<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- - ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21379
CUBIST PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3192085
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
24 Emily Street
Cambridge, Massachusetts 02139
(Address of Principal Executive Offices)
(617) 576-1999
(Registrant's Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
- -
As of November 3, 1998, there were 16,646,954 shares outstanding of the
Company's common stock, $0.001 per value per share.
- --------------------------------------------------------------------------------
<PAGE>
CUBIST PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
Item Page
Number Number
- ------ ------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Unaudited Financial Statements
Condensed Balance Sheets as of September 30, 1998
and December 31, 1997............................................................... 3
Condensed Statements of Operations for the three months
ended September 30, 1998 and 1997 and for the nine months
ended September 30, 1998 and 1997................................................... 4
Condensed Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997................................................... 5
Notes to the Unaudited Condensed Financial Statements............................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................ 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................................................ 12
Item 6. Exhibits and Reports on Form 8-K........................................................ 12
Signature............................................................................... 13
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
CUBIST PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
September December 31,
30, 1998 1997
---------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $19,043,987 $2,837,600
Short-term investments............................................ 2,041,848 6,709,623
Accounts receivable .............................................. -- 53,333
Prepaid expenses and other current assets......................... 189,418 142,635
---------------- -----------------
Total current assets.............................................. 21,275,253 9,743,191
Property and equipment ................................................ 7,263,454 5,893,101
Less: Accumulated depreciation and amortization.................. (3,619,775) (2,712,341)
---------------- -----------------
Property and equipment, net ...................................... 3,643,679 3,180,760
Long-term investments.................................................. 2,061,400 8,569,107
Other assets .......................................................... 141,243 180,294
---------------- -----------------
Total assets............................................. $27,121,575 $21,673,352
---------------- -----------------
---------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................................. $404,194 $275,260
Accrued expenses.................................................. 1,415,236 492,304
Current portion of long-term debt................................. 93,337 189,730
Current portion of capital lease obligations ..................... 641,871 548,351
---------------- -----------------
Total current liabilities .............................. 2,554,638 1,505,645
Long-term debt, net of current portion................................. 38,360 100,072
Long-term capital lease obligation, net of current portion............. 1,405,235 1,004,969
---------------- -----------------
Total liabilities........................................ 3,998,233 2,610,686
---------------- -----------------
Commitments
Stockholders' Equity:
Common Stock - $.001 par value;
authorized: 25,000,000 shares; issued: 16,646,954 shares,
1998 and 10,580,555 shares, 1997 ................................. 16,646 10,581
Additional paid-in capital............................................. 54,927,846 42,047,966
Accumulated deficit .................................................. (31,821,150) (22,995,881)
---------------- -----------------
Total stockholders' equity............................... 23,123,342 19,062,666
---------------- -----------------
Total liabilities and stockholders' equity............... $27,121,575 $21,673,352
---------------- -----------------
---------------- -----------------
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
3
<PAGE>
CUBIST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------ -----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sponsored research revenues ......... $ 373,550 $ 402,667 $ 1,260,650 $ 2,081,267
Operating expenses:
Research and development ......... 2,491,517 2,450,564 7,760,410 6,754,724
General and administrative ....... 960,371 783,139 2,635,703 2,362,476
------------ ------------ ------------ ------------
Total operating expenses ....... 3,451,888 3,233,703 10,396,113 9,117,200
Interest income ..................... 194,375 237,643 574,491 771,400
Interest expense .................... (80,776) (64,187) (264,297) (184,168)
Other income ........................ -- 1,833,334 -- 1,833,334
------------ ------------ ------------ ------------
Net loss ............................ ($ 2,964,739) ($ 824,246) ($ 8,825,269) ($ 4,615,367)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic and diluted net loss per common
share ............................... ($ .27) ($ .08) ($ .82) ($ .47)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of common
shares for basic and diluted net
loss per common share ............ 11,042,603 10,384,786 10,736,550 9,828,971
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
4
<PAGE>
CUBIST PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows for operating activities:
Net loss ................................................. $ (8,825,269) $ (4,615,367)
Adjustments to reconcile net loss to net cash provided by/
(used in) operating activities:
Depreciation and amortization .......................... 960,378 759,180
Changes in assets and liabilities:
Accounts receivable ............................... 53,333 394,267
Prepaid expenses and other current assets ......... (46,783) (132,696)
Other assets ..................................... 39,051 (6,495)
Accounts payable and accrued expenses ............. 1,051,866 (498,241)
Deferred revenue .................................. -- (84,600)
------------ ------------
Total adjustments ............................... 2,057,845 431,415
------------ ------------
Net cash used in operating activities ....................... (6,767,424) (4,183,952)
Cash flows from investing activities:
Purchase of fixed assets ................................. (1,336,711) (841,128)
Leasehold improvements ................................... (33,642) (94,478)
Purchase of short-term investments ....................... -- (6,578,808)
Maturities of short-term investments ..................... 4,667,775 --
Purchase of long-term investments ........................ -- (5,515,413)
Maturities of long-term investments ...................... 6,507,707 --
------------ ------------
Net cash provided by/(used in) investing activities ......... 9,805,129 (13,029,827)
Cash flows from financing activities:
Issuance of stock ........................................ 12,823,001 5,977,437
Proceeds from notes receivable ........................... 10,000 --
Repayments of debt ....................................... (158,105) (140,310)
Proceeds from capital lease financing .................... 913,355 890,644
Principal payments of capital lease obligations .......... (419,569) (486,245)
------------ ------------
Net cash provided by financing activities ................... 13,168,682 6,241,526
------------ ------------
Net increase (decrease) in cash and cash equivalents ........ 16,206,387 (10,972,253)
Cash and cash equivalents,
beginning of period ...................................... 2,837,600 19,329,353
------------ ------------
Cash and cash equivalents,
end of period ............................................ $ 19,043,987 $ 8,357,100
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ................... $ 264,297 $ 184,168
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
5
<PAGE>
CUBIST PHARMACEUTICALS, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note A. Nature of Business
Cubist Pharmaceuticals, Inc. ("Cubist" or the "Company") is a
biopharmaceutical company founded in May 1992 and is focused on the discovery,
development and commercialization of novel classes of antiinfective drugs to
treat infectious diseases caused by bacteria and fungal pathogens. Cubist has
established multiple technology licenses and collaborations, as well as a
network of advisors and collaborators. The Company is located in Cambridge,
Massachusetts.
Note B. Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are necessary, in
the opinion of management, for a fair presentation of the results of the interim
periods presented. Interim results are not necessarily indicative of results for
a full year. These unaudited condensed financial statements do not include all
information and footnote disclosures required by generally accepted accounting
principles and therefore should be read in conjunction with the Company's
audited financial statements and related footnotes for the year ended December
31, 1997 which are included in the Company's Annual Report on Form 10-K. Such
Annual Report on Form 10-K was filed by the Company with the Securities and
Exchange Commission (the "Commission") on March 20, 1998.
Net Loss Per Common Share
The net loss per common share is computed based upon the weighted
average number of common shares and common equivalent shares (using the treasury
stock method) outstanding after certain adjustments described below. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive.
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards 128 (SFAS 128) "Earnings per Share", which requires the
disclosure of Basic Earnings per Common Share and Diluted Earnings per Common
Share, both as defined in the standard, for all periods presented. Adoption of
this standard did not have any impact on the earnings per share computation for
any period presented.
Comprehensive Income
Effective January 1, 1998, the Company adopted the Statement of
Financial Accounting Standards No. 130 (SFAS 130) "Reporting Comprehensive
Income". This statement requires changes in comprehensive income to be shown in
a financial statement that is displayed with the same prominence as other
financial statements. Adoption of this statement did not have an impact on the
financial statements.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities" which is effective for fiscal years
beginning after June 15, 1999. The statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Adoption of this standard is not expected to have a material impact on the
financial position or results of operations of the Company.
Note C. Private Placement
6
<PAGE>
On September 23, 1998, the Company completed a private placement
financing with investors and raised approximately $12.8 million (net of
financing costs of $820,000) by issuing 6,065,560 shares at $2.25 per share,
along with 3,032,783 warrants exercisable for Common Stock at $2.25 per share.
The warrants are exercisable at any time from September 23, 1998 until September
23, 2003. The value of the warrants and Common Stock have been reflected in
additional paid-in-capital. The Company has filed an S-3 registration statement
to register the resale of the 9,098,343 shares of Common Stock related to this
financing. The proceeds of this private offering will be used primarily to fund
the clinical development of daptomycin and the development of its proprietary
genomic target validation and assay development (VITA-TM-) technology.
7
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
Except for the historical information contained herein, this Quarterly
Report on Form 10-Q may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, but not limited to, (i) statements about the
adequacy of the Company's cash, cash equivalents, other capital resources,
interest income, other income and future revenues due under the Company's
collaborative agreements to fund its operating expenses and capital requirements
as currently planned through 1999 (ii) statements about the amount of capital
expenditures that the Company expects to incur in 1998, (iii) statements about
the Company's plans to begin clinical trials of daptomycin in the first quarter
of 1999, and (iv) certain statements identified or qualified by words such as
"likely", "will", "suggests", "may", "would", "could", "should", "expects",
"anticipates", "estimates", "plans", "projects", "believes", or similar
expressions (and variants of such words or expressions). Investors are cautioned
that forward-looking statements are inherently uncertain. Actual performance and
results of operations may differ materially from those projected or suggested in
the forward-looking statements due to certain risks and uncertainties,
including, but not limited to, the risks and uncertainties described or
discussed in the section "Risk Factors" in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997. The forward-looking statements
contained herein represent the Company's judgment as of the date of this
quarterly report on Form 10-Q, and the Company cautions readers not to place
undue reliance on such statements.
Overview
Since its incorporation on May 1, 1992 and commencement of operations
in February 1993, Cubist has been focused on the discovery, development and
commercialization of novel antiinfective drugs to treat infectious diseases
caused by bacteria and fungal pathogens. The Company has a limited history of
operations and has experienced significant operating losses since inception. The
Company expects to incur significant additional operating losses over the next
several years and expects cumulative losses to increase substantially due to
expanded research and development efforts, pre-clinical and clinical trials and
development of manufacturing, marketing and sales capabilities.
A key element of the Company's strategy is to enhance certain of its
drug discovery and development programs and to fund its capital requirements, in
part, by entering into collaborative agreements with major pharmaceutical
companies. The Company is a party to collaborative agreements based specifically
on its aminoacyl-tRNA synthetase program with Bristol-Myers Squibb Company
("Bristol-Myers Squibb") and Merck & Co., Inc. ("Merck"). Under these
collaborative agreements, the Company is entitled to receive research support
payments and, if certain drug development milestones are achieved, milestone
payments. In addition, the Company will be entitled to receive royalties on
worldwide sales of any drug developed and commercialized from these
collaborations.
In addition, the Company entered into a license agreement with Eli
Lilly and Company ("Eli Lilly") pursuant to which the Company acquired exclusive
worldwide rights to develop, manufacture and market daptomycin. Daptomycin is a
novel, natural product being developed for the treatment of Staphylococcus
aureus and enterococcus infections. The Company anticipates that it will begin
clinical trials of daptomycin in the first quarter of 1999. In exchange for such
license, the Company has paid an upfront license fee in cash, and if certain
drug development milestones are achieved, has agreed to pay milestone payments
by issuing shares of Common Stock to Eli Lilly. In addition, the Company will be
required to pay royalties to Eli Lilly on worldwide sales of daptomycin.
8
<PAGE>
Results of Operations
Three Months Ended September 30, 1998 and 1997
Revenues. Total revenues in the three months ended September 30, 1998
were $374,000 compared to $403,000 in the three months ended September 30, 1997,
a decrease of $29,000 or 7.2%. The revenue earned in the three months ended
September 30, 1998 consisted of $250,000 in research support funding from the
Bristol-Myers Squibb collaboration, and $124,000 in SBIR grants. In the three
months ended September 30, 1997, revenues consisted of research funding from the
Bristol-Myers Squibb and Merck collaborations, and SBIR grants. The decrease was
due to the lack of Merck funding in the current quarter due to such stage of
research support funding, offset in part by increased SBIR grant funding.
Research and Development Expenses. Total research and development
expenses in the three months ended September 30, 1998 were $2,492,000 compared
to $2,451,000 in the three months ended September 30, 1997, an increase of
$41,000 or 1.7%. The increase was largely due to increased costs related to
daptomycin development, and the additional personnel and purchases that are
required by such development, offset by amortization of the Company's purchase
option in Novalon over the term of the Company's option to acquire Novalon in
the same period in 1997.
General and Administrative Expenses. General and administrative
expenses in the three months ended September 30, 1998 were $961,000 compared to
$783,000 in the three months ended September 30, 1997, an increase of $178,000
or 22.7%. The increase was largely due to both increased marketing expenses of
our potential product, daptomycin, and increased costs related to additional
personnel hired in connection with the Company's growth.
Interest Income and Expense. Interest income in the three months ended
September 30, 1998 was $194,000 compared to $238,000 in three months ended
September 30, 1997, a decrease of $44,000 or 18.4%. The decrease in interest
income was due primarily to lower average cash, cash equivalent and investment
balances during the three months ended September 30, 1998 as compared to the
three months ended September 30, 1997. Interest expense in the three months
ended September 30, 1998 was $81,000 as compared to $64,000 during the three
months ended September 30, 1997 due to increased capital lease activity.
Other Income. Other income in the three months ended September 30, 1997
was $1,833,000 and consisted entirely of gain on the sale of the Company's
equity position in Novalon.
Net Loss. The net loss during the three months ended September 30, 1998
was $2,965,000 compared to $824,000 during the three months ended September 30,
1997, an increase of $2,141,000 or 259.8%. The increased loss was primarily due
to the additional expenses incurred to support the advancement of the Company's
internal research and development programs, as well as reduced revenue from
research support funding, and the lack of other income recognized in the three
months ended September 30, 1998, as compared to the same period in 1997.
Nine Months Ended September 30, 1998 and 1997
Revenues. Total revenues in the nine months ended September 30, 1998
were $1,261,000 compared to $2,081,000 in the nine months ended September 30,
1997, a decrease of $820,000 or 39.4%. The revenue recognized in the nine months
ended September 30, 1998 consisted of $857,000 in research support payments from
the Bristol-Myers Squibb and Merck collaborations; and $404,000 in SBIR grant
funding. In the nine months ended September 30, 1997, revenues consisted of
research support payments from Bristol-Myers Squibb, Merck and Pfizer; milestone
payments from Bristol-Myers Squibb; and SBIR grant funding. The decrease was
mainly due to smaller revenues associated with such stage of the Bristol-Myers
Squibb and Merck collaborations, and the completion of the Pfizer collaboration.
Research and Development Expenses. Total research and development
expenses in the nine months ended September 30, 1998 were $7,760,000 compared to
$6,755,000 in the nine months ended September 30, 1997, an
9
<PAGE>
increase of $1,005,000 or 14.9%. The increase was largely due to increased costs
related to daptomycin development, and the additional personnel and purchases
that are required by such development, offset by amortization of the Company's
purchase option in Novalon over the term of the Company's option to acquire
Novalon in the same period in 1997.
