund 80,850 10.39
WHI Somatix Partners 26,950 10.39
Merrill Lynch, Pierce, Fenner & Smith Inc. 5,792 3.01
Merrill Lynch, Pierce, Fenner & Smith Inc. 2,234 5.04
Merrill Lynch, Pierce, Fenner & Smith Inc. 10,095 3.01
</TABLE>
<PAGE> 35
SCHEDULE 3(c) CAPITALIZATION CONTINUED
<TABLE>
<CAPTION>
WARRANTS OUTSTANDING: WARRANTS STRIKE PRICE
- --------------------- -------- ------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith Inc. 2,234 5.04
Mark Fawer 5,879 3.01
Mark Fawer 2,266 5.04
Mark Fawer 2,008 3.01
Steven Rosenfeld 10,241 3.01
Steven Rosenfeld 2,266 5.04
Steven Rosenfeld 2,008 3.01
Martin Berman 6,620 0.03
Susan Shenk 16,550 0.03
TBD Ltd. 33,101 0.03
Aberlyn Capital Management Limited Partnership 4,812 18.18
Financing For Science International 7,434 18.33
</TABLE>
All warrants have registration rights. Excluding the Hoechst Marion Roussel
warrant, the warrants are subject to certain registration rights pursuant to the
Somatix acquisition. The company plans to register the shares pursuant to these
warrants under the S3 registration statement to be filed for the convertible
preferred financing.
ABGENIX, INC.
Warrants $6.00 per share 121,667 shares of Series A Preferred Stock
Held by Cell Genesys, Inc.
$4 million convertible promissory note convertible at $6.00 per share
Convertible at earlier 180 days after Abgenix IPO, July 14, 1999, or 20 business
days after
Cell Genesys receives Abgenix notice to exercise prepayment option
Due July 14, 2000
Held by Cell Genesys, Inc.
$5 million convertible line of credit convertible at $6.00 per share
Due at earlier of Abgenix IPO or June 30, 1998
Held by Cell Genesys, Inc.
Potential $4.5 million convertible note
Convertible at Abgenix option, post IPO, at IPO price or fair market value
Guaranteed by Cell Genesys until IPO
Held by potential corporate partner
Potential private and public equity financings by Abgenix, Inc.
Potential redemption obligation under potential terms of private equity
financings by Abgenix, Inc.
<PAGE> 36
SCHEDULE 3(e) NO CONFLICTS
None
SCHEDULE 3(g) ABSENCE OF CERTAIN CHANGES
GenPharm Cross-License and Settlement Agreement March 27, 1997
Acquisition of Somatix Therapy Corporation May 30, 1997
SCHEDULE 3(h) ABSENCE OF LITIGATION
The Company is a party to three ongoing U.S. Patent Office interference
proceedings:
- Gene activation technology - This is a two-way interference
involving Cell Genesys and Ares Serono. The Company's expenses
in this interference are partly reimbursed by Hoechst Marion
Roussel, a licensee to certain applications of Cell Genesys
technology in this area.
- Ex vivo gene therapy - This is a three-way interference
involving Cell Genesys, Novartis and a third party. The
Company's involvement in this interference is as a result of the
acquisition of Somatix Therapy Corporation.
- Chimeric receptor technology - This is currently a two-way
interference involving Cell Genesys and the Weizmann Institute
of Science (Rehovot, Israel). Previously, Cell
Genesys, Massachusetts General Hospital and Hoechst Marion
Roussel cross-licensed certain issued and pending patent claims
involving chimeric receptor technology.
Given the size and breadth of its intellectual property portfolio in gene
therapy, the Company anticipates that it may be a party to other interference
proceedings in the future.
SCHEDULE 3(j) NO UNDISCLOSED EVENT, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES
Under the collaborative agreement with Hoechst Marion Roussel dated October
1995, Hoechst Marion Roussel has the ability to terminate its commitment at any
time two years after its anniversary date; under termination, Cell Genesys is
entitled to certain wind down payments Cell Genesys' Officer Change In Control
Agreements approved by Board of Directors 10/8/97 Potential private and public
equity financings by Abgenix, Inc.
SCHEDULE 3(n) INTELLECTUAL PROPERTY RIGHTS
The Company is a party to three ongoing U.S. Patent Office interference
proceedings:
- Gene activation technology - This is a two-way interference
involving Cell Genesys and Ares Serono. The Company's expenses
in this interference are partly reimbursed by Hoechst Marion
Roussel, a licensee to certain applications of Cell Genesys
technology in this area.
- Ex vivo gene therapy - This is a three-way interference
involving Cell Genesys, Novartis and a third party. The
Company's involvement in this interference is as a result of the
acquisition of Somatix Therapy Corporation.
- Chimeric receptor technology - This is currently a two-way
interference involving Cell Genesys and the Weizmann Institute
of Science (Rehovot, Israel). Previously, Cell
<PAGE> 37
Genesys, Massachusetts General Hospital and Hoechst Marion
Roussel cross-licensed certain issued and pending patent claims
involving chimeric receptor technology.
Given the size and breadth of its intellectual property portfolio in gene
therapy, the Company anticipates that it may be a party to other interference
proceedings in the future.
SCHEDULE 3(p) TITLE
Cell Genesys equipment leasehold leaselines
Abgenix equipment/leasehold leaselines
Cell Genesys Silicon Valley Bank loan for leasehold improvements
Abgenix Silicon Valley Bank loan for leasehold improvements
SCHEDULE 3(u) TAX STATUS
None
SCHEDULE 4(d) USE OF PROCEEDS
The net proceeds to the Company from the sale of the Preferred Stock offered
hereby are estimated to be approximately $20 million and will be expended for
the purposes of research, clinical trials and manufacturing, technology
licensing and acquisitions, retirement of debt, redemption of the Company's and
subsidiary's securities and general corporate purposes.
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
November 13, 1997, by and among Cell Genesys, Inc., a Delaware corporation, with
headquarters located at 342 Lakeside Drive, Foster City, California 94404 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell to the Buyers shares of the Company's
Series B Convertible Preferred Stock (the "PREFERRED SHARES"), which will be
convertible into shares of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Series B Convertible Preferred Stock (the
"CERTIFICATE OF DESIGNATIONS"); and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of
<PAGE> 2
effectiveness of such Registration Statement(s) by the United States Securities
and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the Conversion Shares issued or
issuable upon conversion of the Preferred Shares and any shares of capital stock
issued or issuable with respect to the Conversion Shares or the Preferred Shares
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise.
e. "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
prior to 60 days after the date of issuance of the relevant Preferred Shares,
file with the SEC a Registration Statement or Registration Statements (as is
necessary) on Form S-3 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration, subject to the
consent of the Investors holding a majority of the Registrable Securities and
the provisions of Section 2(c), which consent will not be unreasonably
withheld), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares (i) to prevent dilution resulting from
stock splits, stock dividends or similar transactions and (ii) by reason of
changes in the Conversion Price or Conversion Rate of the Preferred Shares in
accordance with the terms thereof. Such Registration Statement shall initially
register for resale at least 5,624,000 shares of Common Stock, subject to
adjustment as provided in Section 3(b). Such registered shares of Common Stock
shall be allocated among the Investors pro rata based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable Securities is
declared effective by the SEC. The Company shall use its best efforts to have
the Registration Statement(s) declared effective by the SEC as soon as
practicable, but in no event later than 120 days after the issuance of the
relevant Preferred Shares.
b. Counsel and Investment Bankers. Subject to Section 5 hereof, in
connection with any offering pursuant to Section 2, the Investors shall have the
right to select one legal counsel and an investment banker or bankers and
manager or managers to administer their interest in the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel and investment bankers. The expenses, including underwriting
discounts and commissions and fees and disbursements of such counsel and
investment bankers shall be paid by the Buyers.
-43-
<PAGE> 3
c. Piggy-Back Registrations. If a Registration Statement in
compliance with this Agreement is not effective, and prior to the expiration of
the Registration Period (as hereinafter defined), the Company proposes to file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall promptly send to each Investor
who is entitled to registration rights under this Section 2(c) written notice of
the Company's intention to file a Registration Statement and of such Investor's
rights under this Section 2(c) and, if within twenty (20) days after receipt of
such notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, subject to the priorities
set forth in Section 2(d) below. No right to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a). The obligations of the Company under this Section
2(c) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
d. Priority in Piggy-Back Registration Rights in connection with
Registrations for Company Account. If the registration referred to in Section
2(c) is to be an underwritten public offering and the managing underwriter(s)
advise the Company in writing, that in their reasonable good faith opinion,
marketing or other factors dictate that a limitation on the number of shares of
Common Stock which may be included in the Registration Statement (which may
include a total "cut-back" of all Registrable Securities) is necessary to
facilitate and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, as of the date hereof, drawn from
them pro rata based on the number each has requested to be included in such
registration.
e. Eligibility for Form S-3. The Company represents, warrants and
covenants that on and after the date hereof it meets and will meet the
requirements for the use of Form S-3 for registration of the sale by the
Investors of the Registrable Securities and the Company has filed and shall file
all reports required to be filed by the Company with the SEC in a timely manner
so as to obtain and maintain such eligibility for the use of Form S-3. In the
event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, then the Company (i) with the consent of the Investors
holding a majority of the Registrable Securities pursuant to Section 2(a), shall
register the sale of the Registrable Securities on another appropriate form and
(ii)
-44-
<PAGE> 4
the Company shall undertake to register the Registrable Securities on Form S-3
as soon as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the sixtieth (60th) day after the date of issuance of any Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)) and use
its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as possible after such filing
(but in no event later than 120 days after the issuance of any Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)), and
keep such Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which (A) the
Investors shall have sold all the Registrable Securities and (B) none of the
Preferred Shares is outstanding (the "REGISTRATION PERIOD"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
b. Subject to Section 3(f), the Company shall prepare and file with
the SEC such amendments (including post-effective amendments) and supplements to
a Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend such Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably
-45-
<PAGE> 5
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof. For purposes of the foregoing provision, the
number of shares available under a Registration Statement shall be deemed
"insufficient to cover all of the Registrable Securities" if at any time the
number of Registrable Securities issued or issuable upon conversion of the
Preferred Shares is greater than the quotient determined by dividing (i) the
number of shares of Common Stock available for resale under such Registration
Statement by (ii) 1.5. For purposes of the calculation set forth in the
foregoing sentence, any restrictions on the convertibility of the Preferred
Shares shall be disregarded and such calculation shall assume that the Preferred
Shares are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Company's Certificate of Designations).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, the prospectus included in such Registration
Statement (including each preliminary prospectus) and, with regards to such
Registration Statement(s), any correspondence by or on behalf of the Company to
the SEC or the staff of the SEC and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including any preliminary prospectus, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
-46-
<PAGE> 6
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering; provided, that the Company shall not be obligated to pay any fees,
disbursements or expenses such underwriters incur in connection with such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate. Notwithstanding anything to the contrary in this
Section 3(f), at any time after the Registration Statement has been declared
effective, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a "GRACE PERIOD"); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of material
non-public information giving rise to a Grace Period and the date on which the
Grace Period will begin, and (ii) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that (A) during any
consecutive 120 day period, the Grace Period shall not exceed thirty (30)
calendar days in the aggregate, and (B) during any consecutive 365 day period,
the Grace Period shall not exceed forty-five (45) calendar days in the
aggregate, and (C) there has been no Underwriting Lock-Up Period (as defined in
the Securities Purchase Agreement) in the 20 day period prior to the Company's
notice to the Investors of a Grace Period. For purposes of determining the
length of a Grace Period above, the Grace Period shall begin on and include the
date the holders receive the notice referred to in clause (i) and shall end on
and include the date the holders receive the notice referred to in clause (ii).
The provisions of Sections 2(c) and 3(d)(ii) of the Certificate of Designations
shall not be applicable during the period of any Grace Period. Upon expiration
of the Grace Period, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto. In the
event there is a Grace Period, the Mandatory Conversion Date (as defined in the
Certificate of Designations) shall be delayed two days for each day in the Grace
Period as provided in Section 2(g) of the Certificate of Designations.
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g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor and a single firm of
counsel, initially Katten Muchin & Zavis or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold a majority
of the Registrable Securities being sold, to review and comment upon a
Registration Statement and all amendments and supplements thereto at least seven
business days prior to their filing with the SEC, and not file any document in a
form to which such counsel reasonably objects. The Company shall not submit a
request for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which consent shall not be unreasonably withheld.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall use its best efforts to
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (i)
if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.
j. The Company shall make reasonably available for inspection by (i)
any Investor, (ii) any underwriter participating in any disposition pursuant to
a Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "INSPECTORS") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "RECORDS"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered
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<PAGE> 8
pursuant to a final, non-appealable subpoena or order from a court or government
body of competent jurisdiction, or (c) the information in such Records has been
made generally available to the public other than by disclosure in violation of
this or any other agreement of which the Inspector has knowledge. The Company
shall not be required to disclose any confidential information in such Records
to an Inspector unless and until such Inspector shall have entered into a
confidentiality agreement with the Company with respect thereto, substantially
in the form of this Section 3(j). Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii), the Company
is unsuccessful in satisfying the preceding clause (i) or (ii), to secure the
inclusion for quotation on The Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or
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<PAGE> 9
underwriters, the Investors may reasonably request and registered in such names
as the managing underwriter or underwriters, if any, or the Investors may
request.
n. Intentionally omitted.
o. The Company shall provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters or an Investor, the
Company shall (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by a shareholder or any underwriter of such Registrable Securities.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities; provided
that the Company shall have no obligation to seek such registration or approval
with governmental agencies or authorities outside of the United States.
r. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
s. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
t. Within two (2) business days after the Registration Statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
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4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated filing
date of a Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor if such
Investor elects to have any of such Investor's Registrable Securities included
in such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2, each such Investor agrees to
enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations (only with respect to violations
which occur in reliance upon and in conformity with information furnished in
writing to the Company by such Investor expressly for use in the Registration
Statement for such underwritten public offering), with the managing underwriter
of such offering and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities, unless
such Investor notifies the Company in writing of such Investor's election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f).
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
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5. EXPENSES OF REGISTRATION.
Except as otherwise provided in this Agreement, all expenses, other
than underwriting discounts and commissions and fees and disbursements of
counsel for the Buyers, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents of,
and each Person, if any, who controls, any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
and any underwriter (as defined in the 1933 Act) for the Investors, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each
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such underwriter or controlling person, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
violation and such Indemnified Person, notwithstanding such advice, used it;
(iii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company; and (iv) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages 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 to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section
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9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
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 control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party
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within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has
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complied with the reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (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 to permit the investors to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned in
accordance with the terms of the Securities Purchase Agreement; (iii)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, including providing the Company with a current
address for all required notices; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; and (vi) such transferee shall be an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically generated and kept on file by the sending
party); (iii) three (3) days after being sent by U.S. certified
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mail, return receipt requested; or (iv) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Cell Genesys, Inc.
342 Lakeside Drive
Foster City, California 94404
Telephone: 650-425-4400
Facsimile: 650-358-0230
Attention: President
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: 650-493-9300
Facsimile: 650-493-6811
Attention: Trevor J. Chaplick, Esq.
If to a Buyer, to its address and facsimile number on the Schedule
of Buyers attached hereto, with copies to such Buyer's counsel as
set forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party of any
change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York without regard to the principles of
conflict of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting the City of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good
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and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities,
determined as if all of the Preferred Shares then outstanding have been
converted into Registrable Securities.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
-58-
<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
CELL GENESYS, INC. NELSON PARTNERS
By: /s/ Kathleen Sereda Glaub By: /s/ Nitin Aggarwal
----------------------------------
Name: Kathleen Sereda Glaub Name: Anne Dupuy
------------------------------
Its: Senior Vice President and Chief Its: Officer
--------------------------------
Financial Officer
--------------------------------
OLYMPUS SECURITIES, LTD.
By: /s/ Nitin Aggarwal
Name: Anne Dupuy
Its: Alternate Director
THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: /s/ James F. O'Brien, Jr.
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: /s/ James F. O'Brien, Jr.
Name: James F. O'Brien, Jr.
Its: President
<PAGE> 19
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
Name: Michael L. Gordon
Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Its: Investment Advisor
By: /s/ Michael L. Gordon
Name: Michael L. Gordon
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: /s/ Michael L. Gordon
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE> 20
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: /s/ Michael L. Gordon
Name: Michael L. Gordon
Its: Managing Officer
HALIFAX FUND, L.P.
By: The Palladin Group
Its: Investment Manager
By: Palladin Capital Management LLC
Its: General Partner
By: /s/ Andrew Kaplan
Name: Andrew Kaplan
Its: Authorized Representative
COLONIAL PENN LIFE INSURANCE
COMPANY
By: The Palladin Group
Its: Investment Manager
By: Palladin Capital Management LLC
Its: General Partner
By: /s/ Andrew Kaplan
Name: Andrew Kaplan
Its: Authorized Representative
<PAGE> 21
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
- -------------------- ----------------------------- --------------------------------------
<S> <C> <C>
Nelson Partners c/o Leeds Management Services Citadel Investment Group, L.L.C.
129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Benjamin Kopin
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-4347
Olympus Securities, c/o Leeds Management Services Citadel Investment Group, L.L.C.
Ltd 129 Front Street, 5th Floor 225 West Washington Street
Hamilton HM12 Bermuda Chicago, Illinois 60606
Attn: Anne Dupuy Attention: Benjamin Kopin
Facsimile: (441) 292-2239 Kenneth C. Griffin
Facsimile: (312) 368-4347
Themis Partners L.P. c/o Promethean Investment Group,
L.L.C. Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520 40 West 57th Street, Suite 1520
New York, New York 10019 New York, New York 10019
Attn: James F. O'Brien, Jr. Attn: James F. O'Brien, Jr.
Facsimile: 212-698-0505 Thomas Lumsden
Facsimile: 212-698-0505
Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Heracles Fund Bank of Bermuda (Cayman) Limited Promethean Investment Group, L.L.C.
P.O. Box 513 40 West 57th Street, Suite 1520
3rd Floor British American Center New York, New York 10019
Dr. Roy's Drive Attn: James F. O'Brien, Jr.
Georgetown, Grand Cayman Thomas Lumsden
Cayman Island, BWI Facsimile: 212-698-0505
Attn: Allen J. Bernardo
Facsimile: 809-949-7802 Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
GAM Arbitrage c/o Angelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
Investments, Inc. 245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
- ------------------- --------------------------------- --------------------------------------
<S> <C> <C>
AG Super Fund c/o Angelo, Gordon & Co., L.P.
International 245 Park Avenue - 26th Floor
Partners, L.P. New York, New York 10167
Attn: Gary Wolf
Facsimile: 212-867-6449
Raphael, L.P. c/o Angelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Ramius Fund, Ltd. c/o Angelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Halifax Fund, L.P. c/o CITCO Fund Services, Ltd. The Palladin Group
Corporate Center, West Bay Road 40 West 57th Street
P.O. Box 31106 Suite 1500
SMB New York, New York 10019
Grand Cayman, Cayman Islands Attn: Andrew Kaplan
Attn: Patrick Agemian Facsimile: 212-698-0599
Facsimile: 809-949-3877
Colonial Penn Life c/o The Palladin Group The Palladin Group
Insurance Company 40 West 57th Street 40 West 57th Street
Suite 1520 Suite 1500
New York, New York 10019 New York, New York 10019
Attn: Andrew Kaplan Attn: Andrew Kaplan
Facsimile: 212-698-0599 Facsimile: 212-698-0599
</TABLE>
<PAGE> 23
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
BOSTON EQUISERVE
150 Royall Street
Canton, MA 02021
ATTN: MR. GREG BARTEK, MAIL STOP 450262
RE: CELL GENESYS, INC.