General and Administrative Expenses. General and administrative
expenses in the nine months ended September 30, 1998 were $2,636,000 compared to
$2,362,000 in the nine months ended September 30, 1997, an increase of $274,000
or 11.6%. The increase was due to increased costs related to additional
personnel hired in connection with the Company's growth, as well as increased
marketing and investor relations expenses.
Interest Income and Expense. Interest income in the nine months ended
September 30, 1998 was $574,000 compared to $771,000 in the nine months ended
September 30, 1997, a decrease of $197,000 or 25.5%. The decrease in interest
income was due primarily to a lower average cash, cash equivalent and investment
balance during the nine months ended September 30, 1998 as compared to the nine
months ended September 30, 1997. Interest expense in the nine months ended
September 30, 1998 was $264,000 as compared to $184,000 during the nine months
ended September 30, 1997 due to increased capital lease activity.
Other Income. Other income in the nine months ended September 30, 1997
was $1,833,000 and consisted entirely of gain on the sale of the Company's
equity position in Novalon.
Net Loss. The net loss during the nine months ended September 30, 1998
was $8,825,000 compared to $4,615,000 in the nine months ended September 30,
1997, an increase of $4,210,000 or 91.2%. The increase was primarily due to the
additional expenses incurred to support the advancement of the Company's
internal research and development programs as well as reduced revenue from such
stage of research support funding, and the lack of other income recognized in
the nine months ended September 30, 1998, as compared to the same period in
1997.
Liquidity and Capital Resources
Since inception, the Company has financed its operations through the
sale of equity securities, equipment financing, sponsored research revenues,
license revenues and interest earned on invested capital. The Company's total
cash, cash equivalent and investments balance at September 30, 1998 was
$23,147,000 compared to $18,116,000 at December 31, 1997.
As of September 30, 1998, the Company had invested an aggregate of
$7,263,000 (of which $502,000 was invested during the three months then ended)
in property and equipment, primarily in laboratory equipment under capital
leases. The obligations under capital leases at September 30, 1998 were
$2,047,000. Minimum annual principal payments due under capital leases total
$569,000 in 1998. Principal payments are scheduled to decline each year
thereafter until expiration in 2002. The Company made principal payments under
its capital lease obligations of $420,000 in the nine months ended on September
30, 1998. The Company expects its capital expenditures in 1998 to be
approximately $1,500,000 consisting of laboratory and other equipment purchases.
10
<PAGE>
The Company believes that its existing capital resources, interest
income and future revenues due under the Bristol-Myers Squibb and Merck
collaborative agreements will be sufficient to fund its operating expenses and
capital requirements, as currently planned, through 1999. The Company's actual
cash requirements may vary materially from those now planned and will depend on
numerous factors. There can be no assurance that the Company's existing cash,
cash equivalents, other capital resources, interest income and future revenues
due under the Bristol-Myers Squibb and Merck collaborative agreements will be
sufficient to fund its operating expenses and capital requirements during such
period. The Company will need to raise substantial additional capital to fund
its operations. The Company intends to seek such additional funding through
public or private financing or collaborative or other arrangements with
corporate partners.
On September 23, 1998, the Company completed a private placement
financing with investors and raised approximately $12.8 million (net of
financing costs of $820,000) by issuing 6,065,560 shares at $2.25 per share,
along with 3,032,783 warrants exercisable for Common Stock at $2.25 per share.
The Company has filed an S-3 registration statement to register the resale of
the 9,098,343 shares of Common Stock related to this financing. The proceeds of
this private offering will be used primarily to fund the clinical development of
daptomycin and the development of its proprietary genomic target validation and
assay development (VITA(TM)) technology. For additional information, see Part
II, Item II hereof. These additional funds together with existing cash resources
are expected to be used to fund the Company's operations and capital
requirements through 1999.
Earnings Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards 128 (SFAS 128) "Earnings per Share", which requires the
disclosure of Basic Earnings per Common Share and Diluted Earnings per Common
Share, both as defined in the standard, for all periods presented. Adoption of
this standard did not have any impact on the earnings per share computation for
any period presented.
Comprehensive Income
Effective January 1, 1998, the Company adopted the Statement of
Financial Accounting Standards No. 130 (SFAS 130) "Reporting Comprehensive
Income". This statement requires changes in comprehensive income to be shown in
a financial statement that is displayed with the same prominence as other
financial statements. Adoption of this statement did not have an impact on the
financial statements.
Investments
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities" which is effective for fiscal years
beginning after June 15, 1999. The statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Adoption of this standard is not expected to have a material impact on the
financial position or results of operations of the Company.
Year 2000 Compliance
The Company has assessed the impact of the year 2000 as it relates to
the Company's computer and operating systems and does not believe there is a
significant risk of material impact from the year 2000 on the Company's internal
systems, business, results of operations or financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
<PAGE>
PART II -- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On September 23, 1998, the Company completed a private placement
financing by issuing 6,065,560 shares of the Company's common stock, par value
$0.001 per share ("Common Stock"), for a per share price of $2.25 and an
aggregate offering price of $13,647,510, along with 3,032,783 warrants
exercisable for Common Stock at $2.25 per share, to a group of institutional
investors. The warrants are exercisable at any time from September 23, 1998
until September 23, 2003. An exemption from registration is claimed pursuant to
Section 4(2) of the Act and Rule 506 promulgated thereunder.
The Company's Registration Statement on Form S-1 (Reg. No. 333-6795) in
connection with the Company's initial public offering of Common Stock was
declared effective by the Securities and Exchange Commission ("the SEC") on
October 25, 1996. On October 25, 1996, the Company also filed another
Registration Statement on Form S-1 (Reg. No. 333-5880) with the SEC pursuant to
Rule 462 (b) promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Such Registration Statements (together the "IPO Registration
Statement") provided for the registration under the Securities Act of 2,875,000
shares of the Company's Common Stock.
The aggregate initial public offering proceeds for all 2,875,000 shares
of Common Stock registered under the Securities Act pursuant to the IPO
Registration Statement was $17,250,000. The net proceeds to the Company from
such issuance and distribution, after deducting the aggregate amount of expenses
(including underwriting discounts and commissions) paid by the Company in
connection therewith, were $15,153,000.
Of such net proceeds, an aggregate of $9,960,000 has been spent through
September 30, 1998 for the following uses and in the following amounts per use:
$324,000 in construction of plant, building and facilities; $2,239,000 for
repayment of indebtedness; $7,397,000 for working capital. All amounts spent by
the Company for such uses, other than payment of salaries to directors and
officers of the Company, consisted of direct payments to persons or entities,
none of which was a director or officer of the Company, holder of 10 percent or
more of any class of equity securities of the Company or other affiliate of the
Company. The remaining balance of such net proceeds, consisting of $5,193,000,
are held in cash, cash equivalents, and investments.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 -- Securities Purchase Agreement, dated as of September
10, 1998 between the Company and each of the Purchasers listed
on Exhibit A thereto.
10.2 -- Registration Rights Agreement, dated as of September
10, 1998 between the Company and each person listed on Exhibit
A thereto.
10.3 -- Common Stock Purchase Warrants, dated September 23,
1998, executed by the Company. 27 -- Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Company on September 14,
1998, to file a press release announcing the execution of the
definitive agreement with investors to raise approximately
$13.7 million (See Part II, Item II).
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CUBIST PHARMACEUTICALS, INC.
November 4, 1998 By: /s/ Thomas A. Shea
---------------------------------
Thomas A. Shea,
Senior Director of Finance
& Administration and Treasurer
(Authorized Officer and Principal
Finance and Accounting Officer)
13
<PAGE>
Exhibit 10.1
CUBIST PHARMACEUTICALS, INC.
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is dated as of the 10th day of
September, 1998 by and between CUBIST PHARMACEUTICALS, INC., a Delaware
corporation with its principal office at 24 Emily Street, Cambridge,
Massachusetts 02139 (the "Company"), and the several purchasers named in the
attached Exhibit A (individually, a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers, severally, desire to purchase from the Company, 6,065,560 shares
(the "Purchased Shares") of the authorized but unissued shares of common stock,
$.001 par value per share, of the Company (the "Common Stock"), and the Company
desires to issue to the Purchasers, and the Purchasers desire to acquire from
the Company, Common Stock Purchase Warrants exercisable, in the aggregate, for
3,032,783 shares of Common Stock.
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
(a) "Affiliate" of a party means any corporation or other
business entity (and, in addition in the case of Sofinov, a governmental body)
controlled by, controlling or under common control with such party. For this
purpose "control" shall mean direct or indirect beneficial ownership of more
than fifty percent (50%) of the voting or income interest in such corporation or
other business entity (and, in the case of Sofinov, such governmental body).
(b) "Closing " shall have the meaning ascribed to such term in
Section 2.4 hereof.
(c) "Closing Date" means the date of the Closing.
(d) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and all of the rules and regulations promulgated thereunder.
(e) "Majority Purchasers" means, at the relevant time of
reference thereto, those Purchasers, who at Closing would have the right to
acquire more than fifty percent (50%) of the Purchased Shares, provided that
Sofinov forms part of such group.
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(f) "Majority Other Purchasers" means, at the relevant time of
reference thereto, those Other Purchasers holding more than fifty percent (50%)
of the Purchased Shares and Warrant Shares then held by all of the Other
Purchasers.
(g) "Other Purchasers" means all of the Purchasers listed on
Exhibit A hereto other than Sofinov.
(h) "Registration Rights Agreement" shall mean that certain
Registration Rights Agreement, dated as of the date hereof, among the Company
and the Purchasers.
(i) "SEC" shall mean the Securities and Exchange Commission.
(j) "Securities" shall mean, collectively, the Purchased
Shares, the Warrants and the Warrant Shares.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated thereunder.
(l) "Shares" shall mean, collectively, the Purchased Shares
and the Warrant Shares.
(m) "Sofinov" means Societe Financiere d'Innovation Inc., a
company organized under the laws of the Province of Quebec.
(n) "Warrants" shall have the meaning ascribed to such term in
Section 2.2 hereof.
(o) "Warrant Shares" means the shares of Common Stock issued
and/or issuable upon exercise of any or all of the Warrants.
2. Purchase and Sale of Purchased Shares; Issuance of Common Stock
Purchase Warrants.
2.1 Purchase and Sale. Subject to and upon the terms and
conditions set forth in this Agreement, the Company agrees to issue and sell to
each Purchaser, and each Purchaser, severally, hereby agrees to purchase from
the Company, at the Closing, the number of shares of Common Stock set forth
opposite the name of such Purchaser under the heading "Number of Purchased
Shares to be Purchased" on Exhibit A hereto, at a purchase price of $2.25 per
share. The total purchase price payable by each Purchaser for the number of
shares of Common Stock that such Purchaser is hereby agreeing to purchase is set
forth opposite the name of such Purchaser under the heading "Purchase Price" on
Exhibit A hereto. The aggregate purchase price payable by all of the Purchasers
to the Company for all of the Purchased Shares shall be $13,647,510.
2.2 Issuance of Common Stock Purchase Warrants. Subject to and
upon the terms and conditions set forth in this Agreement, the Company agrees to
issue to each Purchaser, at the Closing, a Common Stock Purchase Warrant,
substantially in the form attached as Exhibit
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B hereto (each individually, a "Warrant" and, collectively with all Common Stock
Purchase Warrants issued pursuant to this Section 2.2 to the other Purchasers,
the "Warrants"), exercisable for the number of shares of Common Stock set forth
opposite the name of such Purchaser under the heading "Number of Warrant Shares"
on Exhibit A hereto, at an exercise price of $2.25 per share. No additional
consideration shall be payable by any Purchaser in respect of the issuance by
the Company of such Purchaser's Warrant at the Closing.
2.3 Reservation of Warrant Shares. Prior to the Closing Date,
the Company will have duly authorized and reserved, free of preemptive rights
and other preferential rights, an aggregate of 3,032,783 shares of Common Stock
for issuance upon exercise of the Warrants. The Company covenants to continue to
reserve, free of preemptive rights and other preferential rights, a sufficient
number of its authorized but unissued shares of Common Stock for issuance upon
exercise of the Warrants.
2.4 Closing. The closing of the transactions contemplated
under this Agreement (the "Closing") shall take place at the Boston offices of
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110 at 10:00 a.m.
on the earlier of (i) the second business day after the Company shall have given
written notice (the "Closing Notice") to the Purchasers that it believes all of
the conditions precedent set forth in Section 5.1 have been satisfied in full or
(ii) thirty (30) days from the date hereof, or at such other location, date and
time as may be agreed upon between the Purchasers and the Company. The fact that
the Company shall have given such Closing Notice shall not limit any Purchaser's
right to disagree with such Closing Notice.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
3.1 Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect upon the Company. The Company has all requisite corporate power
and authority to carry on its business as now conducted. The Company has no
subsidiaries.
3.2 Capitalization. The authorized capital stock of the
Company consists of (i) 25,000,000 shares of Common Stock, of which 10,581,394
shares are outstanding on the date hereof and (ii) 5,000,000 shares of preferred
stock, of which no shares are outstanding on the date hereof. Except as set
forth in Schedule 3.2 hereto, there are no existing options, warrants, calls,
preemptive (or similar) rights, subscriptions or other rights, agreements,
arrangements or commitments of any character obligating the Company to issue,
transfer or sell, or cause to be issued, transferred or sold, any shares of the
capital stock of the Company or other equity interests in the Company or any
securities convertible into or exchangeable for such shares of capital stock or
other equity interests, and there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of its capital
stock or other equity interests.
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3.3 Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement, the
Warrants and the Registration Rights Agreement and the consummation of the
transactions contemplated herein and therein has been taken. When executed and
delivered by the Company, each of this Agreement, the Warrants and the
Registration Rights Agreement shall constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally and by
general equitable principles. The Company has all requisite corporate power to
enter into this Agreement, the Warrants and the Registration Rights Agreement
and to carry out and perform its obligations under the terms of this Agreement,
the Warrants and the Registration Rights Agreement.
3.4 Valid Issuance of the Purchased Shares, Warrants and
Warrant Shares. The Purchased Shares being purchased by the Purchasers hereunder
will, upon issuance pursuant to the terms hereof, be duly authorized and validly
issued, fully paid, nonassessable and free of any liens or encumbrances created
by the Company and will be in compliance with applicable state and federal
securities laws. The Warrants to be issued to the Purchasers hereunder will,
upon issuance pursuant to the terms hereof, be duly authorized, validly issued
and free of any liens or encumbrances created by the Company and will be in
compliance with applicable state and federal securities laws. The reservation,
issuance, sale and delivery by the Company of the Warrant Shares have been duly
authorized by all requisite corporate action of the Company, and the Warrant
Shares have been duly reserved in accordance with Section 2.3 of this Agreement.
The Warrant Shares, upon issuance pursuant to the terms of the Warrants, (i)
will be validly issued, fully paid, nonassessable and free of any liens or
encumbrances created by the Company and, (ii) will be, assuming that at the time
of exercise the holder of such Warrants is an accredited investor and assuming
no change in the applicable state and federal securities laws, in compliance
with applicable state and federal securities laws.
3.5 SEC Documents. The Company has furnished to each
Purchaser, a true and complete copy of the Company's Annual Report on Form
10-K for the year ended December 31, 1997, the Company's Quarterly Report on
Form 10-Q for the three months ended March 31, 1998, the Company's Quarterly
Report on Form 10-Q for the three months ended June 30, 1998, and any other
statement, report, registration statement (other than registration statements
on Form S-8) or definitive proxy statement filed by the Company with the SEC
during the period commencing June 30, 1998 and ending on the date hereof. The
Company will, promptly upon the filing thereof, also furnish to each
Purchaser all statements, reports (including, without limitation, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K), registration
statements and definitive proxy statements filed by the Company with the SEC
during the period commencing on the date hereof and ending on the Closing
Date (all such materials required to be furnished to each Purchaser pursuant
to this sentence or pursuant to the next preceding sentence of this Section
3.5 being called, collectively, the "SEC Documents"). As of their respective
filing dates, the SEC Documents complied or will comply in all material
respects with the requirements of the Exchange Act or the Securities Act, as
applicable, and none of the SEC Documents 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 made therein, in light
of the circumstances under which they were made, not misleading, as of their
respective filing
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dates, except to the extent corrected by a subsequently filed SEC Document.
The Company has, during the period that the Company has been subject to the
requirements of Section 12 or 15(d) of the Exchange Act, filed in a timely
manner all reports and other material required to be filed by it pursuant to
Section 13, 14 or 15(d) of the Exchange Act. The Company has not filed any
amendment to its Annual Report on Form 10-K for the year ended December 31,
1997, its Quarterly Report on Form 10-Q for the three months ended March 31,
1998, or its Quarterly Report on Form 10-Q for the three months ended June
30, 1998. As of the date hereof, the Company has not filed any Current Report
on Form 8-K for any period ending on the date hereof.
3.6 Financial Statements. The Company's audited Statements of
Income, Stockholders' Equity and Cash Flows for each of the fiscal years ended
December 31, 1996 and 1997 and the Company's audited Balance Sheet as of
December 31, 1997 are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, a copy of which has been delivered to the
Purchasers. The Company's unaudited Statements of Income, Stockholders' Equity
and Cash Flows for the period from January 1, 1998 to June 30, 1998 and the
Company's unaudited Balance Sheet as of June 30, 1998 are included in the
Company's Quarterly Report on Form 10-Q for the three months ended June 30,
1998, a copy of which has been delivered to the Purchasers. All of the financial
statements referred to above in this Section 3.6 are hereinafter referred to,
collectively, as the "Financial Statements". The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved, and fairly present, in all
material respects, the financial position of the Company and the results of its
operations as of the date and for the periods indicated thereon, except that
those Financial Statements that are unaudited may not have been prepared in
accordance with generally accepted accounting principles because of the absence
of footnotes normally contained therein and may be subject to normal year-end
audit adjustments which, individually, and in the aggregate, will not be
material.
3.7 Consents. All consents, approvals, orders, authorizations,
registrations, qualifications, and filings required on the part of the Company
to be obtained or made prior to the Closing in connection with the execution,
delivery or performance of this Agreement, the Warrants and the Registration
Rights Agreement, and the consummation of the transactions contemplated herein
and therein have been obtained or made or will be obtained or made, prior to the
Closing.
3.8 No Conflict. The execution and delivery of this Agreement,
the Warrants and the Registration Rights Agreement by the Company and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit or give rise to an event which results in the creation of any lien,
charge or encumbrance upon any of the Company's properties or assets under (i)
any provision of the Certificate of Incorporation or By-laws of the Company or
(ii) any agreement or instrument, permit, franchise, license, judgment, order,
statute, law, ordinance, rule or regulations, applicable to the Company or its
respective properties or assets.
<PAGE>
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3.9 Absence of Litigation. There is no action, suit or
proceeding or, to the Company's knowledge, any investigation, pending, or to the
Company's knowledge, threatened against the Company and in which an unfavorable
outcome, ruling or finding in any said matter, or for all matters taken as a
whole, might have a material adverse effect on the Company. The foregoing
includes, without limitation, any such action, suit, proceeding or investigation
that questions this Agreement, the Warrants or the Registration Rights Agreement
or the right of the Company to execute, deliver and perform under same.
3.10 Nasdaq National Market. The Common Stock is listed on the
Nasdaq National Market, and there are no proceedings to revoke or suspend such
listing. The sale of the Securities as contemplated hereby will not result in a
violation of the Nasdaq rules and regulations.
3.11 Brokers or Finders. Except for Pacific Growth Equities,
Inc., the Company has not dealt with any broker or finder in connection with the
transactions contemplated by this Agreement, and the Company has not incurred,
and shall not incur, directly or indirectly, any liability for any brokerage or
finders' fees or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby. All fees payable to
Pacific Growth Equities, Inc. will be paid by the Company.
3.12 Compliance With Laws. The Company has complied, and is in
compliance with, all federal, state, county, local and foreign laws, rules,
regulations, ordinances, decrees and orders applicable to the operation of its
business or to the real property or personal property that it owns or leases
(including, without limitation, all such laws, rules, ordinances, decrees and
orders relating to federal food and drug administration, antitrust, consumer
protection, currency exchange, environmental protection, equal opportunity,
health, occupational safety, pension, securities and trading-with-the-enemy
matters), the failure to comply with which would, individually or in the
aggregate, have a material adverse effect on the Company. The Company has not
received any notification of any asserted present or past unremedied failure by
the Company to comply with any of such laws, rules, regulations, ordinances,
decrees or orders.
3.13 Private Offering. During the six months preceding the
date of this Agreement, neither the Company nor any person acting on its behalf
has, directly or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of any security (as defined in the
Securities Act) that is or may be integrated with the sale of the Purchased
Shares and the Warrants in a manner that would require the registration of the
Purchased Shares or the Warrants under the Securities Act. During the six months
preceding the date of this Agreement, neither the Company nor any person acting
on its behalf has offered or sold any Purchased Shares or Warrants by means of
any general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act. Assuming the accuracy of the Purchasers'
representations in Section 4 hereof, the offering and sale of the Purchased
Shares and the Warrants will satisfy the requirements of Rule 506 under the
Securities Act.
3.14 Changes.
(a) Since June 30, 1998, there has not been:
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(i) any damage, destruction or loss (whether or not
covered by insurance) to its assets which has had or is expected to have a
material adverse effect on the Company;
(ii) any material change in the accounting methods or
practices followed by the Company;
(iii) any material debt, obligation or liability
(whether absolute or contingent) incurred by the Company (whether or not
presently outstanding) except (x) current liabilities incurred, and obligations
under agreements entered into, in the ordinary course of business and (y)
obligations or liabilities entered into or incurred in connection with the
execution of this Agreement; or
(iv) any sale, lease, abandonment or other
disposition by the Company of any real property or, other than in the ordinary
course of business, of any equipment or other operating properties or, other
than in the ordinary course of business, any sale, assignment, transfer, license
or other disposition by the Company of any intellectual property or other
intangible asset.
(b) Notwithstanding anything to the contrary in this
Agreement, if, after the date of this Agreement the Company discloses
information concerning an event that renders the representation and warranty set
forth in this Section 3.14 inaccurate, and such information is material and not
otherwise available to the public generally, the Purchasers agree not to sell,
assign or otherwise transfer any of the Securities based on such material
non-public information until such material non-public information is made
available to the public generally. In the event that the Closing contemplated
hereby actually occurs, the Company shall disclose such material non-public
information in the Registration Statement required to be filed pursuant to the
Registration Rights Agreement.
3.15 Material Contracts. Except as set forth on Schedule 3.15
hereto, the contracts listed as exhibits to the Company's Annual Report on Form
10-K for the year ended December 31, 1997, the Company's Quarterly Report on
Form 10-Q for the three months ended March 31, 1998, the Company's Quarterly
Report on Form 10-Q for the three months ended June 30, 1998, are all of the
material contracts (as defined in the Securities Exchange Act of 1934 as
amended) to which the Company is a party or by which it or its assets may be
bound. The Company is, and, to the best of the Company's knowledge, all other
parties to such material contracts are, in compliance in all material respects
with their obligations thereunder.
3.16 Title to Properties and Assets, Liens, etc. The Company
has good and marketable title to its properties and assets, and good title to
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance, or charge, other than (i) those resulting from taxes which have not
yet become delinquent, (ii) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or have a material
adverse effect on the Company, and (iii) those that have otherwise arisen in the
ordinary course of business.
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3.17 Patents and Trademarks. To the best of the Company's
knowledge, the Company has sufficient title and ownership of or rights to use
such trade names, copyrights, trade secrets, information, patents, trademarks,
service marks, rights and processes (including all applications therefor) as are
necessary for its business as now conducted and as proposed to be conducted,
without any conflict with or infringement of the rights of others. Except as set
forth in the exhibit list to the Company's 1997 Form 10-K, there are no material
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any material options, licenses or agreements
of any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, proprietary rights and processes of any
other person or entity. The Company has not received any communications alleging
that the Company has violated or, by conducting its business as now conducted or
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as now conducted or proposed to be conducted. To the
best of the Company's knowledge, no person or entity is infringing or
threatening to infringe the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of the Company. All
employees, officers and directors, other than those employees who are not privy
to any of the Company's confidential information, are bound by confidentiality
and assignment of intellectual property and technology agreements and such
agreements and obligations do not confer on any such person any rights of the
intellectual property of the Company.
3.18 Labor Matters. The Company has no collective bargaining
agreement with any of its employees and, to the Company's knowledge, there is no
labor union organizing activity pending or threatened with respect to the
Company. There are no disputes pending or, to the knowledge of the Company,
threatened between the Company, on the one hand, and any of its employees, on
the other hand, other than employee grievances arising in the ordinary course of
business which would not, individually or in the aggregate, have a material
adverse effect on the Company.
3.19. Form S-3 Eligibility. The Company is eligible to file a
Registration Statement on Form S-3, or any successor form, pursuant to Section
3(a) of the Registration Rights Agreement. The Company is not aware of any facts
that would prevent or destroy such eligibility.
4. Representations and Warranties of the Purchasers. Each Purchaser
severally for itself, and not jointly with the other Purchasers, represents and
warrants to the Company as follows:
4.1 Authorization. All action on the part of such Purchaser
and, if applicable, its officers, directors, partners and shareholders necessary
for the authorization, execution, delivery and performance of this Agreement and
the Registration Rights Agreement and the consummation of the transactions
contemplated herein and therein has been taken. When executed and delivered,
each of this Agreement and the Registration Rights Agreement will
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constitute the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and by general equitable principles. Such Purchaser
has all requisite corporate, trust or partnership (as the case may be) power to
enter into each of this Agreement and the Registration Rights Agreement and to
carry out and perform its obligations under the terms of this Agreement and the
Registration Rights Agreement.
4.2 Purchase Entirely for Own Account. Such Purchaser is
acquiring the Purchased Shares and the Warrant being acquired by it hereunder,
and will acquire any Warrant Shares issued by the Company upon exercise of such
Purchaser's Warrant, for investment, for its own account, and not for resale or
with a view to distribution thereof in violation of the Securities Act.
4.3 Investor Status; Etc. Such Purchaser certifies and
represents to the Company that, at the time such Purchaser acquires any of the
Purchased Shares and the Warrants, such Purchaser will be an "Accredited
Investor" as defined in Rule 501 of Regulation D promulgated under the
Securities Act. Such Purchaser's financial condition is such that it is able to
bear the risk of holding any and all of the Securities acquired by it for an
indefinite period of time and the risk of loss of its entire investment. Such
Purchaser has been afforded the opportunity to ask questions of and receive
answers from the management of the Company concerning the Company and its
business and this investment, and has also been afforded the opportunity to
review any relevant documents and records concerning the business of the
Company. Such Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Company. This representation shall not be deemed to limit the
Company's representations and warranties contained in Section 3 of this
Agreement.
4.4 Securities Not Registered. Such Purchaser understands that
because the Securities are issued by the Company in a transaction exempt from
the registration requirements of the Securities Act, the Securities have not
been registered under the Securities Act, and that the Securities must continue
to be held by such Purchaser unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration. The
Purchaser understands that the exemptions from registration afforded by Rule 144
(the provisions of which are known to it) promulgated under the Securities Act
depend on the satisfaction of various conditions, and that, if applicable, Rule
144 may afford the basis for sales only in limited amounts.
4.5 Additional Investment Representations. Such Purchaser
shall deliver to the Company a Certificate of Additional Investment
Representations in the form of Exhibit C hereto (in each case, an "Investment
Representations Certificate"). Such Purchaser acknowledges that the Company is
relying on the truth and accuracy of the representations and warranties
contained in its Investment Representations Certificate in the offering of those
Purchased Shares being offered for sale to such Purchaser without having first
registered such Purchased Shares under the Securities Act.
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4.6 No Conflict. The execution and delivery of this Agreement
and the Registration Rights Agreement by such Purchaser and the consummation of
the transactions contemplated hereby and thereby will not conflict with or
result in any violation of or default by such Purchaser (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) any provision of the organizational documents of such
Purchaser or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to
such Purchaser or its respective properties or assets.
4.7 Consents. All consents, approvals, orders and
authorizations required on the part of such Purchaser in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated herein have been obtained or will be obtained prior to
the Closing.
4.8 Brokers. Such Purchaser has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
5. Conditions Precedent.
5.1 Conditions to the Obligation of the Purchasers to
Consummate the Closing. The obligation of each Purchaser to consummate the
Closing and to purchase and pay for the Purchased Shares being purchased by it
pursuant to this Agreement is subject to the satisfaction of the following
conditions precedent:
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.
(b) The Registration Rights Agreement shall have been executed
and delivered by the Company, and the Warrant issuable to such Purchaser
hereunder shall have been executed and delivered to such Purchaser by the
Company.
(c) The Company shall not have been adversely affected in any
material way prior to the Closing Date; and the Company shall have performed all
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Closing Date.
(d) Such Purchaser shall have received from Bingham Dana LLP,
counsel to the Company, an opinion addressed to the Purchasers, dated the
Closing Date and substantially in the form of Exhibit D hereto.
(e) The Company shall not have received a letter from Nasdaq
stating that the approvals obtained by the Company from certain of its
stockholders in connection with the transactions contemplated hereunder do
not satisfy the stockholder approval requirements set forth in Sections
4460(i)(1)(B) and 4460(i)(1)(D)(ii) of the Nasdaq rules and regulations.
(f) Each of DSV Partners IV, International Biotechnology Trust
and Hambrecht & Quist shall have entered into a Lock-up Agreement in the form of
Exhibit E hereto
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with the Company agreeing not to sell any shares of the Company's Common Stock
within 180 days following the Closing.
(g) No proceeding challenging this Agreement, the Warrants or
the Registration Rights Agreement or the transactions contemplated hereby or
thereby, or seeking to prohibit, alter, prevent or materially delay the Closing,
shall have been instituted before any court, arbitrator or governmental body,
agency or official and shall be pending.
(h) The purchase of and payment for the Purchased Shares by
the Purchasers and the issuance of the Warrants to the Purchasers shall not be
prohibited by any law or governmental order or regulation. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or administrative
agency or of any other person with respect to any of the transactions
contemplated by the Agreement and the Warrants shall have been duly obtained or
made and shall be in full force and effect.