Ladies and Gentlemen:
We are counsel to Cell Genesys, Inc., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and
among the Company and the buyers named therein (collectively, the "HOLDERS")
pursuant to which the Company issued to the Holders shares of its Series B
Convertible Preferred Stock, par value $0.001 per share, (the "PREFERRED
SHARES") convertible into shares of the Company's common stock, par value $0.001
per share (the "COMMON STOCK"). Pursuant to the Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Holders (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Preferred Shares, under the Securities Act of 1933, as
amended (the "1933 ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 1997, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
By:
------------------------------
cc: [LIST NAMES OF HOLDERS]
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
CELL GENESYS, INC.
Cell Genesys, Inc. (the "COMPANY"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company at a meeting duly held, adopted resolutions (i)
authorizing a series of the Company's previously authorized preferred stock, par
value $0.001 per share, and (ii) providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of Four Thousand (4,000) shares of Series B
Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 4,000 shares of
Series B Convertible Preferred Stock (the "PREFERRED SHARES"), par value
$0.001 per share, which shall have the following powers, designations,
preferences and other special rights:
(1) Dividends. The Preferred Shares shall not bear any dividends.
(2) Holder's Conversion of Preferred Shares. A holder of
Preferred Shares shall have the right, at such holder's option, to
convert the Preferred Shares into shares of the Company's common stock,
$0.001 par value per share (the "COMMON STOCK"), on the following terms
and conditions:
(a) Conversion Right. Subject to the provisions of Section
2(j) below, at any time or times on or after the Issuance Date (as
defined below), any holder of Preferred Shares shall be entitled to
convert any whole number of Preferred Shares into fully paid and
nonassessable shares (rounded to the nearest whole share in accordance
with Section 2(h) below) of Common Stock, at the Conversion Rate (as
defined below); provided, however, that in no event shall any holder be
entitled to convert Preferred Shares in excess of that number of
Preferred Shares which, upon giving effect to such conversion, would
cause the aggregate number of shares of Common Stock beneficially owned
by the holder and its affiliates to exceed 4.9% of the outstanding
shares of the Common Stock following such conversion. For purposes of
the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the
Preferred Shares with respect to which the determination of such proviso
is being made, but shall exclude the number of
<PAGE> 2
shares of Common Stock which would be issuable upon (i) conversion of
the remaining, nonconverted Preferred Shares beneficially owned by the
holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any warrants) subject to a
limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the holder and its affiliates.
Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. The
holder may waive the foregoing limitations by written notice to the
Company upon not less than 61 days prior notice (with such waiver taking
effect only upon the expiration of such 61 day notice period).
(b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of each of the Preferred Shares pursuant to
Sections (2)(a) and 2(g) shall be determined according to the following
formula (the "CONVERSION RATE"):
(.05)(N/365)($10,000) + $10,000
-------------------------------
Conversion Price
For purposes of this Certificate of Designations, the following terms
shall have the following meanings:
(i) "CONVERSION PRICE" means, as of any
Conversion Date (as defined below) or other date of determination, the lower of
the Fixed Conversion Price and the Floating Conversion Price, each in effect as
of such date and subject to adjustment as provided herein; provided, however,
that (A) during the period beginning on and including the date which is 90 days
after the applicable Issuance Date (as defined below) and ending on and
including the date which is 180 days after the applicable Issuance Date, the
Conversion Price shall be not less than 75% of the Floating Conversion Price on
the applicable Issuance Date, and (B) during the period beginning on and
including the date which is 181 days after the applicable Issuance Date and
ending on and including the date which is 270 days after the applicable Issuance
Date, the Conversion Price shall be not less than 50% of the Floating Conversion
Price on the applicable Issuance Date; and, provided further, that the
restrictions on the Conversion Price described in clauses (A) and (B)
immediately above shall not apply on and after the date of the occurrence of a
Triggering Event (as defined in Section 3(d) below) or the public announcement
or occurrence of a Major Transaction (as defined in Section 3(c) below).
(ii) "FIXED CONVERSION PRICE" means 125% of the
Market Price on the date of issuance of the applicable Preferred Shares,
provided that the Fixed Conversion Price for the Preferred Shares issued on the
Initial Closing Date shall be $11.02, subject in each case to adjustment as
provided herein;
(iii) "FLOATING CONVERSION PRICE" means, as of any
date of determination, the amount obtained by multiplying the Conversion
Percentage in effect as of such date by the Market Price as of such date;
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<PAGE> 3
(iv) "CONVERSION PERCENTAGE" means 100%, subject
in each case to adjustment as provided herein;
(v) "MARKET PRICE" means, with respect to any
security for any date, the average of the two lowest Closing Bid Prices (as
defined below) for such security during the ten consecutive trading days
immediately preceding such date;
(vi) "CLOSING BID PRICE" means, for any security
as of any date, the last closing bid price for such security on the Nasdaq
National Market as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if
the Nasdaq National Market is not the principal trading market for such
security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of Preferred Shares. If the Company and the
holders of Preferred Shares are unable to agree upon the fair market value of
the Common Stock, then such dispute shall be resolved pursuant to Section
2(f)(iii) below with the term "Closing Bid Price" being substituted for the term
"Market Price." (All such determinations to be appropriately adjusted for any
stock dividend, stock, split or other similar transaction during such period).
(vii) "N" means the number of days from, but
excluding, the Issuance Date through and including the Conversion Date for the
Preferred Shares for which conversion is being elected; and
(viii) "ISSUANCE DATE" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(c) Effect of Failure to Obtain and Maintain
Effectiveness of Registration Statement. If the registration statement (the
"REGISTRATION STATEMENT") covering the resale of the shares of Common Stock
issuable upon conversion of the Preferred Shares and required to be filed by the
Company pursuant to the Registration Rights Agreement between the Company and
the Buyers referred to therein (the "REGISTRATION RIGHTS AGREEMENT") is not (i)
filed within 60 days of the first Issuance Date of any Preferred Shares (the
"SCHEDULED FILING DATE"), (ii) declared effective by the United States
Securities and Exchange Commission (the "SEC") on or before 120 days after the
first Issuance Date for any Preferred Shares (the "SCHEDULED EFFECTIVE DATE"),
or (iii) if after the Registration Statement has been declared effective by the
SEC, sales of all the shares of Common Stock issued or issuable upon conversion
of the Preferred Shares (without taking into account any limitations or
restrictions on the timing or amount of conversions of the Preferred Shares or
sales of the underlying Common Stock) cannot be made pursuant to the
Registration Statement (whether because of a failure to keep the Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to the Registration Statement, to register sufficient
-67-
<PAGE> 4
shares of Common Stock or otherwise, provided that such inability to sell shares
is not due solely to the action or inaction of the Buyers), then, as partial
relief for the damages to any holder by reason of any such delay in or reduction
of its ability to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Conversion Percentage and the Fixed Conversion Price shall be adjusted as
follows:
(A) Conversion Percentage. The
Conversion Percentage in effect at such time shall be reduced by a
number of percentage points equal to the product of (I) .06 and (II) the
sum of (x) the number of days after the Scheduled Filing Date that the
relevant Registration Statement is filed with the SEC, (y) the number of
days after the Scheduled Effective Date and prior to the date that the
relevant Registration Statement is declared effective by the SEC
(without double- counting any number of days after the Scheduled Filing
Date that the relevant Registration Statement is filed, if applicable)
and (z) the number of days that sales cannot be made pursuant to the
Registration Statement in accordance with the Registration Rights
Agreement after the Registration Statement has been declared effective
(such number of days being collectively referred to herein as the
"REGISTRATION STATEMENT DEFAULT DAYS"). Notwithstanding the foregoing,
the Registration Statement Default Days shall not include the number of
days during any Grace Period (as defined in the Registration Rights
Agreement). (For example, if the Registration Statement becomes
effective 30 days after the Scheduled Effective Date, the Conversion
Percentage would be 98.2% percent until any subsequent adjustment; if
thereafter sales could not be made pursuant to the Registration
Statement for a period of 40 additional days, the Conversion Percentage
would then be 95.8%); and
(B) Fixed Conversion Price. The Fixed
Conversion Price in effect at such time shall be reduced by an amount
equal to the product of (I) the Fixed Conversion Price in effect as of
the Issuance Date and (II) .0006 multiplied by (III) Registration
Statement Default Days. The Registration Statement Default Days shall
not include the number of days during any Grace Period (as defined in
the Registration Rights Agreement). (For example, assuming for purposes
of this Section 3(c)(B) only that the Fixed Conversion Price equals
$9.00, if the Registration Statement becomes effective 30 days after the
Scheduled Effective Date, the Fixed Conversion Price would be $8.982
until any subsequent adjustment; if thereafter sales could not be made
pursuant to the Registration Statement for a period of 40 additional
days, the Fixed Conversion Price would then be $8.958.)
(d) Adjustment to Conversion Price -- Dilution and
Other Events. In order to prevent dilution of the rights granted under this
Certificate of Designations, the Conversion Price will be subject to adjustment
from time to time as provided in this Section 2(d).
(i) Adjustment of Fixed Conversion Price upon
Issuance of Common Stock. If and whenever on or after the date of issuance of
the Preferred Shares, the Company issues or sells, or is deemed to have issued
or sold, any shares of Common Stock (other than shares of Common Stock deemed to
have been issued by the Company in connection with the Warrants (as defined in
the Securities Purchase Agreement between the Company and the initial holders of
the Preferred Shares (the "SECURITIES PURCHASE AGREEMENT")), the GenPharm Note
(as defined in the Securities Purchase Agreement), an
-68-
<PAGE> 5
Approved Stock Plan (as defined below) or an Excluded Issuance (as defined
below)) for a consideration per share less than the Fixed Conversion Price in
effect immediately prior to such time (the "APPLICABLE PRICE"), then immediately
after such issue or sale, the Fixed Conversion Price shall be reduced to an
amount equal to the product of (x) the Fixed Conversion Price in effect
immediately prior to such issue or sale and (y) the quotient determined by
dividing (1) the sum of (I) the product of the Applicable Price and the number
of shares of Common Stock Deemed Outstanding (as defined below) immediately
prior to such issue or sale, and (II) the consideration, if any, received by the
Company upon such issue or sale, by (2) the product of (I) the Applicable Price
and (II) the number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale. For purposes of determining the adjusted Fixed
Conversion Price under this Section 2(d)(i), the following shall be applicable:
(A) Issuance of Options. If the
Company in any manner grants any rights or options to subscribe for or
to purchase Common Stock (other than pursuant to an Approved Stock Plan
or upon conversion of the Preferred Shares or the GenPharm Note or
exercise of the Warrants) or any stock or other securities convertible
into or exchangeable for Common Stock (such rights or options being
herein called "OPTIONS" and such convertible or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES") and the price
per share for which Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible Securities is
less than the Applicable Price, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to
be outstanding and to have been issued and sold by the Company for such
price per share. For purposes of this Section 2(d)(i)(A), the "price per
share for which Common Stock is issuable upon exercise of such Options
or upon conversion or exchange of such Convertible Securities" is
determined by dividing (I) the total amount, if any, received or
receivable by the Company as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in
the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to
the Company upon the issuance or sale of such Convertible Securities and
the conversion or exchange thereof, by (II) the total maximum number of
shares of Common Stock issuable upon exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No adjustment of the Fixed Conversion
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Issuance of Convertible Securities.
If the Company in any manner issues or sells any Convertible Securities
and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Applicable Price, then the
maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company for such
price per share. For the purposes of this Section 2(d)(i)(B), the "price
per share for which Common Stock is issuable upon such conversion or
exchange" is determined by dividing (I) the total amount received or
receivable by the Company as consideration for the issue or sale of such
-69-
<PAGE> 6
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (II) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities. No adjustment of the Fixed Conversion Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of the Fixed Conversion Price had been or are to be made
pursuant to other provisions of this Section 2(d)(i), no further
adjustment of the Fixed Conversion Price shall be made by reason of such
issue or sale.
(C) Change in Option Price or Rate of
Conversion. If the purchase price provided for in any Options, the
additional consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, the Fixed Conversion Price in effect at the
time of such change shall be readjusted to the Fixed Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold; provided
that no adjustment shall be made if such adjustment would result in an
increase of the Fixed Conversion Price then in effect. Nothing in this
Section 2(d)(i)(C) shall be construed to require any readjustment to the
Fixed Conversion Price where the Board of Directors of the Company votes
to reprice at fair market value any rights or options to subscribe for
or to purchase Common Stock granted pursuant to an Approved Stock Plan
in order to provide appropriate employee incentives.
(D) Certain Definitions. For purposes
of determining the adjusted Fixed Conversion Price under this Section
2(d)(i), the following terms have meanings set forth below:
(I) "APPROVED STOCK PLAN" shall mean
any contract, plan or agreement which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities may
be issued to any employee, officer, director, consultant or other
service provider.
(II) "COMMON STOCK DEEMED
OUTSTANDING" means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding pursuant to Sections 2(d)(i)(A)
and 2(d)(i)(B) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any
shares of Common Stock issuable upon conversion of the Preferred Shares.
(III) "EXCLUDED ISSUANCE" shall
mean (i) a single issuance by the Company consisting solely of Common
Stock, (ii) any underwritten public offering by the Company consisting
solely of Common Stock, (iii) any transaction involving the Company's
issuance of securities in connection with any strategic partnership or
joint venture (the primary
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purpose of which is not to raise equity capital), (iv) any issuance of
securities by a subsidiary of the Company, and (v) any issuance of
securities by the Company as consideration for the acquisition of a
license by the Company; provided that (x) in each instance under clauses
(i) and (iii) immediately above the consideration received by the
Company for each such share of Common Stock issued is not less than the
lesser of (A) the Closing Bid Price (as defined in the Certificate of
Designations) on the date of issuance of such shares and (B) the average
of the Closing Bid Prices for the Common Stock for the 20 consecutive
trading days immediately preceding the date of issuance of such shares,
and (y) in each instance under clause (ii) above the consideration
received by the Company for each such share of Common Stock issued is
not less than 95% of the lesser of (A) the Closing Bid Price on the date
of issuance of such shares and (B) the average of the Closing Bid Prices
for the Common Stock for the 20 consecutive trading days immediately
preceding the date of issuance of such shares.
(E) Effect on Fixed Conversion Price of
Certain Events. For purposes of determining the adjusted Fixed
Conversion Price under this Section 2(d)(i), the following shall be
applicable:
(I) Calculation of Consideration
Received. If any Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount
received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the arithmetic average of
the Closing Bid Prices on the twenty (20) consecutive trading days
immediately preceding the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company
is the surviving entity the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair
value of any consideration other than cash or securities will be
determined jointly by the Company and the holders of a majority of the
Preferred Shares then outstanding. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event
requiring valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an independent,
reputable appraiser selected by the Company. The determination of such
appraiser shall be deemed binding upon all parties absent manifest
error.
(II) Integrated Transactions. In
case any Option is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $.01.
(III) Treasury Shares. The number
of shares of Common Stock outstanding at any given time does not include
shares owned or held by or for the account of
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the Company, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.
(IV) Record Date. If the Company
takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable
in Common Stock, Options or in Convertible Securities or (2) to
subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Adjustment of Fixed Conversion Price upon
Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, the Fixed Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced.
If the Company at any time combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Fixed Conversion Price in
effect immediately prior to such combination will be proportionately
increased.
(iii) Adjustment of Floating Conversion Price upon
Issuance of Convertible Securities. If the Company in any manner issues
or sells Convertible Securities that are convertible into Common Stock
at a price which varies with the market price of the Common Stock (the
formulation for such variable price being herein referred to as, the
"VARIABLE PRICE") and such Variable Price is not calculated using the
same formula used to calculate the Floating Conversion Price in effect
immediately prior to the time of such issue or sale, the Company shall
provide written notice thereof via facsimile and overnight courier to
each holder of the Preferred Shares ("VARIABLE NOTICE") on the date of
issuance of such Convertible Securities. If the holders of Preferred
Shares representing at least two-thirds (2/3) of the Preferred Shares
then outstanding provide written notice via facsimile and overnight
courier (the "VARIABLE PRICE ELECTION NOTICE") to the Company within
five (5) business days of receiving a Variable Notice that such holders
desire to replace the Floating Conversion Price then in effect with the
Variable Price described in such Variable Notice, the Company shall
prepare and deliver to each holder of the Preferred Shares via facsimile
and overnight courier a copy of an amendment to this Certificate of
Designations (the "VARIABLE PRICE AMENDMENT") that substitutes the
Variable Price for the Floating Conversion Price (together with such
modifications to this Certificate of Designations as may be required to
give full effect to the substitution of the Variable Price for the
Floating Conversion Price) within five (5) business days after receipt
of the requisite number of Variable Price Election Notices set forth
above. The Company shall file such Variable Price Amendment with the
Secretary of State of the State of Delaware within five (5) business
days after delivery of the Variable Price Amendment to the holders of
the Preferred Shares; provided that in the event that the Company
receives a notice prior to the filing of the Variable Price Amendment
from any holder who has delivered a Variable Price Election Notice in
connection with such Variable Price Amendment that such holder objects
to the form of the Variable Price Amendment, the Company shall not file
such Variable Price Amendment
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until such time as the Variable Price Amendment has been revised to the
reasonable satisfaction of such holder and approved in writing by the
holders of the Preferred Shares representing at least two-thirds (2/3)
of the Preferred Shares then outstanding. Except as provided in the
preceding proviso, a holder's delivery of a Variable Price Election
Notice shall serve as the consent required to amend this Certificate of
Designations pursuant to Section 12 below.
(iv) Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially
all of the Company's assets to another Person (as defined below) or
other transaction which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange
for Common Stock is referred to herein as an "ORGANIC CHANGE." Prior to
the consummation of any Organic Change, the Company will make
appropriate provision (in form and substance satisfactory to the holders
of a majority of the Preferred Shares then outstanding) to insure that
each of the holders of the Preferred Shares will thereafter have the
right to acquire and receive in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Preferred Shares, such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of
such holder's Preferred Shares had such Organic Change not taken place
(without taking into account any limitations or restrictions on the
timing or amount of conversions). In any such case, the Company will
make appropriate provision (in form and substance satisfactory to the
holders of a majority of the Preferred Shares then outstanding) with
respect to such holders' rights and interests to insure that the
provisions of this Section 2(d) and Section 2(e) below will thereafter
be applicable to the Preferred Shares (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of
the Fixed Conversion Price to the value for the Common Stock reflected
by the terms of such consolidation, merger or sale, if the value so
reflected is less than the Fixed Conversion Price in effect immediately
prior to such consolidation, merger or sale). The Company will not
effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the Company)
resulting from consolidation or merger or the entity purchasing such
assets assumes, by written instrument, the obligation to deliver to each
holder of Preferred Shares such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be
entitled to acquire. "PERSON" shall mean an individual, a limited
liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department
or agency thereof.
(v) Certain Events. If any event occurs of the
type contemplated by the provisions of this Section 2(d) but not
expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board
of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the holders of the Preferred Shares;
provided that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 2(d).