(i) All instruments and corporate proceedings in connection
with the transactions contemplated by this Agreement, the Warrants and the
Registration Rights Agreement to be consummated at the Closing shall be
satisfactory in form and substance to such Purchaser, and such Purchaser shall
have received copies (executed or certified, as may be appropriate) of all
documents which such Purchaser may have reasonably requested in connection with
such transactions.
(j) The aggregate price paid for Purchased Shares by
Purchasers shall not be less than $12,000,000, a minimum of $3,000,000 of which
shall be paid by Purchasers who were shareholders of the Company prior to the
Closing Date.
(k) The offer and sale of the Purchased Shares and the
Warrants to the Purchasers pursuant to this Agreement shall be exempt from
registration under the Securities Act.
(l) The Company shall have delivered to the Purchasers a
certificate dated as of the Closing Date signed by an authorized officer of the
Company certifying the satisfaction of the conditions set forth in Section
5.1(a) and that the Company has performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing Date.
5.2 Conditions to the Obligation of the Company to Consummate
the Closing. The obligation of the Company to consummate the Closing and to
issue to each Purchaser the Purchased Shares and the Warrant to be purchased by
it at the Closing is subject to the satisfaction of the following conditions
precedent:
(a) The representations and warranties contained herein of
such Purchaser shall be true and correct on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
(b) Such Purchaser shall have performed all obligations and
conditions herein required to be performed or observed by such Purchaser on or
prior to the Closing Date.
<PAGE>
-12-
(c) The Registration Rights Agreement shall have been executed
and delivered by such Purchaser.
(d) Such Purchaser shall have executed and delivered to the
Company such Purchaser's Investment Representations Certificate.
(e) The Company shall not have received a letter from Nasdaq
stating that the approvals obtained by the Company from certain of its
stockholders in connection with the transactions contemplated hereunder do not
satisfy the stockholder approval requirements set forth in Sections
4460(i)(1)(B) and 4460(i)(1)(D)(ii) of the Nasdaq rules and regulations.
(f) No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted before any court,
arbitrator or governmental body, agency or official and shall be pending.
(g) The sale and/or issuance of any of the Securities by the
Company shall not be prohibited by any law or governmental order or regulation.
(h) Such Purchaser shall have delivered to the Company a
certificate dated as of the Closing Date signed by an authorized officer of such
Purchaser certifying the satisfaction of the conditions set forth in Section
5.2(a) and that such Purchaser has performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing
Date.
6. Conduct of Business Pending Closing. The Company covenants and
agrees that, between the date of this Agreement and the earlier of the
termination of this Agreement or the Closing Date, unless the Majority
Purchasers shall otherwise agree in writing, the businesses of the Company shall
be conducted only in, and the Company shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice. By
way of amplification and not limitation, except as contemplated by this
Agreement, the Company shall not, between the date of this Agreement and the
earlier of the termination of this Agreement or the Closing Date, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Majority Purchasers:
(a) amend or otherwise change the Company's Certificate of
Incorporation or By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of Common Stock, or Preferred Stock, or any options, warrants,
convertible securities or other rights of any kind to acquire shares of Common
Stock or Preferred Stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company; at a purchase price per share
that is less than the purchase price per Purchased Share to be paid by the
Purchasers:
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
<PAGE>
-13-
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement material to the business,
results of operations or financial condition of the Company other than in the
ordinary course of business, consistent with past practice; (iv) authorize any
capital expenditure; or (v) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in this
subsection (e);
(f) sell, assign or otherwise transfer all or substantially
all of the assets of the Company;
(g) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures;
7. Restrictions on Transfer; Delivery of Purchased Shares and Warrant
Shares.
7.1 Restrictions on Transfer of the Purchased Shares.
(a) No Purchaser shall offer, sell, assign, transfer, endorse,
pledge, mortgage, hypothecate or otherwise convey or dispose of any of the
Purchased Shares purchased by it, or any interest therein, unless (i) any such
offer, sale, assignment, transfer, endorsement, pledge, mortgage, hypothecation
or other conveyance or disposition shall be effected (A) pursuant to and in
conformity with an effective registration statement under the Securities Act (a
"Registered Sale") or any then available exemption from the registration
requirements of the Securities Act, and (B) pursuant to and in conformity with
any applicable state securities or blue sky laws, and (ii) in the case of any
offer, sale, assignment, transfer, endorsement, pledge, mortgage, hypothecation
or other conveyance or disposition other than pursuant to a Registered Sale, if
requested by the Company, such Purchaser shall have obtained and delivered to
the Company a written legal opinion of counsel (reasonably satisfactory to the
Company as to such counsel and as to the substance of such opinion) to the
effect that any such proposed offer, sale, assignment, transfer, endorsement,
pledge, mortgage, hypothecation or other conveyance or disposition by such
Purchaser does not violate the registration provisions of the Securities Act and
any applicable state securities or blue sky law.
(b) No Purchaser shall sell, assign, transfer, endorse,
pledge, mortgage, hypothecate or otherwise convey or dispose of any of the
Purchased Shares purchased by it, or any interest therein, unless the proposed
transferee thereof shall have executed and delivered to the Company a written
agreement or instrument, in form and substance satisfactory to the
<PAGE>
-14-
Company, providing for such proposed transferee's written acknowledgment and
agreement that he, she or it shall be bound by all of the provisions of this
Section 7, provided, however, that if such sale, assignment, transfer,
endorsement, pledge, mortgage, hypothecation or other conveyance or disposition
is made pursuant to a Registered Sale or in accordance with Rule 144 of the
Securities Act, such written agreement or instrument shall not be required.
7.2 Effect of Violation of Transfer Restrictions; Preventive
Measures. Any offer, sale, assignment, transfer, endorsement, pledge, mortgage,
hypothecation, or other conveyance or disposition of any Purchased Shares, or of
any interest therein, in violation of this Section 7 shall be null and void. The
Company may make a notation on its records or give instructions to any of its
transfer agents in order to implement the restrictions on transfer set forth in
this Section 7. The Company shall not incur any liability for any delay in
recognizing any transfer of any Purchased Shares if the Company reasonably
believes that any such transfer may have been or would be in violation of the
provisions of the Securities Act, applicable blue sky laws or this Section 7.
7.3 Restrictions on Transfer of the Warrants and the Warrant
Shares. Each Warrant and any Warrant Shares issued and/or issuable upon exercise
of such Warrant shall be subject to the restrictions on transfer set forth in
such Warrant.
7.4 Legends.
(a) Each certificate evidencing any of the Purchased Shares
shall be endorsed with the legend set forth below, and each Purchaser covenants
that, except to the extent such restrictions are waived by the Company, it shall
not transfer the Purchased Shares represented by any such certificate without
complying with the restrictions on transfer described in this Agreement and the
legends endorsed on such certificate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, ENDORSED, PLEDGED, MORTGAGED,
HYPOTHECATED OR OTHERWISE CONVEYED OR DISPOSED OF, UNLESS SUCH
SHARES ARE (1) SO REGISTERED OR (2) AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND, IF REQUESTED BY THE COMPANY, A
WRITTEN LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY IS PROVIDED BY THE TRANSFEROR. IF THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERRED PURSUANT
TO AND IN CONFORMITY WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 OR IN ACCORDANCE WITH RULE
144 OF THE SECURITIES ACT OF 1933, SUCH SHARES ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 7 OF A SECURITIES PURCHASE AGREEMENT DATED SEPTEMBER
10, 1998, AND NO TRANSFER OF SUCH SHARES SHALL BE VALID
<PAGE>
-15-
OR EFFECTIVE IF IT IS NOT EFFECTED IN COMPLIANCE WITH ALL OF
SUCH RESTRICTIONS ON TRANSFER. A COPY OF SUCH SECURITIES
PURCHASE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF SUCH SHARES TO THE
SECRETARY OF CUBIST PHARMACEUTICALS, INC."
(b) The Warrants that are issued by the Company shall be
endorsed with the legend set forth below, and each Purchaser covenants that,
except to the extent such restrictions are waived by the Company, it shall not
transfer the Warrants without complying with the restrictions on transfer
described in the legends endorsed on such Warrants:
"NEITHER THIS WARRANT NOR THE SHARES ISSUED OR ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
ENDORSED, PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE
CONVEYED OR DISPOSED OF, UNLESS THEY ARE (1) SO REGISTERED OR
(2) AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND IF
REQUESTED BY THE COMPANY, A WRITTEN LEGAL OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED BY THE
TRANSFEROR. THIS WARRANT AND THE SHARES ISSUED OR ISSUABLE
UPON EXERCISE OF THIS WARRANT IF NOT TRANSFERRED PURSUANT TO
AND IN CONFORMITY WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 OR IN ACCORDANCE WITH RULE
144 OF THE SECURITIES ACT OF 1933 ARE ALSO SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 9 OF THIS
WARRANT, AND NO TRANSFER OF THIS WARRANT AND/OR SUCH SHARES
SHALL BE VALID OR EFFECTIVE IF IT IS NOT EFFECTED IN
COMPLIANCE WITH SUCH RESTRICTIONS ON TRANSFER."
(c) Each certificate evidencing any of the Purchased Shares
and each Warrant shall be endorsed with any legend required under any applicable
state securities or blue sky laws.
<PAGE>
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7.5 Purchaser Buy-In Rights.
(a) If after receipt from any Purchaser of all of the
documentation necessary to consummate the exercise of such Purchaser's Warrant,
the Company fails to timely deliver the requisite Warrant Shares to such
Purchaser, or as such Purchaser may direct, and, because of such failure to so
timely deliver, (i) such Purchaser consummates a sale through a registered
broker/dealer of the number of shares of Common Stock such Purchaser anticipated
to receive upon exercise of such Purchaser's Warrant (the "Section 7.5(a) Sold
Shares") and (ii) at any time following such sale of the Section 7.5(a) Sold
Shares and the settlement of the transactions relating to such sale of the
Section 7.5(a) Sold Shares, such Purchaser is required by such broker/dealer to
purchase (in an open market transaction or otherwise at the market price then in
effect) shares of Common Stock to replace such Section 7.5(a) Sold Shares (the
"Section 7.5(a) Cover Shares"), then, subject to Section 7.5(c) and 7.5(d)
below, the Company shall pay (in addition to the Company's continuing obligation
to deliver the Warrant Shares) to such Purchaser the amount by which (x) such
Purchaser's total purchase price (including brokerage commissions, if any) for
the Section 7.5(a) Cover Shares shall exceed (y) the net proceeds received by
such Purchaser from the sale of the Section 7.5(a) Sold Shares. In addition, the
Company shall indemnify and save and hold harmless such Purchaser from and
against any and all loss, liability, damage, cost and expense (collectively, the
"Loss") resulting from the foregoing, it being understood that such Loss shall
take into account (i) whether or not the Company subsequently delivers the
requisite Warrant Shares and if delivered, the date on which same are delivered
to such Purchaser, and (ii) any amount previously paid by the Company to such
Purchaser under this Section 7.5(a) in respect of the failure to deliver such
requisite Warrant Shares.
(b) If after receipt by the Company from any Purchaser of all
of the documentation necessary to properly remove the restrictive legends from
any of such Purchaser's Purchased Shares or Warrant Shares, as the case may be,
the Company fails to timely deliver unlegended certificates representing such
Purchased Shares or Warrant Shares, as the case may be, to such Purchaser, or as
such Purchaser may direct, and, because of such failure to so timely deliver,
(i) the Purchaser consummates a sale through a registered broker/dealer of the
number of shares of Common Stock that would have been represented by such
unlegended certificates that the Company failed to deliver to such Purchaser on
a timely basis (the "Section 7.5(b) Sold Shares") and (ii) at any time following
such sale of the Section 7.5(b) Sold Shares and the settlement of the
transactions relating to such sale of the Section 7.5(b) Sold Shares, the
Purchaser is required by such broker/dealer to purchase (in an open market
transaction or otherwise at the market price then in effect) unlegended shares
of Common Stock to replace such Section 7.5(b) Sold Shares (the "Section 7.5(b)
Cover Shares" and, collectively with the Section 7.5(a) Cover Shares, herein
referred to as "Cover Shares"), then, subject to Section 7.5(c) and 7.5(d)
below, the Company shall pay (in addition to the Company's continuing obligation
to deliver unlegended certificates representing the Purchased Shares or Warrant
Shares, as the case may be) to such Purchaser the amount by which (x) such
Purchaser's total purchase price (including brokerage commissions, if any) for
the Section 7.5(b) Cover Shares shall exceed (y) the net proceeds received by
such Purchaser from the sale of the Section 7.5(b) Sold Shares. In addition, the
Company shall indemnify and save and hold harmless such Purchaser from and
against any and all Loss resulting from the foregoing, it being understood that
such Loss shall take into account (i) whether or not the Company subsequently
delivers the requisite unlegended
<PAGE>
-17-
certificates representing Purchased Shares and/or Warrant Shares, as the case
may be, and if delivered, the date on which same are delivered to such
Purchaser, and (ii) any amount previously paid by the Company to such Purchaser
under this Section 7.5(b) in respect of the failure to deliver such unlegended
certificates representing Purchased Shares and/or Warrant Shares, as the case
may be.
(c) The Company shall make any payments required by Section
7.5(a) or 7.5(b) within five business days after receipt of written notice from
any Purchaser stating that the purchase by the Purchaser of Cover Shares has
occurred (together with evidence satisfactory to the Company that such purchase
has occurred) and setting forth the calculation of the amount due pursuant to
either Section 7.5(a) or 7.5(b).
(d) Notwithstanding any of the foregoing, the Company shall
not be required to make any payment under Sections 7.5(a) or 7.5(b) in the event
that the Company delivers the Warrant Shares or unlegended certificates
representing Purchased Shares or Warrant Shares, as the case may be, to such
Purchaser prior to the trade date with respect to the purchase of Cover Shares.
(e) Notwithstanding the indemnification obligation provided
for in the last sentence of each of Section 7.5(a) and 7.5(b), in no event shall
the aggregate amount to which any Purchaser shall be entitled to recover from
the Company pursuant thereto exceed the maximum amount which such Purchaser
would have otherwise been entitled to recover from the Company in any suit
brought by such Purchaser against the Company on account of the Company's breach
of its obligation to timely deliver any Warrant Shares to such Purchaser upon
exercise of such Purchaser's Warrant or on account of the Company's breach of
its obligation to timely deliver any unlegended certificates representing any of
such Purchaser's Purchased Shares or Warrant Shares.