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(vi) Notices.
(A) As soon as practicable, upon any
adjustment of the Conversion Price, the Company will give written notice
thereof to each holder of Preferred Shares, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(B) The Company will give written notice
to each holder of Preferred Shares at least twenty (20) days prior to
the date on which the Company closes its books or takes a record (I)
with respect to any dividend or distribution upon the Common Stock, (II)
with respect to any pro rata subscription offer to holders of Common
Stock or (III) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation and in no event shall such
notice be provided to such holder prior to such information being made
known to the public.
(C) The Company will also give written
notice to each holder of Preferred Shares at least twenty (20) days
prior to the date on which any Organic Change, dissolution or
liquidation will take place and in no event shall such notice be
provided to such holder prior to such information being made known to
the public.
(e) Purchase Rights. In addition to any adjustments of
the Conversion Price pursuant to Section 2(d) above, if at any time the Company
grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the holders
of Preferred Shares will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Preferred Shares (without taking into account
any limitations or restrictions on the timing or amount of conversions)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(f) Mechanics of Conversion. Subject to the Company's
inability to fully satisfy its obligations under a Conversion Notice (as defined
below) as provided for in Section 6 below:
(i) Holder's Delivery Requirements. To convert
Preferred Shares into full shares of Common Stock on any date (the
"CONVERSION DATE"), the holder thereof shall (A) transmit by facsimile
(or otherwise deliver), for receipt on or prior to 11:59 p.m., Central
Time on such date, a copy of a fully executed notice of conversion in
the form attached hereto as Exhibit I (the "CONVERSION NOTICE"), to the
Company or its designated transfer agent (the "TRANSFER AGENT"), and (B)
surrender to a common carrier for delivery to the Company or the
Transfer Agent as soon as practicable following such date, the original
certificates representing the Preferred Shares being converted (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction) (the "PREFERRED STOCK CERTIFICATES")
and the originally executed Conversion Notice.
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(ii) Company's Response. Upon receipt by the
Company of a facsimile copy of a Conversion Notice, the Company shall
immediately send, via facsimile, a confirmation of receipt of such
Conversion Notice to such holder. Upon receipt by the Company or the
Transfer Agent of the Preferred Stock Certificates to be converted
pursuant to a Conversion Notice, together with the originally executed
Conversion Notice, the Company or the Transfer Agent (as applicable)
shall, on the next business day following the date of receipt, (I) issue
and surrender to a common carrier for overnight delivery to the address
as specified in the Conversion Notice, a certificate, registered in the
name of the holder or its designee, for the number of shares of Common
Stock to which the holder shall be entitled, or (II) credit such
aggregate number of shares of Common Stock to which the holder shall be
entitled to the holder's or its designee's balance account with The
Depository Trust Company. If the number of Preferred Shares represented
by the Preferred Stock Certificate(s) submitted for conversion is
greater than the number of Preferred Shares being converted, then the
Company or Transfer Agent, as the case may be, shall, as soon as
practicable and in no event later than two business days after receipt
of the Preferred Stock Certificate(s) and at its own expense, issue and
deliver to the holder a new Preferred Stock Certificate representing the
number of Preferred Shares not converted.
(iii) Dispute Resolution. In the case of a
dispute as to the determination of the Market Price or the arithmetic
calculation of the Conversion Rate, the Company shall promptly issue to
the holder the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to
the holder via facsimile as soon as possible, but in no event later than
two (2) business days after receipt of such holder's Conversion Notice.
If such holder and the Company are unable to agree upon the
determination of the Market Price or arithmetic calculation of the
Conversion Rate within one (1) business day of such disputed
determination or arithmetic calculation being submitted to the holder,
then the Company shall within one (1) business day submit via facsimile
(A) the disputed determination of the Market Price to an independent,
reputable investment bank or (B) the disputed arithmetic calculation of
the Conversion Rate to its independent, outside accountant. The Company
shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and
the holder of the results no later than forty-eight (48) hours from the
time it receives the disputed determinations or calculations. Such
investment bank's or accountant's determination or calculation, as the
case may be, shall be binding upon all parties absent manifest error.
(iv) Record Holder. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of
Preferred Shares shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If within
ten (10) business days of the Company's or the Transfer Agent's receipt
of the Preferred Stock Certificates to be converted and the originally
executed Conversion Notice the Company shall fail to issue a certificate
to a holder or credit the holder's balance account with The Depository
Trust Company for the number of shares of Common Stock to which such
holder is entitled upon such holder's conversion of Preferred Shares or
to issue a new Preferred Stock Certificate representing the number of
Preferred Shares to which such holder is entitled pursuant to Section
2(f)(ii), in addition to all other available
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remedies which such holder may pursue hereunder and under the Securities
Purchase Agreement (including indemnification pursuant to Section 8
thereof), the Company shall pay additional damages to such holder on
each date on and after the sixth (6th) business day after the Company's
receipt of such Conversion Notice that such conversion is not timely
effected in an amount equal to 0.5% of the product of (A) the sum of the
number of shares of Common Stock not issued to the holder on a timely
basis pursuant to Section 2(f)(ii) and to which such holder is entitled
and, in the event the Company has failed to deliver a Preferred Stock
Certificate to the holder on a timely basis pursuant to Section
2(f)(ii), the number of shares of Common Stock issuable upon conversion
of the Preferred Shares represented by such Preferred Stock Certificate,
as of the last possible date which the Company could have issued such
Preferred Stock Certificate to such holder without violating Section
2(f)(ii) and (B) the Closing Bid Price of the Common Stock on the last
possible date which the Company could have issued such Common Stock and
such Preferred Stock Certificate, as the case may be, to such holder
without violating Section 2(f)(ii).
(g) Mandatory Conversion. If any Preferred Shares remain
outstanding on the Mandatory Conversion Date (as defined below), then
all such Preferred Shares shall be converted as of such date in
accordance with this Section 2 as if the holders of such Preferred
Shares had given the Conversion Notice on the Mandatory Conversion Date.
All holders of Preferred Shares shall thereupon surrender all Preferred
Stock Certificates, duly endorsed for cancellation, to the Company or
the Transfer Agent. "MANDATORY CONVERSION DATE" means the date which is
five years after the applicable Issuance Date, unless extended pursuant
to Section 4(k) of the Securities Purchase Agreement or Section 3(f) of
the Registration Rights Agreement, which extension shall be equal to
twice the aggregate number of days of all Underwriting Lock-Up Periods
(as defined in Section 4(k) of the Securities Purchase Agreement) and
Grace Periods (as defined in Section 3(f) of the Registration Rights
Agreement).
(h) Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of
Common Stock (including fractions thereof) issuable upon conversion of
more than one Preferred Share by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the
issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance of
a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up or down to the nearest whole
share.
(i) Taxes. The Company shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of
Common Stock upon the conversion of the Preferred Shares.
(j) Conversion Restrictions. The right of a holder of
Preferred Shares to convert Preferred Shares pursuant to this Section 2
shall be limited as set forth below. Without the prior consent of the
Company, a holder of Preferred Shares shall not be entitled to convert
an aggregate number of Preferred Shares from the Issuance Date of such
Preferred Shares through the date of this determination in excess of the
number of Preferred Shares which when divided by the number of Preferred
Shares purchased by such holder on such Issuance Date would exceed (i)
0.25 for the
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period beginning on the date which is 91 days after the Issuance Date
and ending on and including the date which is 135 days after the
Issuance Date, (ii) 0.50 for the period beginning on and including the
date which is 136 days after the Issuance Date and ending on and
including the date which is 180 days after the Issuance Date, (iii) 0.75
for the period beginning on the date which is 181 days after the
Issuance Date and ending on and including the date which is 225 days
after the Issuance Date, and (iv) 1.00 for the period beginning on and
including the date which is 226 days after the Issuance Date and ending
on and including the Mandatory Conversion Date. Notwithstanding the
foregoing, the conversion restriction set forth in this Section 2(j)
shall not apply (x) with respect to any conversion of Preferred Shares
at a Conversion Price which is equal to the Fixed Conversion Price then
in effect or (y) if an event constituting a Major Transaction (as
defined in Section 3(c) below) or a Triggering Event (as defined in
Section 3(d) below) shall have occurred or been publicly announced.
(k) Adjustment of Conversion Restrictions upon Issuance of
Convertible Securities. If the Company in any manner issues or sells
Convertible Securities that are convertible into Common Stock and are
subject to (i) restrictions on the amount of shares that can be
converted, or (ii) no restrictions on the amount of shares that can be
converted (the restriction on conversions or lack thereof being herein
referred to as the "CONVERSION RESTRICTION"), and such Conversion
Restriction is not formulated with using the same time periods and
percentages used in Section 2(j), then the Company shall provide written
notice thereof via facsimile and overnight courier to each holder of the
Preferred Shares ("CONVERSION RESTRICTION NOTICE") on the date of
issuance of such Convertible Securities. If the holders of Preferred
Shares representing at least two-thirds (2/3) of the Preferred Shares
then outstanding which remain subject to the restrictions in Section
2(j) provide written notice via facsimile and overnight courier (the
"CONVERSION RESTRICTION ELECTION NOTICE") to the Company within five (5)
business days of receiving a Conversion Restriction Notice that such
holders desire to replace the conversion restrictions set forth in
Section 2(j) then in effect with the Conversion Restriction described in
such Conversion Restriction Notice, the Company shall prepare and
deliver to each holder of the Preferred Shares via facsimile and
overnight courier a copy of an amendment to this Certificate of
Designations (the "CONVERSION RESTRICTION AMENDMENT") that substitutes
the Conversion Restriction for conversion restrictions set forth in
Section 2(j) (together with such modifications to this Certificate of
Designations as may be required to give full effect to the substitution
of the Conversion Restriction for the conversion restrictions set forth
in Section 2(j)) within five (5) business days after receipt of the
requisite number of Conversion Restriction Election Notices set forth
above. The Company shall file such Conversion Restriction Amendment with
the Secretary of State of the State of Delaware within five (5) business
days after delivery of the Conversion Restriction Amendment to the
holders of the Preferred Shares; provided that in the event that the
Company receives a notice prior to the filing of the Conversion
Restriction Amendment from any holder who has delivered a Conversion
Restriction Election Notice in connection with such Conversion
Restriction Amendment that such holder objects to the form of the
Conversion Restriction Amendment, the Company shall not file such
Conversion Restriction Amendment until such time as the Conversion
Restriction Amendment has been revised to the reasonable satisfaction of
such holder and approved in writing by the holders of the Preferred
Shares representing at least two-thirds (2/3) of the Preferred Shares
then outstanding. Except as provided in the preceding
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proviso, a holder's delivery of a Conversion Restriction Election Notice
shall serve as the consent required to amend this Certificate of
Designations pursuant to Section 12 below.