8. Termination; Liabilities Consequent Thereon. This Agreement may be
terminated and the transactions contemplated hereunder abandoned at any time
prior to the Closing only as follows:
(a) by any Purchaser, upon notice to the Company if the
Closing has not occurred on or prior to October 11, 1998; provided, however,
that the right to terminate this Agreement pursuant to this Section 8(a) shall
not be available to any Purchaser whose failure to fulfill any obligation of
such Purchaser under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or prior to such date; or
(b) by the Company, upon notice to the Purchasers if the
Closing has not occurred on or prior to October 11, 1998; provided, however,
that the right to terminate this Agreement pursuant to this Section 8(b) shall
not be available to the Company if the Company's failure to fulfill any
obligation of the Company under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or prior to such date; or
(c) at any time by mutual agreement of the Company and the
Purchasers; or
<PAGE>
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(d) by any Purchaser in respect of the Purchased Shares to be
purchased by such Purchaser, if there has been any material breach of any
representation, warranty or covenant of the Company contained herein and the
same has not been cured prior to October 11, 1998; or
(e) by the Company in respect of the Purchased Shares to be
purchased by a Purchaser, if there has been any material breach of any
representation, warranty or covenant of such Purchaser contained herein and the
same has not been cured prior to October 11, 1998.
Any termination pursuant to this Section 8 shall be without liability
on the part of any party, unless such termination is the result of a material
breach of this Agreement by a party to this Agreement in which case such
breaching party shall remain liable for such breach notwithstanding any
termination of this Agreement. Notwithstanding the foregoing, no termination
pursuant to this Section 8 shall relieve the Company of its obligation to
reimburse Sofinov for its accountable costs and expenses incurred in
satisfaction of its legal, scientific and patent due diligence and its legal
review of the closing documents.
9. Election of Sofinov Nominee and Other Purchasers' Nominee to Board
of Directors.
9.1 Initial Election of Sofinov Nominee and Other Purchasers'
Nominee to Board of Directors; Obligation to Nominate. The Company shall take
all steps as are necessary and appropriate and otherwise use its best efforts to
cause one individual designated by Sofinov and one individual designated by the
Majority Other Purchasers (which designation shall be made by Sofinov or the
Majority Other Purchasers, as the case may be, in accordance with the provisions
set forth below in this Section 9) (such individual so initially designated by
Sofinov and each other individual from time to time designated by Sofinov
pursuant to, and in accordance with, the provisions set forth below in this
Section 9 in replacement of the individual theretofore designated by Sofinov
being referred to herein as the "Sofinov Nominee"; such individual so initially
designated by the Majority Other Purchasers and each other individual from time
to time designated by the Majority Other Purchasers pursuant to, and in
accordance with, the provisions set forth below in this Section 9 in replacement
of the individual theretofore designated by the Majority Other Purchasers being
referred to herein as the "Other Purchasers' Nominee") to be duly and properly
elected on the Closing Date to a seat on the Board of Directors of the Company.
Thereafter, until the Nomination Termination Date (as defined below in Section
9.4 hereof), at each annual or special meeting of the stockholders of the
Company, or in connection with any written consent solicited from the
stockholders of the Company, at or with respect to which a vote is taken to
elect a director to fill the seat occupied by the Sofinov Nominee and/or the
Other Purchasers' Nominee theretofore serving as a director of the Company
(whether upon the expiration of the Sofinov Nominee's or the Other Purchasers'
Nominee's, as the case may be, term as a director of the Company or otherwise),
the Company shall nominate the Sofinov Nominee and/or the Other Purchasers'
Nominee for election to the Board of Directors.
9.2 Vacancy; Expense Reimbursement; D&O Insurance. Until the
Nomination Termination Date, in the event that the individuals at anytime
serving on the Board of Directors of the Company as the Sofinov Nominee or the
Other Purchasers' Nominee shall, for any reason, cease or be unable so to serve,
the Company shall take all steps as are necessary
<PAGE>
-19-
and appropriate and otherwise use its best efforts to cause the vacancy on the
Board of Directors of the Company thereby created to be filled promptly by the
election to the Board of Directors of another Sofinov Nominee or another Other
Purchasers' Nominee, as the case may be. The individuals serving on the Board of
Directors of the Company as the Sofinov Nominee and the Other Purchasers'
Nominee shall be entitled to reimbursement of costs and expenses and payment of
fees on terms no less favorable than those available to other outside directors
of the Company. In addition, the individuals serving on the Board of Directors
of the Company as the Sofinov Nominee and the Other Purchasers' Nominee shall be
entitled to directors' insurance and indemnification coverage on terms no less
favorable than those available to other outside directors of the Company.
9.3 Limitation on Right of Sofinov and Other Purchasers to
Designate. Notwithstanding anything in this Section 9 to the contrary, without
the prior written consent of the Company, in no event shall Sofinov or the
Majority Other Purchasers designate any individual as the Sofinov Nominee or the
Other Purchasers' Nominee, as the case may be, if such individual is an officer,
director, employee, consultant or major stockholder of (A) any business, person
or entity that is a competitor, vendor, supplier or customer of the Company or
(B) any Affiliate of any business, person or entity referred to in the foregoing
clause (A). Also notwithstanding anything in this Section 9 to the contrary, in
no event shall the Company be required to nominate a specific individual for
election to the Board of Directors of the Company as the Sofinov Nominee or the
Other Purchasers' Nominee, as the case may be, or to otherwise take any steps or
utilize any efforts to cause such individual to be elected to the Board of
Directors of the Company if the stockholders of the Company do not vote or
otherwise take action in favor of the reelection of such individual to the Board
of Directors of the Company, or vote or otherwise take action to remove such
individual as a director of the Company. The foregoing sentence shall not
relieve the Company's obligations under this Section 9 with respect to any other
individual that becomes the Sofinov Nominee or the Other Purchasers' Nominee, as
the case may be.
9.4 Termination. The provisions of this Section 9 shall
automatically terminate on the Nomination Termination Date. The term "Nomination
Termination Date" shall mean (i) with respect to the rights granted to Sofinov
to nominate a Sofinov Nominee under this Section 9, the date on which Sofinov
and/or any of its Affiliates ceases to own at least thirty three and one-third
percent (33 1/3%) of those Purchased Shares purchased by Sofinov at the Closing,
pursuant to this Agreement (subject to proportionate adjustment upon any stock
split, stock dividend, reverse stock split or like event), and (ii) with respect
to the rights granted to the Majority Other Purchasers to nominate an Other
Purchasers' Nominee under this Section 9, the date on which the Other Purchasers
and/or any of their Affiliates cease to own, in the aggregate, at least thirty
three and one-third percent (33 1/3%) of those Purchased Shares purchased by the
Other Purchasers at the Closing, pursuant to this Agreement (subject to
proportionate adjustment upon any stock split, stock dividend, reverse stock
split or like event).
10. Miscellaneous Provisions.
10.1 Public Statements or Releases. None of the parties to
this Agreement shall make, issue, or release any announcement, whether to the
public generally, or to any of its employees, suppliers, or customers, with
respect to this Agreement or the transactions provided
<PAGE>
-20-
for herein, or make any statement or acknowledgment of the existence of, or
reveal the status of, this Agreement or the transactions provided for herein,
without the prior consent of the other parties, which shall not be unreasonably
withheld or delayed, provided, that nothing in this Section 10.1 shall prevent
any of the parties hereto from making such public announcements as it may
consider necessary in order to satisfy its legal obligations, but to the extent
not inconsistent with such obligations, it shall provide the other parties with
an opportunity to review and comment on any proposed public announcement before
it is made.
10.2 Further Assurances. Each party agrees to cooperate fully
with the other parties, to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by the other party to better evidence and reflect the transactions
described herein and contemplated hereby, and to carry into effect the intents
and purposes of this Agreement, and to use its best efforts to cause the
conditions precedent set forth in Sections 5.1 and 5.2 to be satisfied.
10.3 Rights Cumulative. Each and all of the various rights,
powers and remedies of the parties shall be considered to be cumulative with and
in addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
10.4 Pronouns. All pronouns or any variation thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
10.5 Notices.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by courier (overnight or same day) or telecopy or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
(b) All correspondence to the Company shall be addressed as
follows:
Cubist Pharmaceuticals, Inc.
24 Emily Street
Cambridge, MA 02139
Attention: Scott M. Rocklage,
President and Chief Executive Officer
Telecopier: (617) 576-0232
with a copy to:
Bingham Dana LLP
150 Federal Street
<PAGE>
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Boston, Massachusetts 02110
Attention: Justin P. Morreale, Esq.
and
Julio E. Vega, Esq.
Telecopier: (617) 951-8736
(c) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in Exhibit A.
(d) Any entity may change the address to which correspondence
to it is to be addressed by notification as provided for herein.
10.6 Captions. The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.
10.7 Severability. Should any part or provision of this
Agreement be held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable part or provisions
shall be replaced with a provision which accomplishes, to the extent possible,
the original business purpose of such part or provision in a valid and
enforceable manner, and the remainder of this Agreement shall remain binding
upon the parties hereto.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal and substantive laws of the
Commonwealth of Massachusetts and without regard to any conflicts of laws
concepts which would apply the substantive law of some other jurisdiction.
10.9 Waiver. No waiver of any term, provision or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or be construed as, a further or continuing waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
10.10 Expenses. Each party will bear its own costs and
expenses in connection with this Agreement; provided however, the Company agrees
to reimburse Sofinov for its accountable costs and expenses incurred in
satisfaction of its legal, scientific and patent due diligence review and its
legal review of the closing documents.
10.11 Assignment. The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the successors
and permitted assigns of each party. No Purchaser may assign its rights or
obligations under this Agreement or designate another person other than an
Affiliate of such Purchaser (i) to perform all or part of such Purchaser's
obligations under this Agreement or (ii) to have all or part of such Purchaser's
rights and benefits under this Agreement, in each case without the prior written
consent of the Company. The Company may not assign its rights or obligations
under this Agreement or designate another person (i) to perform all or part of
its obligations under this Agreement or (ii) to have all or part of its rights
and benefits under this Agreement, in each case without the prior written
consent of the Purchasers. Notwithstanding anything expressed or implied in this
Agreement to the contrary,
<PAGE>
-22-
Sofinov's or the Other Purchasers' rights under Section 9 hereof may not be
assigned or transferred to, or exercised by, any other person other than an
Affiliate of Sofinov or such Other Purchasers, respectively.
10.12 Survival. The respective representations and warranties
given by the parties hereto, and the other covenants and agreements contained
herein, shall survive the Closing Date and the consummation of the transactions
contemplated herein indefinitely, without regard to any investigation made by
any party.
10.13 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by the parties hereto; provided, however, that the provisions of
Section 9 of this Agreement may be amended, modified, altered, waived or
changed, in the case of the Sofinov Nominee, with the prior written consent of
the Company and Sofinov, and, in the case of the Other Purchaser's Nominee, with
the prior written consent of the Company and the Majority Other Purchasers.
10.14 Use of Proceeds. The proceeds from the sale of the
Securities hereunder will be used by the Company for working capital and for
general corporate purposes.
10.15 Information Rights. For so long as such Purchaser holds
any of the Securities, the Company shall deliver to each of such Purchaser,
copies of its quarterly and annual disclosure statements (including financial
statements) as filed by the Company with the SEC and all press releases issued
by the Company.
10.16 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
10.17 Listing of Shares. The Company shall list for trading on
the Nasdaq Stock Market a sufficient number of shares to cover the Purchased
Shares and the Warrant Shares.
10.18 Limitation of H&Q Liability. The parties hereto
acknowledge that the names H&Q Healthcare Investors and H&Q Life Sciences
Investors (collectively, the "H&Q Trusts") are the designation of the Trustees
for the time being under Declarations of Trust dated April 21, 1987, as amended,
and February 20, 1992, as amended, respectively, and all persons dealing with
either H&Q Trust must look solely to the trust property of such H&Q Trust for
the enforcement of any claim against such H&Q Trust, as neither the respective
Trustees, officers nor shareholders of either H&Q Trust assume any personal
liability for the obligations entered into on behalf of such H&Q Trust.
<PAGE>
-23-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
CUBIST PHARMACEUTICALS, INC.
By: /s/ Scott M. Rocklage
-----------------------------------
Scott M. Rocklage,
President and Chief Executive Officer
PURCHASERS:
SOFINOV SOCIETE FINANCIERE
D'INNOVATION INC.
By: /s/ Denis Dionnne
-----------------------------------
Name: Denis Dionne
Title: President
By: /s/ Luc Villeneuve
-----------------------------------
Name: Luc Villeneuve
Title: Director
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation,
General Partner
By: /s/ Jason Fisherman
-----------------------------------
Name: Jason Fisherman
Title: Vice President
BIOTECHNOLOGY DEVELOPMENT
FUND, L.P.
By: /s/ Frank Kung
-----------------------------------
Name: Frank Kung
Title: Managing Partner
BIOCAPITAL INVESTMENTS LIMITED
PARTNERSHIP
By: /s/ Normand Balthazard
-----------------------------------
Name: Normand Balthazard
Title: General Partner, President and CEO
<PAGE>
-24-
CLARION CAPITAL CORPORATION
By: /s/ Morton A. Cohen
-----------------------------------
Name: Morton A. Cohen
Title: Chairman
SPECIAL SITUATIONS PRIVATE EQUITY
FUND, L.P.
By: MG Advisers, L.L.C.,
General Partner
By: /s/ David M. Greenhouse
-----------------------------------
Name: David M. Greenhouse
Title:
SPECIAL SITUATIONS FUND III, L.P.
By: MGP Advisers, Limited Partnership,
General Partner
By: AWM Investment Company, Inc.,
General Partner
By: /s/ David M. Greenhouse
-----------------------------------
Name: David M. Greenhouse
Title:
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: AWM Investment Company, Inc.,
General Partner
By: /s/ David M. Greenhouse
-----------------------------------
Name: David M. Greenhouse
Title:
<PAGE>
-25-
INTERNATIONAL BIOTECHNOLOGY
TRUST plc
By: /s/ Jeremy L. Curnock Cook
-----------------------------------
Name: Jeremy L. Curnock Cook
Title: Director
H & Q HEALTHCARE INVESTORS, INC.
By: /s/ Alan G. Carr
-----------------------------------
Name: Alan G. Carr
Title: President
H & Q LIFE SCIENCES INVESTORS, INC.
By: /s/ Alan G. Carr
-----------------------------------
Name: Alan G. Carr
Title: President
<PAGE>
-26-
LANCASTER INVESTMENT PARTNERS
By: /s/ Robert A. Berlacher
-----------------------------------
Name: Robert A. Berlacher
Title: Manager, General Partner
CPR (USA) INC.
By: /s/ Steven S. Rogers
-----------------------------------
Name: Steven S. Rogers
Title: Chief Administrative Officer and General
Counsel
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Richard Drake
-----------------------------------
Name: Richard F. Drake
Title: Director, Venture Capital
PORTER PARTNERS, L.P.
By: /s/ Jeffrey H. Porter
-----------------------------------
Name: Jeffrey H. Porter
Title: General Partner
MICHAEL T. JACKSON TRUST, NEW
TECHNOLOGIES FUND
By: /s/ Michael T. Jackson
-----------------------------------
Name: Michael T. Jackson, TTEE
Title: Trustee
<PAGE>
-27-
BIOTECHNOLOGY DEVELOPMENT
FUND III, L.P.
By: /s/ Frank Kung
-----------------------------------
Name: Frank Kung
Title: Managing Partner
<PAGE>
-28-
Exhibit A
PURCHASERS
<TABLE>
<CAPTION>
Number of
Purchased Shares Number of
Purchaser to be Purchased Warrant Shares Purchase Price
--------- --------------- -------------- --------------
<S> <C> <C> <C>
SOFINOV SOCIETE FINANCIERE D'INNOVATION 2,222,223 1,111,112 $5,000,001.75
INC.
Address:
1981, Avenue McGill College
7e etage
Montreal, Quebec H3A 3C7
ROVENT II LIMITED PARTNERSHIP 333,334 166,667 $750,001.50
Address:
c/o Advent International
101 Federal Street
Boston, MA 02110
BIOTECHNOLOGY DEVELOPMENT FUND, L.P. 81,480 40,740 $183,330
Address:
c/o BioAsia
575 High Street, Suite 201
Palo Alto, CA 94301
BIOTECHNOLOGY DEVELOPMENT FUND III, L.P. 29,632 14,816 $66,672
Address:
c/o BioAsia
575 High Street, Suite 201
Palo Alto, CA 94301
BIOCAPITAL INVESTMENTS LIMITED PARTNERSHIP 150,000 75,000 $337,500
Address:
3690, rue de la Montague
Montreal, H3G 248 CANADA
CLARION CAPITAL CORPORATION 155,556 77,778 $350,001
Address:
1801 East 9th Street
Cleveland, OH 44114
</TABLE>
<PAGE>
-29-
Exhibit A (cont.)
<TABLE>
<CAPTION>
Number of
Purchased Shares Number of
Purchaser to be Purchased Warrant Shares Purchase Price
--------- --------------- -------------- --------------
<S> <C> <C> <C>
SPECIAL SITUATIONS PRIVATE EQUITY FUND, 266,667 133,334 $600,000.75
L.P.
Address:
153 East 53rd Street
New York, NY 10022
SPECIAL SITUATIONS FUND III, L.P. 466,667 233,334 $1,050,000.75
Address:
153 East 53rd Street
New York, NY 10022
SPECIAL SITUATIONS CAYMAN FUND, L.P. 155,556 77,778 $350,001
Address:
153 East 53rd Street
New York, NY 10022
INTERNATIONAL BIOTECHNOLOGY TRUST plc 222,223 111,112 $500,001.75
Address:
c/o Rothschild Asset Management
5 Arrows House
St. Swithin's Lane
London, EC48 NR ENGLAND
H & Q HEALTHCARE INVESTORS, INC. 400,001 200,001 $900,002.25
Address:
c/o Hambrecht & Quist Group
50 Rowes Wharf
Boston, MA 02110-3328
H & Q LIFE SCIENCES INVESTORS, INC. 266,666 133,333 $599,998.50
Address:
c/o Hambrecht & Quist Group
50 Rowes Wharf
Boston, MA 02110-3328
</TABLE>
<PAGE>
-30-
Exhibit A (cont.)
<TABLE>
<CAPTION>
Number of
Purchased Shares Number of
Purchaser to be Purchased Warrant Shares Purchase Price
--------- --------------- -------------- --------------
<S> <C> <C> <C>
LANCASTER INVESTMENT PARTNERS 100,000 50,000 $225,000
Address:
500 N. Gulph, Suite 110
King of Prussia, PA 19406
CPR (USA) INC. 100,000 50,000 $225,000
Address:
c/o Liberty View Capital
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
NEW YORK LIFE INSURANCE COMPANY 888,888 444,444 $1,999,998
Address:
51 Madison Avenue
New York, NY 10010
PORTER PARTNERS, L.P. 100,000 50,000 $225,000
Address:
100 Shoreline Avenue, Suite 211B
Mill Valley, CA 94941
MICHAEL T. JACKSON TRUSTEE, 126,667 63,334 $285,000.75
NEW TECHNOLOGIES FUND
Address:
c/o Emerging Growth MGMT Co.
One Embarcadero Center, Ste 2410
San Francisco, CA 94111
------------------------ ----------------------- ------------------------
Total: 6,065,560 3,032,783 $13,647,510
</TABLE>
<PAGE>
Exhibit 10.2
CUBIST PHARMACEUTICALS, INC.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
September 10, 1998 by and among (i) Cubist Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), (ii) each person listed on Exhibit A attached
hereto (collectively, the "Initial Investors" and each individually, an "Initial
Investor"), and (iii) each person or entity that subsequently becomes a party to
this Agreement pursuant to, and in accordance with, the provisions of Section 12
hereof (collectively, the "Investor Permitted Transferees" and each individually
an "Investor Permitted Transferee").
WHEREAS, the Company has agreed to issue and sell to the Initial
Investors, and the Initial Investors have agreed to purchase from the Company,
6,065,560 shares (the "Purchased Shares") of the Company's common stock, $0.001
par value per share (the "Common Stock"), all upon the terms and conditions set
forth in that certain Securities Purchase Agreement, dated of even date
herewith, between the Company and the Initial Investors (the "Securities
Purchase Agreement"), and has agreed to issue to each of the Initial Investors
Common Stock Purchase Warrants exercisable, in the aggregate, for that number of
shares of Common Stock as shall be equal to 50% of the Purchased Shares; and
WHEREAS, the terms of the Securities Purchase Agreement provide that it
shall be a condition precedent to the closing of the transactions thereunder,
for the Company and the Initial Investors to execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings provided
therefor below or elsewhere in this Agreement as described below:
"Board" shall mean the board of directors of the Company.
"Closing" shall have the meaning ascribed to such term in the
Securities Purchase Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated thereunder.
"Investors" shall mean, collectively, the Initial Investors and the
Investor Permitted Transferees; provided, however, that the term "Investors"
shall not include any of the Initial Investors or any of the Investor Permitted
Transferees that ceases to own or hold any Securities.
"Qualifying Holder" shall have the meaning ascribed thereto in Section
12 hereof.
"Registrable Shares" shall mean the Purchased Shares and the Warrant
Shares, provided, however, such term shall not, after the Mandatory Registration
Termination Date, include any of the Purchased Shares or Warrant Shares of any
Purchaser who can sell all of its Purchased Shares and Warrant Shares under Rule
144 within the next 90 days.
<PAGE>
"Rule 144" shall mean Rule 144 promulgated under the Securities Act and
any successor or substitute rule, law or provision.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean the Purchased Shares, the Warrants and the
Warrant Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all of the rules and regulations promulgated thereunder.
"Warrants" shall mean, collectively, the Common Stock Purchase Warrants
issued by the Company to the Initial Investors pursuant to the Securities
Purchase Agreement.
"Warrant Shares" shall mean the shares of Common Stock issued and/or
issuable upon exercise of any or all of the Warrants.
2. EFFECTIVENESS; TERMINATION. This Agreement shall become effective
and legally binding only if the Closing occurs. This Agreement shall terminate
and be of no further force or effect, automatically and without any action being
required of any party hereto therefor, upon the termination of the Securities
Purchase Agreement pursuant to Section 8 thereof.
3. MANDATORY REGISTRATION.
(a) Within ten (10) business days after the Closing, the Company will
prepare and file with the SEC a registration statement on Form S-3, or, if Form
S-3 is not available, on Form S-1, for the purpose of registering under the
Securities Act all of the Registrable Shares for resale by, and for the account
of, the Investors as selling stockholders thereunder (the "Registration
Statement"). The Registration Statement shall permit the Investors to offer and
sell, on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, any or all of the Registrable Shares. The Company agrees to use its best
efforts to cause the Registration Statement to become effective as soon as
practicable. The Company shall be required to keep the Registration Statement
effective until such date that is the earlier of (i) the date when all of the
Registrable Shares registered thereunder shall have been sold or (ii) the second
anniversary of the Closing, subject to extension as set forth below (such date
is referred to herein as the "Mandatory Registration Termination Date").
Thereafter, the Company shall be entitled to withdraw the Registration Statement
and the Investors shall have no further right to offer or sell any of the
Registrable Shares pursuant to the Registration Statement (or any prospectus
relating thereto). In the event the right of the selling Investors to use the
Registration Statement (and the prospectus relating thereto) is delayed or
suspended pursuant to Sections 5(c) or 11 hereof, the Company shall be required
to extend the Mandatory Registration Termination Date beyond the second
anniversary of the Closing by the same number of days as such delay or
Suspension Period (as defined in Section 11 hereof).
(b) The offer and sale of the Registrable Shares pursuant to the
Registration Statement shall not be underwritten.
-2-
<PAGE>
4. "PIGGYBACK" REGISTRATION RIGHTS.
(a) If, at any time after the Mandatory Registration
Termination Date, the Company proposes to register any of its Common Stock under
the Securities Act, whether as a result of a primary or secondary offering of
Common Stock or pursuant to registration rights granted to holders of other
securities of the Company (but excluding in all cases any registrations to be
effected on Forms S-4 or S-8 or other applicable successor Forms), the Company
shall, each such time, give to the Investors holding Registrable Shares written
notice of its intent to do so. Upon the written request of any such Investor
given within 30 days after the giving of any such notice by the Company, the
Company shall use its best efforts to cause to be included in such registration
the Registrable Shares of such selling Investor, to the extent requested to be
registered; provided that (i) the number of Registrable Shares proposed to be
sold by such selling Investor is equal to at least seventy-five percent (75%) of
the total number of Registrable Shares then held by such participating selling
Investor (ii) such selling Investor agrees to sell those of its Registrable
Shares to be included in such registration in the same manner and on the same
terms and conditions as the other shares of Common Stock which the Company
proposes to register, and (iii) if the registration is to include shares of
Common Stock to be sold for the account of the Company or any party exercising
demand registration rights pursuant to any other agreement with the Company, the
proposed managing underwriter does not advise the Company that in its opinion
the inclusion of such selling Investor's Registrable Shares (without any
reduction in the number of shares to be sold for the account of the Company or
such party exercising demand registration rights) is likely to affect materially
and adversely the success of the offering or the price that would be received
for any shares of Common Stock offered, in which case the rights of such selling
Investor shall be as provided in Section 4(b) hereof.
(b) If a registration pursuant to Section 4(a) hereof involves
an underwritten offering and the managing underwriter shall advise the Company
in writing that, in its opinion, the number of shares of Common Stock requested
by the Investors to be included in such registration is likely to affect
materially and adversely the success of the offering or the price that would be
received for any shares of Common Stock offered in such offering, then,
notwithstanding anything in Section 4(a) to the contrary, the Company shall only
be required to include in such registration, to the extent of the number of
shares of Common Stock which the Company is so advised can be sold in such
offering, (i) first, the number of shares of Common Stock proposed to be
included in such registration for the account of the Company and/or any
stockholders of the Company (other than the Investors) that have exercised
demand registration rights, in accordance with the priorities, if any, then
existing among the Company and/or such stockholders of the Company with
registration rights (other than the Investors), and (ii) second, the shares of
Common Stock requested to be included in such registration by all other
stockholders of the Company who have piggyback registration rights (including,
without limitation, the Investors), pro rata among such other stockholders
(including, without limitation, the Investors) on the basis of the number of
shares of Common Stock that each of them requested to be included in such
registration.
(c) In connection with any offering involving an underwriting of
shares, the Company shall not be required under Section 4 hereof or otherwise to
include the Registrable Shares of any Investor therein unless such Investor
accepts and agrees to the terms of the underwriting, which shall be reasonable
and customary, as agreed upon between the Company and the underwriters selected
by the Company.
-3-
<PAGE>
5. OBLIGATIONS OF THE COMPANY. In connection with the Company's
obligation under Section 3 and 4 hereof to file the Registration Statement with
the SEC and to use its best efforts to cause the Registration Statement to
become effective as soon as practicable, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Shares covered by the Registration Statement;
(b) Furnish to the selling Investors such number of copies of
a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents
(including, without limitation, prospectus amendments and supplements
as are prepared by the Company in accordance with Section 5(a) above)
as the selling Investors may reasonably request in order to facilitate
the disposition of such selling Investors' Registrable Shares;
(c) Notify the selling Investors, at any time when a
prospectus relating to the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in or relating to the
Registration Statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading; and, thereafter, the Company will promptly (and in any
event within 10 days) prepare (and, when completed, give notice to each
selling Investor) a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable Shares,
such prospectus will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein not
misleading; provided that upon such notification by the Company, the
selling Investors will not offer or sell Registrable Shares until the
Company has notified the selling Investors that it has prepared a
supplement or amendment to such prospectus and delivered copies of such
supplement or amendment to the selling Investors (it being understood
and agreed by the Company that the foregoing proviso shall in no way
diminish or otherwise impair the Company's obligation to promptly
prepare a prospectus amendment or supplement as above provided in this
Section 5(c) and deliver copies of same as above provided in Section
5(b) hereof); and
(e) Use commercially reasonable efforts to register and
qualify the Registrable Shares covered by the Registration Statement
under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably appropriate in the opinion of the Company and the
managing underwriters, if any, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions, and provided further that
(notwithstanding anything in this Agreement to the contrary with
respect to the bearing of expenses) if any jurisdiction in which any of
such Registrable Shares shall be qualified shall require that expenses
incurred in connection with the qualification therein of any such
Registrable Shares must be borne by the selling Investors and may not
be paid or reimbursed by the Company, then the selling Investors shall,
to the extent required by such jurisdiction, pay their pro rata share
of such qualification expenses.
-4-
<PAGE>
6. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the selling Investors shall furnish to the Company such information regarding
them and the securities held by them as the Company shall reasonably request and
as shall be required in order to effect any registration by the Company pursuant
to this Agreement.
7. EXPENSES OF REGISTRATION. All expenses incurred in connection with
the registration of the Registrable Shares pursuant to this Agreement (excluding
underwriting, brokerage and other selling commissions and discounts), including
without limitation all registration and qualification and filing fees, printing,
and fees and disbursements of counsel for the Company, shall be borne by the
Company. In addition, the Company shall reimburse the Investors as a group for
the reasonable accountable costs and expenses incurred by one legal counsel to
the selling Investors as a group.
8. DELAY OF REGISTRATION. The Investors shall not take any action to
restrain, enjoin or otherwise delay any registration as the result of any
controversy which might arise with respect to the interpretation or
implementation of this Agreement.
9. INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each selling Investor, any investment banking firm acting as an
underwriter for the selling Investors, any broker/dealer acting on behalf of any
selling Investors and each officer and director of such selling Investor, such
underwriter, such broker/dealer and each person, if any, who controls such
selling Investor, such underwriter or broker/dealer within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the Registration Statement, in any preliminary
prospectus or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and will reimburse such
selling Investor, such underwriter, broker/dealer or such officer, director or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission made in connection with
the Registration Statement, any preliminary prospectus or final prospectus
relating thereto or any amendments or supplements to the Registration Statement
or any such preliminary prospectus or final prospectus, in reliance upon and in
conformity with written information furnished expressly for use in connection
with the Registration Statement or any such preliminary prospectus or final
prospectus by the selling Investors, any underwriter for them or controlling
person with respect to them.