(l) Conversion at the Option of the Company. At any time
or times on or after the date which is three years after the Issuance
Date, the Company shall have the right, in its sole discretion, to
require that any or all of the outstanding Preferred Shares issued on
such Issuance Date be converted ("CONVERSION AT COMPANY'S ELECTION") at
the Conversion Rate; provided that the Conditions to Conversion at
Company's Election (as defined below) are satisfied. The Company shall
exercise its right to Conversion at Company's Election by providing each
holder of such Preferred Shares written notice ("NOTICE OF CONVERSION AT
COMPANY'S ELECTION") at least 30 days prior to the date selected by the
Company for conversion ("COMPANY'S ELECTION CONVERSION DATE"). If the
Company elects to require conversion of some, but not all, of such
Preferred Shares, the Company shall convert an amount from each holder
of such Preferred Shares equal to such holder's pro rata amount (based
on the number of Preferred Shares held by such holder relative to the
number of Preferred Shares outstanding on Company's Election Conversion
Date) of all Preferred Shares the Company is requiring to be converted.
The Notice of Conversion at Company's Election shall indicate (x) the
number of Preferred Shares the Company has selected for conversion, (y)
the Company's Election Conversion Date, which date shall be not less
than 30 or more than 40 days after each holder's receipt of such notice,
and (z) each holder's pro rata share of outstanding Preferred Shares.
All Preferred Shares selected for conversion in accordance with the
provision of this Section 2(l) shall be converted as of the Company's
Election Conversion Date in accordance with this Section 2 as if the
holders of such Preferred Shares selected by the Company to be converted
had given the Conversion Notice on the Company's Election Conversion
Date. All holders of Preferred Shares shall thereupon and within two
business days of the Company's Election Conversion Date surrender all
Preferred Stock Certificates selected for conversion, duly endorsed for
cancellation, to the Company or the Transfer Agent. "CONDITIONS TO
CONVERSION AT COMPANY'S ELECTION" means the following conditions: (i) on
each day during the 20 consecutive trading days immediately preceding
the date of the Company's Notice of Conversion at the Company's
Election, the last reported sale price (as reported by Bloomberg) of the
Common Stock is at least 250% of the Fixed Conversion Price of such
Preferred Shares as of the applicable Issuance Date of the Preferred
Shares being converted; (ii) the Company shall not have previously given
Notice of Conversion at Company's Election in the 365 days prior to such
Notice of Conversion at Company's Election; (iii) on each day during the
period beginning 20 days prior to the Notice of Conversion at the
Company's Election and ending on and including the Company's Election
Conversion Date, the Registration Statement shall be effective and
available for the sale of no less than 150% of the sum of (A) the number
of Conversion Shares then issuable upon the conversion of all
outstanding Preferred Shares, including the Conversion Shares to be
issued pursuant to this Conversion at the Company's Election and (B) the
number of Conversion Shares that are then held by the holders of the
Preferred Shares, (iv) on each day during the period beginning 20 days
prior to the date of the Company's Notice of Conversion at Company's
Election and ending on and including the Company's Election Conversion
Date, the Common Stock is designated for quotation on the Nasdaq
National Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc. and is not suspended from trading; (v) during the period
beginning on the Initial Issuance Date and ending on and including the
Company's Election Conversion Date, the Company shall have delivered
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Conversion Shares upon conversion of the Preferred Shares on a timely
basis as set forth in Section 2(f)(ii) of this Certificate of
Designations; (vi) none of the holders shall have been subject to a
lockup agreement under Section 4(k) of the Securities Purchase Agreement
at any time during the period beginning 20 days prior to the date of the
Company's Notice of Conversion at Company's Election and ending on an
including the Company's Election Conversion Date; and (vii) the Company
otherwise has satisfied its obligations and is not in default under this
Certificate of Designations, the Securities Purchase Agreement and the
Registration Rights Agreement. Notwithstanding the above, any holder of
Preferred Shares may convert such shares (including Preferred Shares
selected for conversion) into Common Stock pursuant to Section 2(a) on
or prior to the date immediately preceding the Company's Election
Conversion Date (and, after such holder's receipt of the Notice of
Conversion at Company's Election, without regard to the conversion
limitations set forth in Section 2(j) above).
(3) Redemption at Option of Holders.
(a) Redemption Option Upon Major Transaction. In addition
to all other rights of the holders of Preferred Shares contained herein,
simultaneous with or after the occurrence of a Major Transaction (as
defined below), each holder of Preferred Shares shall have the right, at
such holder's option, to require the Company to redeem all or a portion
of such holder's Preferred Shares at a price per Preferred Share equal
to the greater of (i) the sum of (A) $12,000 and (B) an amount equal to
the product of (.05) (N/365) ($10,000), and (ii) the product of (A) the
Conversion Rate at such time and (B) the Closing Bid Price on the date
of the public announcement of such Major Transaction or the next date on
which the exchange or market on which the Common Stock is traded is open
if such public announcement is made (X) after 12:00 p.m., Central Time,
time on such date or (Y) on a date on which the exchange or market on
which the Common Stock is traded is closed ("MAJOR TRANSACTION
REDEMPTION PRICE").
(b) Redemption Option Upon Triggering Event. In addition
to all other rights of the holders of Preferred Shares contained herein,
after a Triggering Event (as defined below), each holder of Preferred
Shares shall have the right, at such holder's option, to require the
Company to redeem all or a portion of such holder's Preferred Shares at
a price per Preferred Share equal to the greater of (i) the sum of (A)
$12,000 and (B) an amount equal to the product of (.05) (N/365)
($10,000), and (ii) the product of (A) the Conversion Rate at such time
and (B) the Closing Bid Price calculated as of the date immediately
preceding such Triggering Event on which the exchange or market on which
the Common Stock is traded is open ("TRIGGERING EVENT REDEMPTION PRICE"
and, collectively with "MAJOR TRANSACTION REDEMPTION PRICE," the
"REDEMPTION PRICE").
(c) "Major Transaction". A "MAJOR TRANSACTION" shall be
deemed to have occurred at such time as any of the following events:
(i) the consolidation, merger or other business
combination of the Company with or into another Person (other than
pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company);
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(ii) the sale or transfer of all or substantially
all of the Company's assets; or
(iii) a purchase, tender or exchange offer made to
and accepted by the holders of more than 50% of the outstanding shares
of Common Stock.
(d) "Triggering Event". A "TRIGGERING EVENT" shall be
deemed to have occurred at such time as any of the following events:
(i) the failure of the Registration Statement to be
declared effective by the SEC on or prior to the date that is 240 days
after the Initial Issuance Date;
(ii) while the Registration Statement is required
to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the Registration Statement lapses
for any reason (including, without limitation, the issuance of a stop
order) or is unavailable to the holder of the Preferred Shares for sale
of the Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of
ten consecutive trading days (not including any days during a Grace
Period (as defined in Section 3(f) of the Registration Rights
Agreement)), provided that the cause of such lapse or unavailability is
not due to factors solely within the control of such holder of Preferred
Shares;
(iii) the failure of the Common Stock to be listed
on the Nasdaq National Market, The New York Stock Exchange, Inc. or The
American Stock Exchange, Inc. for a period of seven consecutive days; or
(iv) the Company's notice to any holder of
Preferred Shares, including by way of public announcement, at any time,
of its intention not to comply with proper requests for conversion of
any Preferred Shares into shares of Common Stock, including due to any
of the reasons set forth in Section 4(a) below.
(e) Mechanics of Redemption at Option of Buyer Upon Major
Transaction. No sooner than 15 days nor later than 10 days prior to the
consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver
written notice thereof via facsimile and overnight courier ("NOTICE OF
MAJOR TRANSACTION") to each holder of Preferred Shares. At any time
after receipt of a Notice of Major Transaction, the holders of at least
two-thirds (2/3) of the Preferred Shares then outstanding may require
the Company to redeem all of the holder's Preferred Shares then
outstanding by delivering written notice thereof via facsimile and
overnight courier ("NOTICE OF REDEMPTION AT OPTION OF BUYER UPON MAJOR
TRANSACTION") to the Company, which Notice of Redemption at Option of
Buyer Upon Major Transaction shall indicate (i) the number of Preferred
Shares that such holders are voting in favor of redemption and (ii) the
applicable Major Transaction Redemption Price, as calculated pursuant to
Section 3(a) above.
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<PAGE> 17
(f) Mechanics of Redemption at Option of Buyer Upon
Triggering Event. Within one (1) day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier ("NOTICE OF TRIGGERING EVENT") to each
holder of Preferred Shares. At any time after receipt of a Notice of
Triggering Event, any holder of the Preferred Shares then outstanding
may require the Company to redeem all or any portion of the Preferred
Shares held by such holder by delivering written notice thereof via
facsimile and overnight courier ("NOTICE OF REDEMPTION AT OPTION OF
BUYER UPON TRIGGERING EVENT") to the Company, which Notice of Redemption
at Option of Buyer Upon Triggering Event shall indicate (i) the number
of Preferred Shares that such holder is submitting for redemption and
(ii) the applicable Triggering Event Redemption Price, as calculated
pursuant to Section 3(b) above. Notwithstanding the foregoing, if (A)
the Triggering Event is one described in Section 3(d)(ii) above, and (B)
such lapse discontinues and a holder of Preferred Shares receives notice
from the Company that the lapse in the effectiveness of the registration
statement no longer continues prior to such holder's delivery to the
Company of the holder's Notice of Redemption at Option of Buyer Upon
Triggering Event, then the holder shall no longer have the right to
deliver a Notice of Redemption at Option of Buyer Upon Triggering Event
to the Company with respect to such lapse.
(g) Payment of Redemption Price. Upon the Company's
receipt of a Notice(s) of Redemption at Option of Buyer Upon Major
Transaction from the holders of at least two-thirds (2/3) of the
Preferred Shares then outstanding the Company shall immediately notify
each holder by facsimile of the Company's receipt of such requisite
notice(s) necessary to effect a redemption and each holder of Preferred
Shares shall thereafter promptly send such holder's Preferred Stock
Certificates to be redeemed to the Company or its Transfer Agent. Upon
the Company's receipt of a Notice(s) of Redemption at Option of Buyer
Upon Triggering Event from any holder of Preferred Shares, the Company
shall immediately notify each holder of Preferred Shares by facsimile of
the Company's receipt of such Notice(s) of Redemption at Option of Buyer
Upon Triggering Event and each holder which has sent such a notice shall
promptly submit to the Company or its Transfer Agent such holder's
Preferred Stock Certificates which such holder has elected to have
redeemed. The Company shall deliver the applicable Redemption Price to
such holder within ten business days after the Company's receipt of the
requisite notices required to effect a redemption; provided that a
holder's Preferred Stock Certificates shall have been so delivered to
the Company or its Transfer Agent; provided further that if the Company
is unable to redeem all of the Preferred Shares to be redeemed, the
Company shall redeem an amount from each holder of Preferred Shares
being redeemed equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number of
Preferred Shares outstanding) of all Preferred Shares being redeemed. If
the Company shall fail to redeem all of the Preferred Shares submitted
for redemption (other than pursuant to a dispute as to the arithmetic
calculation of the Redemption Price), in addition to any remedy such
holder of Preferred Shares may have under this Certificate of
Designations and the Securities Purchase Agreement, the applicable
Redemption Price payable in respect of such unredeemed Preferred Shares
shall bear interest at the rate of 2.0% per month (prorated for partial
months) until paid in full. Until the Company pays such unpaid
applicable Redemption Price in full to a holder of Preferred Shares
submitted for redemption, such holder shall have the option, in the case
of a Notice of Redemption at Option of Buyer Upon Triggering Event, and,
in the event of a Notice of Redemption at Option of Buyer Upon Major
Transaction, the holders
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<PAGE> 18
of at least two-thirds (2/3) of the Preferred Shares then outstanding
(including Preferred Shares submitted for redemption pursuant to this
Section 3 and for which the applicable Redemption Price has not been
paid) shall have the option (the "VOID OPTIONAL REDEMPTION OPTION") to,
in lieu of redemption, require the Company to promptly return to such
holder(s) all of the Preferred Shares that were submitted for redemption
by such holder(s) under this Section 3 and for which the applicable
Redemption Price has not been paid, by sending written notice thereof to
the Company via facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon
the Company's receipt of such Void Optional Redemption Notice(s) and
prior to payment of the full applicable Redemption Price to such holder,
(i) the Notice(s) of Redemption at Option of Buyer Upon Triggering Event
or the Notice(s) of Redemption at Option of Buyer Upon Major
Transaction, as the case may be, shall be null and void with respect to
those Preferred Shares submitted for redemption and for which the
applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Preferred Shares submitted to the Company by each
holder for redemption under this Section 3(g) and for which the
applicable Redemption Price has not been paid, (iii) the Fixed
Conversion Price of such returned Preferred Shares shall be adjusted to
the lesser of (A) the Fixed Conversion Price as in effect on the date on
which the Void Optional Redemption Notice(s) is delivered to the Company
and (B) the lowest Closing Bid Price during the period beginning on the
date on which the Notice(s) of Redemption of Option of Buyer Upon Major
Transaction or the Notice(s) of Redemption at Option of Buyer Upon
Triggering event, as the case may be, is delivered to the Company and
ending on the date on which the Void Optional Redemption Notice(s) is
delivered to the Company; provided that no adjustment shall be made if
such adjustment would result in an increase of the Fixed Conversion
Price then in effect, and (iv) the Conversion Percentage in effect at
such time shall be reduced by a number of percentage points equal to the
product of (A) .25 and (B) the number of days in the period beginning on
the date which is five business days after the date on which the
Notice(s) of Redemption at Option of Buyer Upon Major Transaction or the
Notice(s) of Redemption at Option of Buyer Upon Triggering Event, as the
case may be, is delivered to the Company and ending on the date on which
the Void Optional Redemption Notice(s) is delivered to the Company.
Notwithstanding the foregoing, in the event of a dispute as to the
determination of the Closing Bid Price or the arithmetic calculation of
the Redemption Price, such dispute shall be resolved pursuant to Section
2(f)(iii) above with the term "Closing Bid Price" being substituted for
the term "Average Market Price" and the term "Redemption Price" being
substituted for the term "Conversion Rate". Payments provided for in
this Section 3 shall have priority to payments to other stockholders in
connection with a Major Transaction.
(4) Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If,
upon the Company's receipt of a Conversion Notice, the Company can not
issue shares of Common Stock registered for resale under the
Registration Statement for any reason, including, without limitation,
because the Company (x) does not have a sufficient number of shares of
Common Stock authorized and available, (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or its Securities, including without
limitation the Exchange Cap (as defined in Section 11 below), from
issuing all of the Common Stock which is to be issued to a holder of
Preferred
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<PAGE> 19
Shares pursuant to a Conversion Notice or (z) fails to have a sufficient
number of shares of Common Stock registered for resale under the
Registration Statement, then the Company shall issue as many shares of
Common Stock as it is able to issue in accordance with such holder's
Conversion Notice and pursuant to Section 2(f) above and, with respect
to the unconverted Preferred Shares, the holder, solely at such holder's
option, can elect to:
(i) require the Company to redeem from such holder
those Preferred Shares for which the Company is unable to issue Common
Stock in accordance with such holder's Conversion Notice ("MANDATORY
REDEMPTION") at a price per Preferred Share (the "MANDATORY REDEMPTION
PRICE") equal to the Redemption Price as of such Conversion Date;
(ii) if the Company's inability to fully convert
Preferred Shares is pursuant to Section 4(a)(z) above, require the
Company to issue restricted shares of Common Stock in accordance with
such holder's Conversion Notice and pursuant to Section 2(f) above;
(iii) void its Conversion Notice and retain or have
returned, as the case may be, the nonconverted Preferred Shares that
were to be converted pursuant to such holder's Conversion Notice; or
(iv) if the Company's inability to fully convert
Preferred Shares is pursuant to the Exchange Cap described in Section
4(a)(y) above, require the Company to issue shares of Common Stock in
accordance with such holder's Conversion Notice and pursuant to Section
2(f) above at a Conversion Price equal to the Market Price of the Common
Stock for the five consecutive trading days preceding such holder's
Notice in Response to Inability to Convert (as defined below).
(b) Mechanics of Fulfilling Holder's Election. The Company
shall immediately send via facsimile to a holder of Preferred Shares,
upon receipt of a facsimile copy of a Conversion Notice from such holder
which cannot be fully satisfied as described in Section 4(a) above, a
notice of the Company's inability to fully satisfy such holder's
Conversion Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the
Company is unable to fully satisfy such holder's Conversion Notice, (ii)
the number of Preferred Shares which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such holder must within ten (10)
business days of receipt of such Inability to Fully Convert Notice
deliver written notice via facsimile to the Company ("NOTICE IN RESPONSE
TO INABILITY TO CONVERT") of its election pursuant to Section 4(a)
above.
(c) Payment of Redemption Price. If such holder shall
elect to have its shares redeemed pursuant to Section 4(a)(i) above, the
Company shall pay the Mandatory Redemption Price in cash to such holder
within ten (10) days of the Company's receipt of the holder's Notice in
Response to Inability to Convert. If the Company shall fail to pay the
applicable Mandatory Redemption Price to such holder on a timely basis
as described in this Section 4(c) (other than pursuant to a dispute as
to the determination of the arithmetic calculation of the Redemption
Price), in addition to any remedy such holder of Preferred Shares may
have under this Certificate of Designations and the Securities Purchase
Agreement, such unpaid amount shall bear interest at the
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<PAGE> 20
rate of 2.0% per month (prorated for partial months) until paid in full.
Until the full Mandatory Redemption Price is paid in full to such
holder, such holder may void the Mandatory Redemption with respect to
those Preferred Shares for which the full Mandatory Redemption Price has
not been paid and receive back such Preferred Shares. Notwithstanding
the foregoing, if the Company fails to pay the applicable Mandatory
Redemption Price within such ten (10) days time period due to a dispute
as to the determination of the arithmetic calculation of the Redemption
Rate, such dispute shall be resolved pursuant to Section 2(f)(iii) above
with the term "Redemption Price" being substituted for the term
"Conversion Rate".