-5-
<PAGE>
(b) To the extent permitted by law, each selling Investor will
severally and not jointly indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the Registration Statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any investment banking firm acting as underwriter for the Company or the
selling Investors, or any broker/dealer acting on behalf of the Company or any
selling Investors, and all other selling Investors against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
controlling person, underwriter, or broker/dealer or such other selling Investor
may become subject to, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement or any preliminary prospectus or final
prospectus, relating thereto or in any amendments or supplements to the
Registration Statement or any such preliminary prospectus or final prospectus,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent and only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, in any preliminary
prospectus or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, in reliance upon and in conformity with written information
furnished by the selling Investor expressly for use in connection with the
Registration Statement, or any preliminary prospectus or final prospectus; and
such selling Investor will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter, broker/dealer or other selling Investor in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the liability of each selling Investor hereunder shall
be limited to the proceeds (net of underwriting discounts and commissions, if
any) received by such selling Investor from the sale of Registrable Shares
covered by the Registration Statement, and provided, further, however, that the
indemnity agreement contained in this Section 9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of those selling Investor(s) against
which the request for indemnity is being made (which consent shall not be
unreasonably withheld).
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other indemnifying party
similarly noticed, to assume at its expense the defense thereof with counsel
mutually satisfactory to the indemnifying parties with the consent of the
indemnified party which consent will not be unreasonably withheld, conditioned
or delayed. In the event that the indemnifying party assumes any such defense,
the indemnified party may participate in such defense with its own counsel and
at its own expense, provided, however, that the counsel for the indemnifying
party shall act as lead counsel in all matters pertaining to such defense or
settlement of such claim and the indemnifying party shall only pay for such
indemnified party's expenses for the period prior to the date of its
participation on such defense. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to his ability
to defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 9, but the omission so to notify the
indemnifying party will not relieve him of any liability which he may have to
any indemnified party otherwise other than under this Section 9.
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<PAGE>
(d) Notwithstanding anything to the contrary herein, the indemnifying
party shall not be entitled to settle any claim, suit or proceeding unless in
connection with such settlement the indemnified party receives an unconditional
release with respect to the subject matter of such claim, suit or proceeding and
such settlement does not contain any admission of fault by the indemnified
party.
(e) The parties hereto acknowledge that the names H&Q Healthcare
Investors and H&Q Life Sciences Investors (collectively, the "H&Q Trusts") are
the designation of the Trustees for the time being under Declarations of Trust
dated April 21, 1987, as amended, and February 20, 1992, as amended,
respectively, and all persons dealing with either H&Q Trust must look solely to
the trust property of such H&Q Trust for the enforcement of any claim against
such H&Q Trust, as neither the respective Trustees, officers nor shareholders of
either H&Q Trust assume any personal liability for the obligations entered into
on behalf of such H&Q Trust.
10. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit the Investors to sell the Purchased Shares and
the Warrant Shares to the public without registration, the Company agrees to use
commercially reasonable efforts: (i) to make and keep public information
available, as those terms are understood and defined in the General Instructions
to Form S-3, or any successor or substitute form, and in Rule 144, (ii) to file
with the SEC in a timely manner all reports and other documents required to be
filed by an issuer of securities registered under the Securities Act or the
Exchange Act, (iii) as long as any Investor owns any Securities, to furnish in
writing upon such Investor's request a written statement by the Company that it
has complied with the reporting requirements of Rule 144 and of the Securities
Act and the Exchange Act, and to furnish to such Investor a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in availing
such Investor of any rule or regulation of the SEC permitting the selling of any
such Securities without registration and (iv) undertake any additional actions
reasonably necessary to maintain the availability of the Registration Statement
or the use of Rule 144.
11. DEFERRAL. Notwithstanding anything in this Agreement to the
contrary, if the Company shall furnish to the selling Investors a certificate
signed by the President or Chief Executive Officer of the Company stating that
the Board of Directors of the Company has made the good faith determination (i)
that continued use by the selling Investors of the Registration Statement for
purposes of effecting offers or sales of Registrable Shares pursuant thereto
would require, under the Securities Act, premature disclosure in the
Registration Statement (or the prospectus relating thereto) of material,
nonpublic information concerning the Company, its business or prospects or any
proposed material transaction involving the Company, (ii) that such premature
disclosure would be materially adverse to the Company, its business or prospects
or any such proposed material transaction or would make the successful
consummation by the Company of any such material transaction significantly less
likely and (iii) that it is therefore essential to suspend the use by the
Investors of such Registration Statement (and the prospectus relating thereto)
for purposes of effecting offers or sales of Registrable Shares pursuant
thereto, then the right of the selling Investors to use the Registration
Statement (and the prospectus relating thereto) for purposes of effecting offers
or sales of Registrable Shares pursuant thereto shall be suspended for a period
(the "Suspension Period") of not more than 90 days after delivery by the Company
of the certificate referred to above in this Section 11. During the Suspension
Period, none of the Investors shall offer or sell any Registrable Shares
pursuant to or in reliance upon the Registration Statement (or the
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<PAGE>
prospectus relating thereto). Notwithstanding the foregoing, the Company shall
not be entitled to Suspension Periods totaling more than 90 days in any
consecutive twelve-month period during the term of this Agreement.
12. TRANSFER OF REGISTRATION RIGHTS. None of the rights of any Investor
under this Agreement shall be transferred or assigned to any person unless (i)
such person is a Qualifying Holder (as defined below), and (ii) such person
agrees to become a party to, and bound by, all of the terms and conditions of,
this Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit B hereto. For purposes of this Section
12, the term "Qualifying Holder" shall mean, with respect to any Investor, (i)
any partner thereof, (ii) any corporation, partnership or, in addition in the
case of Sofinov, a governmental body, controlling, controlled by, or under
common control with, such Investor or any partner thereof, or (iii) any other
direct transferee from such Investor of at least 50% of those Registrable Shares
held or that may be acquired by such Investor. None of the rights of any
Investor under this Agreement shall be transferred or assigned to any Person
(including, without limitation, a Qualifying Holder) that acquires Registrable
Shares in the event that and to the extent that such Person is eligible to
resell such Registrable Shares pursuant to Rule 144(k) of the Securities Act or
may otherwise resell such Registrable Shares pursuant to an exemption from the
registration provisions of the Securities Act.
13. ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof, and it also supersedes any and all prior negotiations,
correspondence, agreements or understandings with respect to the subject matter
hereof.
14. MISCELLANEOUS.
(a) This Agreement may not be amended, modified or terminated,
and no rights or provisions may be waived, except with the written consent of
each Investor and the Company.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts, and
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors or assigns, provided that
the terms and conditions of Section 12 hereof are satisfied. This Agreement
shall also be binding upon and inure to the benefit of any transferee of any of
the Securities provided that the terms and conditions of Section 12 hereof are
satisfied. Notwithstanding anything in this Agreement to the contrary, if at any
time any Investor shall cease to own any Securities, all of such Investor's
rights under this Agreement shall immediately terminate.
(c) (i) Any notices, reports or other correspondence
(hereinafter collectively referred to as "correspondence") required or permitted
to be given hereunder shall be sent by courier (overnight or same day) or
telecopy or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.
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<PAGE>
(ii) All correspondence to the Company shall be addressed as follows:
Cubist Pharmaceuticals, Inc.
24 Emily Street
Cambridge, MA 02139
Attention: Scott M. Rocklage,
President and Chief Executive Officer
Telecopier (617) 576-0232
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Justin P. Morreale, Esq.
and
Julio E. Vega, Esq.
Telecopier: (617) 951-8736
(iii) All correspondence to any Investor shall be
sent to such Purchaser at the address set forth in Exhibit A.
(d) Any entity may change the address to which correspondence
to it is to be addressed by notification as provided for herein.
(e) The parties acknowledge and agree that in the event of any
breach of this Agreement, remedies at law may be inadequate, and each of the
parties hereto shall be entitled to seek specific performance of the obligations
of the other parties hereto and such appropriate injunctive relief as may be
granted by a court of competent jurisdiction.
(e) This Agreement may be executed in a number of
counterparts, an of which together shall for all purposes constitute one
Agreement, binding on all the parties hereto notwithstanding that all such
parties have not signed the same counterpart.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
CUBIST PHARMACEUTICALS, INC.
By: /s/ Scott M. Rocklage
----------------------------------
Scott M. Rocklage,
President and Chief Executive Officer
PURCHASERS:
SOFINOV SOCIETE FINANCIERE
D'INNOVATION INC.
By: /s/ Denis Dionnne
----------------------------------
Name: Denis Dionne
Title: President
By: /s/ Luc Villeneuve
----------------------------------
Name: Luc Villeneuve
Title: Director
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation,
General Partner
By: /s/ Jason Fisherman
----------------------------------
Name: Jason Fisherman
Title: Vice President
SPECIAL SITUATIONS PRIVATE EQUITY
FUND, L.P.
By: MG Advisers, L.L.C.,
General Partner
By: /s/ David M. Greenhouse
----------------------------------
Name: David M. Greenhouse
Title:
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<PAGE>
SPECIAL SITUATIONS FUND III, L.P.
By: MGP Advisers, Limited Partnership,
General Partner
By: AWM Investment Company, Inc.,
General Partner
By: /s/ David M. Greenhouse
----------------------------------
Name: David M. Greenhouse
Title:
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: AWM Investment Company, Inc.,
General Partner
By: /s/ David M. Greenhouse
----------------------------------
Name: David M. Greenhouse
Title:
BIOTECHNOLOGY DEVELOPMENT
FUND, L.P.
By: /s/ Frank Kung
----------------------------------
Name: Frank Kung
Title: Managing Partner
BIOCAPITAL INVESTMENTS LIMITED
PARTNERSHIP
By: /s/ Normand Balthazard
----------------------------------
Name: Normand Balthazard
Title: General Partner, President and CEO
CLARION CAPITAL CORPORATION
By: /s/ Morton A. Cohen
----------------------------------
Name: Morton A. Cohen
Title: Chairman
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<PAGE>
INTERNATIONAL BIOTECHNOLOGY
TRUST plc
By: /s/ Jeremy L. Curnock Cook
----------------------------------
Name: Jeremy L. Curnock Cook
Title: Director
H & Q HEALTHCARE INVESTORS, INC.
By: /s/ Alan G. Carr
----------------------------------
Name: Alan G. Carr
Title: President
H & Q LIFE SCIENCES INVESTORS, INC.
By: /s/ Alan G. Carr
----------------------------------
Name: Alan G. Carr
Title: President
LANCASTER INVESTMENT PARTNERS
By: /s/ Robert A. Berlacher
----------------------------------
Name: Robert A. Berlacher
Title: Manager, General Partner
CPR (USA) INC.
By: /s/ Steven S. Rogers
----------------------------------
Name: Steven S. Rogers
Title: Chief Administrative Officer and General
Counsel
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<PAGE>
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Richard Drake
----------------------------------
Name: Richard F. Drake
Title: Director, Venture Capital
PORTER PARTNERS, L.P.
By: /s/ Jeffrey H. Porter
----------------------------------
Name: Jeffrey H. Porter
Title: General Partner
MICHAEL T. JACKSON TRUST, NEW
TECHNOLOGIES FUND
By: /s/ Michael T. Jackson
----------------------------------
Name: Michael T. Jackson, TTEE
Title: Trustee
BIOTECHNOLOGY DEVELOPMENT
FUND III, L.P.
By: /s/ Frank Kung
----------------------------------
Name: Frank Kung
Title: Managing Partner
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<PAGE>
Exhibit 10.2
EXHIBIT A
Name and Address
<TABLE>
<S> <C> <C>
SOFINOV SOCIETE FINANCIERE LANCASTER INVESTMENT SPECIAL SITUATIONS FUND III,
D'INNOVATION INC. PARTNERS L.P.
Address: Address: Address:
1981, Avenue McGill College 500 N. Gulph, Suite 110 153 East 53rd Street
7e etage King of Prussia, PA 19406 New York, NY 10022
Montreal, Quebec H3A 3C7
ROVENT II LIMITED PARTNERSHIP CPR (USA) INC. SPECIAL SITUATIONS CAYMAN
Address: FUND, L.P.
c/o Advent International Address: Address:
101 Federal Street c/o Liberty View Capital 153 East 53rd Street
Boston, MA 02110 101 Hudson Street, Suite 3700 New York, NY 10022
Jersey City, NJ 07302
BIOTECHNOLOGY DEVELOPMENT NEW YORK LIFE INSURANCE INTERNATIONAL
FUND, L.P. COMPANY BIOTECHNOLOGY TRUST plc
Address: Address: Address:
c/o BioAsia 51 Madison Avenue c/o Rothschild Asset Management
575 High Street, Suite 201 New York, NY 10010 5 Arrows House
Palo Alto, CA 94301 St. Swithin's Lane
London, EC48 NR ENGLAND
BIOTECHNOLOGY DEVELOPMENT PORTER PARTNERS, L.P. H & Q HEALTHCARE
FUND III, L.P. INVESTORS, INC.
Address: Address: Address:
c/o BioAsia 100 Shoreline Avenue, Suite 211B c/o Hambrecht & Quist Group
575 High Street, Suite 201 Mill Valley, CA 94941 50 Rowes Wharf
Palo Alto, CA 94301 Boston, MA 02110-3328
BIOCAPITAL INVESTMENTS LIMITED MICHAEL T. JACKSON TRUST, NEW H & Q LIFE SCIENCES
PARTNERSHIP TECHNOLOGIES FUND INVESTORS, INC.
Address: Address: Address:
3690, rue de la Montague c/o Emerging Growth MGMT Co. c/o Hambrecht & Quist Group
Montreal, H3G 248 CANADA One Embarcadero Center, Ste 2410 50 Rowes Wharf
San Francisco, CA 94111 Boston, MA 02110-3328
CLARION CAPITAL SPECIAL SITUATIONS PRIVATE EQUITY
CORPORATION FUND, L.P.
Address: Address:
1801 East 9th Street 153 East 53rd Street
Cleveland, OH 44114 New York, NY 10022
</TABLE>
<PAGE>
EXHIBIT B
CUBIST PHARMACEUTICALS, INC.
Instrument of Adherence
Reference is hereby made to that certain Registration Rights Agreement,
dated as of September 10, 1998, among Cubist Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), the Initial Investors and the Investor Permitted
Transferees, as amended and in effect from time to time (the "Registration
Rights Agreement"). Capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Registration Rights Agreement.
The undersigned, in order to become the owner or holder of [___________
shares of common stock, par value $0.001 per share (the "Common Stock"), of the
Company and/or a Common Stock Purchase Warrant exercisable for __________ shares
of Common Stock], hereby agrees that, from and after the date hereof, the
undersigned has become a party to the Registration Rights Agreement in the
capacity of an Investor Permitted Transferee, and is entitled to all of the
benefits under, and is subject to all of the obligations, restrictions and
limitations set forth in, the Registration Rights Agreement that are applicable
to Investor Permitted Transferees. This Instrument of Adherence shall take
effect and shall become a part of the Registration Rights Agreement immediately
upon execution.
Executed under seal as of the date set forth below under the laws of
the Commonwealth of Massachusetts.
Signature: _______________________
Name:
Title:
Accepted:
CUBIST PHARMACEUTICALS, INC.