(d) Pro-rata Conversion and Redemption. In the event the
Company receives a Conversion Notice from more than one holder of
Preferred Shares on the same day and the Company can convert and redeem
some, but not all, of the Preferred Shares pursuant to this Section 4,
the Company shall convert and redeem from each holder of Preferred
Shares electing to have Preferred Shares converted and redeemed at such
time an amount equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number of
Preferred Shares outstanding) of all Preferred Shares being converted
and redeemed at such time.
(5) Reissuance of Certificates. In the event of a conversion or
redemption pursuant to this Certificate of Designations of less than all
of the Preferred Shares represented by a particular Preferred Stock
Certificate, the Company shall promptly cause to be issued and delivered
to the holder of such Preferred Shares a preferred stock certificate
representing the remaining Preferred Shares which have not been so
converted or redeemed.
(6) Reservation of Shares. The Company shall, so long as any of
the Preferred Shares are outstanding, reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding; provided
that the number of shares of Common Stock so reserved shall at no time
be less than 150% of the number of shares of Common Stock for which the
Preferred Shares are at any time convertible; provided further that such
shares of Common Stock so reserved shall be allocated for issuance upon
conversion of Preferred Shares pro rata among the holders of Preferred
Shares based on the number of Preferred Shares held by such holder
relative to the total number of authorized Preferred Shares.
(7) Voting Rights. Holders of Preferred Shares shall have no
voting rights, except as required by law, including but not limited to
the General Corporation Law of the State of Delaware, and as expressly
provided in this Certificate of Designations.
(8) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital
or from earnings available for distribution to its stockholders (the
"PREFERRED FUNDS"), before any amount shall be paid to the holders of
any of the capital stock of the Company of any class junior in rank to
the Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation,
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<PAGE> 21
dissolution and winding up of the Company, an amount per Preferred Share
equal to the sum of (i) $10,000 and (ii) an amount equal to the product
of (.05) (N/365) ($10,000) (such sum being referred to as the
"LIQUIDATION VALUE"); provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Preferred
Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares as
to payments of Preferred Funds (the "PARI PASSU SHARES"), then each
holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of Preferred
Funds payable to such holder as a liquidation preference, in accordance
with their respective Certificate of Designations, Preferences and
Rights, as a percentage of the full amount of Preferred Funds payable to
all holders of Preferred Shares and Pari Passu Shares. The purchase or
redemption by the Company of stock of any class, in any manner permitted
by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person,
nor the sale or transfer by the Company of less than substantially all
of its assets, shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Company. No holder of
Preferred Shares shall be entitled to receive any amounts with respect
thereto upon any liquidation, dissolution or winding up of the Company
other than the amounts provided for herein.
(9) Preferred Rank. All shares of Common Stock shall be of junior
rank to all Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding
up of the Company. The rights of the shares of Common Stock shall be
subject to the preferences and relative rights of the Preferred Shares.
Without the prior express written consent of the holders of not less
than two-thirds (2/3) of the then outstanding Preferred Shares, the
Company shall not hereafter authorize or issue additional or other
capital stock that is of senior rank to the Preferred Shares in respect
of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the
prior express written consent of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares, the Company shall not
hereafter authorize or make any amendment to the Company's Certificate
of Incorporation or bylaws, or file any resolution of the board of
directors of the Company with the Delaware Secretary of State containing
any provisions, which would adversely affect or otherwise impair the
rights or relative priority of the holders of the Preferred Shares
relative to the holders of the Common Stock or the holders of any other
class of capital stock. In the event of the merger or consolidation of
the Company with or into another corporation, the Preferred Shares shall
maintain their relative powers, designations and preferences provided
for herein and no merger shall result inconsistent therewith.
(10) Restriction on Redemption and Cash Dividends with respect to
Other Capital Stock. Until all of the Preferred Shares have been
converted or redeemed as provided herein, the Company shall not,
directly or indirectly, redeem, or declare or pay any cash dividend or
distribution on, its Common Stock without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then
outstanding Preferred Shares.
(11) Limitation on Number of Conversion Shares. The Company
shall not be obligated to issue upon conversion of the Preferred Shares,
in the aggregate, more than a number of shares of
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<PAGE> 22
Common Stock equal to 19.99% of the number of shares of Common Stock
outstanding on the Initial Issuance Date (such amount to be
proportionately and equitably adjusted from time to time in the event of
stock splits, stock dividends, combinations, reverse stock splits,
reclassification, capital reorganizations and similar events relating to
the Common Stock) (the "EXCHANGE CAP"), if issuance of a larger number
of shares of Common Stock would constitute a breach of the Company's
obligations under the rules or regulations of The Nasdaq Stock Market,
Inc. or any other principal securities exchange or market upon which the
Common Stock is or becomes traded. The Exchange Cap shall be allocated
among the Preferred Shares pro rata based on the total number of
authorized Preferred Shares.
(12) Vote to Change the Terms of or Issue Preferred Shares. The
affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting, of the holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, shall be
required for (1) any change to this Certificate of Designations or the
Company's Certificate of Incorporation which would amend, alter, change
or repeal any of the powers, designations, preferences and rights of the
Preferred Shares, or (2) any issuance of Preferred Shares other than
pursuant to the Securities Purchase Agreement.
(13) Lost or Stolen Certificates. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the
Preferred Shares, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the holder to the Company and, in the
case of mutilation, upon surrender and cancellation of the Preferred
Stock Certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date; provided,
however, the Company shall not be obligated to re-issue preferred stock
certificates if the holder contemporaneously requests the Company to
convert such Preferred Shares into Common Stock.
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<PAGE> 23
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by Kathleen Sereda Glaub, its Chief Executive Officer,
as of the 13th day of November, 1997.
CELL GENESYS, INC.
By: /s/ Kathleen Sereda Glaub
-------------------------------
Name: Kathleen Sereda Glaub
-------------------------------
Its: SVP and CFO
-------------------------------
<PAGE> 24
EXHIBIT I
CELL GENESYS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
Series __ Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series B Convertible Preferred
Stock, par value $0.001 per share (the "PREFERRED SHARES"), of Cell Genesys,
Inc., a Delaware corporation (the "COMPANY"), indicated below into shares of
Common Stock, par value $0.001 per share (the "COMMON STOCK"), of the Company,
by tendering the stock certificate(s) representing the share(s) of Preferred
Shares specified below as of the date specified below.
Date of Conversion:
-----------------------------------------------------
Number of Preferred Shares to be converted:
-----------------------------
Stock certificate no(s). of Preferred Shares to be converted:
-----------
Please confirm the following information:
Conversion Price:
-------------------------------------------------------
Number of shares of Common Stock to be issued:
--------------------------
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Facsimile Number:
Authorization:
-------------------------------------------------------
By:
---------------------------------------------------
Title:
------------------------------------------------
Dated:
-------------------------------------------------------
Account Number:
(if electronic book entry transfer):
----------------------------------
Transaction Code Number
(if electronic book entry transfer):
-----------------------------------
<PAGE> 1
EXHIBIT 99.1
Contact: Kathleen Sereda Glaub
Senior Vice President and
Chief Financial Officer
650-425-4542
CELL GENESYS ANNOUNCES $20 MILLION EQUITY FINANCING
CASH POSITION NOW $80 MILLION
FOSTER CITY, Calif., November 14, 1997 - Cell Genesys, Inc. (Nasdaq: CEGE) today
announced the private placement of $20 million convertible preferred stock. The
company, subject to certain conditions, may exercise a put option for up to an
additional $10 million convertible preferred stock and investors, subject to
certain conditions, may exercise a call option for up to an additional $10
million convertible preferred stock. The private placement is scheduled to close
on November 14.
"This equity financing provides Cell Genesys with greater financial flexibility
to invest in the company's expanding preclinical and clinical programs in gene
therapy," said Kathleen Sereda Glaub, senior vice president and chief financial
officer of Cell Genesys. "This infusion puts our total cash resources at
approximately $80 million currently, enabling the company to leverage its gene
therapy assets from a position of strength."
Under the securities agreement, the company will issue 2,000 shares of
convertible preferred stock with a maturity of November 14, 2002. After the
satisfaction of certain holding periods, each of the newly issued Series B
preferred shares is convertible, at the option of the holder, into shares of
common stock of the company based upon a conversion price of $11.02 per share or
if lower, 100 percent of the average of specified trading prices during the 10
trading days preceding a conversion. The convertible preferred stock bears a
dividend of five percent payable in kind.
Promethean Investment Group, L.L.C., a New York based fund management group,
advised investors in the transaction. Cell Genesys has agreed to file a
registration statement for the resale of the shares of Cell Genesys common stock
acquired on conversion of the convertible preferred stock.
Cell Genesys is focused on the development and commercialization of ex vivo and
in vivo gene therapies to treat major, life-threatening diseases and disorders
such as cancer and AIDS. The company's AIDS gene therapy is in Phase II human
clinical testing, and the company has also recently initiated human clinical
trials for its T cell gene therapy in colon cancer and for its GVAX(TM) cancer
vaccine in lung, melanoma and prostate cancer. The company is conducting
preclinical studies in other cancer indications, hemophilia, cardiovascular
disease and neurodegenerative disorders. Cell Genesys' assets outside gene
therapy include its Abgenix, Inc. subsidiary, which is developing antibody
therapies for transplantation-associated medical conditions, inflammation,
autoimmune disorders and cancer, as well as the company's licensing program in
gene activation technology.
-more-
<PAGE> 2
Statements made in this press release about the company's and its subsidiary's
product development activities, clinical trials and product pipelines, other
than statements of historical fact, are forward looking statements and are
subject to a number of uncertainties that could cause actual results to differ
materially from the statements made, including risks associated with the success
of clinical trials, research and product development programs, the regulatory
approval process, and competitive products. Please see the company's Form 10-K/A
dated April 30, 1997 for information about risks associated with clinical trials
and product development programs and other risks which may affect the company.
[11/14/97]