By: ______________________
Name:
Title:
Date: ____________________
<PAGE>
Exhibit 10.3
NEITHER THIS WARRANT NOR THE SHARES ISSUED OR ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, ENDORSED, PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE CONVEYED OR
DISPOSED OF, UNLESS THEY ARE (1) SO REGISTERED OR (2) AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND IF REQUESTED BY THE COMPANY, A WRITTEN LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IS PROVIDED BY THE
TRANSFEROR. THIS WARRANT AND THE SHARES ISSUED OR ISSUABLE UPON EXERCISE OF THIS
WARRANT IF NOT TRANSFERRED PURSUANT TO AND IN CONFORMITY WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR IN ACCORDANCE WITH
RULE 144 OF THE SECURITIES ACT OF 1933, ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER SET FORTH IN SECTION 9 OF THIS WARRANT, AND NO TRANSFER OF THIS
WARRANT AND/OR SUCH SHARES SHALL BE VALID OR EFFECTIVE IF IT IS NOT EFFECTED IN
COMPLIANCE WITH SUCH RESTRICTIONS ON TRANSFER.
No.CBST 1998W-1 Dated: September 23, 1998
CUBIST PHARMACEUTICALS, INC.
COMMON STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, for value received, SOFINOV SOCIETE FINANCIERE
D'INNOVATION INC., a Canadian corporation (the "Initial Warrant Holder"), and
its registered successors and permitted assigns are entitled, subject to the
terms and conditions set forth below, to purchase from CUBIST PHARMACEUTICALS,
INC., a Delaware corporation ("Cubist"), at any time or from time to time after
9:00 A.M., Boston, Massachusetts time, on September 23, 1998 (the "Initial
Exercise Date") and prior to 5:00 P.M., Boston, Massachusetts time, on September
23, 2003 (the "Expiration Date"), any or all of 1,111,112 shares (the "Initial
Warrant Shares"), of common stock, $0.001 par value per share, of Cubist, at a
purchase price per share equal to $2.25 (the "Initial Exercise Price"). The
number and character of the Initial Warrant Shares and the Initial Exercise
Price are subject to adjustment as provided herein.
This Common Stock Purchase Warrant (this "Warrant") is being issued
pursuant to, and is subject to the terms and conditions of, that certain
Securities Purchase Agreement, dated as of September 10, 1998 (the "Securities
Purchase Agreement"), among Cubist and the purchasers listed on Exhibit A
thereto. A copy of the Securities Purchase Agreement is on file at the principal
office of Cubist.
<PAGE>
1. Definitions. As used in this Warrant, the following terms shall have
the respective meanings set forth below or elsewhere in this Warrant as referred
to below:
"Common Stock" shall mean common stock, $0.001 par value per share, of
the Corporation.
"Corporation" shall mean Cubist and/or any Person that shall succeed
to, or assume the obligations hereunder of, Cubist.
"Exercise Date" shall have the meaning set forth in Section 2.3 hereof.
"Exercise Price" shall mean the Initial Exercise Price as adjusted from
time to time pursuant to the terms of this Warrant.
"Fair Market Value" shall mean (i) the last reported sale price per
Unit of Stock on the Nasdaq-NNM or any national securities exchange in which the
Stock is quoted or listed, as the case may be, on the date immediately preceding
the Exercise Date or, if no such sale price is reported on such date, such price
on the next preceding business day in which such price was reported, or (ii) if
such Stock is not quoted or listed on the Nasdaq-NNM or any national securities
exchange, the fair market value per Unit of Stock, as determined in good faith
by the Board of Directors of the Corporation.
"Holder" shall mean, as applicable, (i) the Initial Warrant Holder,
(ii) any successor of the Initial Warrant Holder or (iii) any other holder of
record of this Warrant to whom this Warrant shall have been transferred in
accordance with the provisions of Section 9 hereof.
"Nasdaq-NNM" shall mean The "National Market" portion of the National
Association of Securities Dealers' Automated Quotation system.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Property" shall have the meaning set forth in Section 4.2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock" shall mean (i) Common Stock and/or (ii) any class or series of
capital stock of the Corporation (other than Common Stock) or any other Person
or any other securities of the Corporation or any other Person that the Holder
is entitled to receive, or receives, in lieu of or in addition to Common Stock,
pursuant to Section 4 hereof upon exercise of this Warrant.
"Unit" shall mean (i) in the case of Stock consisting of a single class
or series of capital stock, or single type of security, of the Corporation or
any other Person, a single share of such class or series of such capital stock
or an equivalent unit of measurement of such type or kind of security and (ii)
in the case of Stock consisting of multiple classes or series of capital stock,
or
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<PAGE>
multiple types or kinds of securities, of the Corporation or any other Person, a
single share of each such class or series of such capital stock and/or an
equivalent unit of measurement of each of such type or kind of securities.
"Warrant Shares" shall mean the Initial Warrant Shares as adjusted from
time to time pursuant to the terms of this Warrant. It is understood and agreed
that, depending on the context in which the term "Warrant Shares" is used in
this Warrant, such term is sometimes used to refer to (i) the Stock or other
property (including cash) that has been issued upon a prior exercise of this
Warrant, (ii) the Stock or other property (including cash) that is still subject
to issuance upon exercise of this Warrant or (iii) the Stock or other property
(including cash) referred to in both of the foregoing clauses (i) and (ii).
2. Exercise Of Warrant.
2.1 Method of Exercise.
(a) Subject to and upon all of the terms and conditions set
forth in this Warrant, the Holder may exercise this Warrant, in whole or in part
with respect to any Warrant Shares, at any time and from time to time during the
period commencing on the Initial Exercise Date and ending on the Expiration
Date, by presentation and surrender of this Warrant to the Corporation at its
principal office, together with (i) a properly completed and duly executed
subscription form, in the form attached hereto, which subscription form shall
specify the number of Warrant Shares for which this Warrant is then being
exercised, (ii) if requested by the Corporation, a duly executed instrument or
certificate, in form and substance satisfactory to the Corporation, pursuant to
which the Holder makes such representations and warranties to the Corporation,
and provides or confirms such information concerning the Holder, as the
Corporation may reasonably request (including, without limitation, such
representations and warranties and such information as may be required in order
to confirm compliance with applicable securities laws), (iii) payment of the
aggregate Exercise Price payable hereunder in respect of the number of Warrant
Shares being purchased upon exercise of this Warrant, and (iv) if applicable,
the payment of any transfer taxes required to be paid by the Holder pursuant to
Section 2.8 hereof. Payment of such aggregate Exercise Price and any such
transfer taxes shall be made in cash, by money order, certified or bank
cashier's check or wire transfer (in each case in lawful currency of the United
States of America) or, with respect to the payment of such aggregate Exercise
Price only, in the manner provided in Section 2.1(b) below.
(b) In lieu of making payment, in the manner provided in
Section 2.1 above, of all or any portion of the aggregate Exercise Price payable
in respect of the number of Warrant Shares for which this Warrant is being
exercised, the Holder may pay all or such portion of such aggregate Exercise
Price by electing not to receive all of such Warrant Shares but only to receive
that number of such Warrant Shares as shall be determined in accordance with the
following formula:
X = Y(A-B)
------
A
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<PAGE>
Where: X = the number of Warrant Shares to be issued to the
Holder pursuant to this Section 2.1(b)
Y = the number of Warrant Shares for which
this Warrant is being exercised as of the
applicable Exercise Date
A = the Fair Market Value as of the applicable
Exercise Date of a Unit of the Stock
constituting such Warrant Shares
B = the Exercise Price in effect as of the
applicable Exercise Date of a Unit of the
Stock constituting such Warrant Shares
The Holder may elect to make payment of all or any portion of such aggregate
Exercise Price pursuant to, and in the manner set forth in, this Section 2.1(b)
by surrendering this Warrant to the Corporation at its principal office,
together with (a) a properly completed and duly executed net issue exercise
election, in the form attached hereto, which net issue exercise election shall
specify the number of Warrant Shares for which this Warrant is then being
exercised, the number of such Warrant Shares that the Holder is electing not to
receive and the aggregate fair market value of such number of Warrant Shares
that the Holder is electing not to receive, (b) if requested by the Corporation,
a duly executed instrument or certificate, in form and substance satisfactory to
the Corporation, pursuant to which the Holder makes such representations and
warranties to the Corporation, and provides or confirms such information
concerning the Holder, as the Corporation may reasonably request (including,
without limitation, such representations and warranties and such information as
may be required in order to confirm compliance with applicable securities laws),
and (c) if applicable, the payment of any transfer taxes required to be paid by
the Holder pursuant to Section 2.8 hereof. Payment of such transfer taxes shall
be made in cash, by money order, certified or bank cashier's check or wire
transfer (in each case in lawful currency of the United States of America).
2.2 Limitation on Right to Exercise. Notwithstanding anything expressed
or implied in this Warrant (including, without limitation, any provision of
Section 2.1(a) or Section 2.1(b) above) to the contrary, prior to any exercise
by the Holder of this Warrant, the Holder shall make a determination as to
whether any such proposed exercise requires, prior to the consummation thereof,
that filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or the rules and regulations promulgated thereunder (said Act and said
rules and regulations being referred to herein, collectively, as the "HSR Act"),
be made. If the Holder shall make the determination that any such proposed
exercise requires, prior to the consummation thereof, that filings under the HSR
Act be made, then the Holder shall give prompt written notice of such
determination to the Corporation and such written notice shall state the
portion, if any, of the Warrant Shares originally subject to such proposed
exercise that could be exercised without having to make any filings under the
HSR Act (the "Non-HSR Warrant Shares"), and the portion of Warrant Shares
originally subject to such proposed exercise that require, prior to the
consummation of such proposed exercise, that filings under the HSR Act be made
(the "HSR Warrant Shares"). In the event that the Holder shall give such written
notice to the Corporation, the proposed exercise of the Non-HSR Warrant Shares
shall be consummated pursuant to, and in accordance with, the provisions of this
Warrant, and, notwithstanding
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<PAGE>
anything in this Warrant to the contrary, the proposed exercise of the HSR
Warrant Shares shall not be consummated unless and until (i) the Holder gives
written notice to the Corporation that the Holder desires to cause to be made
the filings required under the HSR Act in order to effect the proposed exercise
of the HSR Warrant Shares (the "HSR Filing Notice"), (ii) such filings required
under the HSR Act are made and (iii) the waiting period under the HSR Act with
respect to such proposed exercise shall have expired or been subject to early
termination. Upon receipt by the Corporation of the HSR Filing Notice, the
Corporation and the Holder (x) shall cooperate, and shall use commercially
reasonable efforts to cause their respective ultimate parent entities (if any)
to cooperate, in preparing the filings required under the HSR Act in order to
effect the proposed exercise of the HSR Warrant Shares and (y) shall cooperate,
and shall use commercially reasonable efforts to cause their respective ultimate
parent entities (if any) to cooperate, in preparing all supplemental material
that is required to accompany such filings, and both parties shall coordinate,
and shall use commercially reasonable efforts to cause their respective ultimate
parent entities (if any) to coordinate, the making of such filings so that such
filings are made concurrently. The Corporation and the Holder shall perform
their respective obligations under this Section 2.2 with reasonable care and in
good faith. It is hereby understood that the provisions of this Section 2.2
shall be applied with respect to any Warrant Shares more than once such that any
categorization of such Warrant Shares as HSR Warrant Shares shall not preclude
any later categorization of the same shares as Non-HSR Warrant Shares.
2.3 Effectiveness of Exercise; Ownership. Each exercise of this Warrant
by the Holder shall be deemed to have been effected immediately prior to the
close of business on the date upon which all of the requirements of Section
2.1(a) or 2.1(b) hereof, as applicable, with respect to such exercise shall have
been complied with in full (each such date, an "Exercise Date"). On the
applicable Exercise Date with respect to any exercise of this Warrant by the
Holder, the Corporation shall be deemed to have issued to the Holder, and the
Holder shall be deemed to have become the holder of record and legal owner of,
the number of Warrant Shares being purchased upon such exercise of this Warrant,
notwithstanding that the stock transfer books of the Corporation shall then be
closed or that certificates representing such number of Warrant Shares being
purchased shall not then be actually delivered to the Holder.
2.4 Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant, and in any event within thirty (30) days
thereafter, the Corporation, at its expense, will cause to be issued in the name
of and delivered to the Holder, or as the Holder may direct (upon payment by the
Holder of any applicable transfer taxes as required by Section 2.8 hereof and
subject to, in all cases, the provisions of Section 9 hereof), a certificate or
certificates for the number of Warrant Shares purchased by the Holder on such
exercise, plus, in lieu of any fractional share to which the Holder would
otherwise be entitled, cash equal to such fraction multiplied by the Fair Market
Value. The provisions set forth in Section 7.5 of the Securities Purchase
Agreement will apply and be for the benefit of the Holder of this Warrant to the
same extent as if the full text of all of such provisions were set forth in this
Warrant.
2.5 Shares To Be Fully Paid and Nonassessable. All Warrant Shares
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable, free of all liens, taxes, charges and other encumbrances or
restrictions on sale (other than those set forth herein) and free and clear of
all preemptive rights and, assuming no change in the federal and state
-5-
<PAGE>
securities laws and assuming the Holder exercising the Warrants is an accredited
investor, will be issued in compliance with all applicable federal and state
securities laws.
2.6 Fractional Shares. No fractional shares of Stock or scrip
representing fractional shares of Stock shall be issued upon the exercise of
this Warrant. With respect to any fraction of a share of Stock called for upon
any exercise hereof, the Corporation shall make a cash payment to the Holder as
set forth in Section 2.4 hereof.
2.7 Issuance of New Warrants; Corporation Acknowledgment. Upon any
partial exercise of this Warrant, the Corporation, at its expense, will
forthwith issue and deliver to the Holder a new warrant or warrants of like
tenor, registered in the name of the Holder, exercisable, in the aggregate, for
the balance of the Warrant Shares. Moreover, the Corporation shall, at the time
of any exercise of this Warrant, upon the request of the Holder, acknowledge in
writing its continuing obligation to afford to the Holder any rights to which
the Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant; provided, however, that if the Holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Corporation to afford to the Holder any such rights.
2.8 Payment of Taxes and Expenses. The Holder shall be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
of, and the preparation and delivery of certificates (if applicable)
representing, (i) any Warrant Shares purchased upon exercise of this Warrant and
issued in a name other than that or the Holder and/or (ii) new or replacement
warrants in a name other than that of the Holder, and, until the payment of such
tax, the Corporation shall not be required to issue or cause to be issued any
such purchased Warrant Shares or any such new or replacement warrants, and the
Corporation shall also not be required to prepare and deliver, or to cause to be
prepared and delivered, certificates representing any such purchased Warrant
Shares.
2.9 Expiration. This Warrant and the Holder's rights hereunder, to the
extent not previously exercised, shall expire as of 5:00 P.M., Boston,
Massachusetts time, on the Expiration Date.
3. Adjustments for Stock Dividends, Subdivisions and Combinations. In
the event that, at any time and from time to time after the Initial Exercise
Date, the Corporation shall (a) issue additional shares of Common Stock as a
dividend or other distribution on outstanding shares of Common Stock, (b)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock or (c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, then, in each such event, (x) the
Exercise Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then current Exercise Price by a fraction, (i) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event, and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such event, and
the product so obtained shall thereafter be the Exercise Price then in effect,
and (y) the number of Warrant Shares shall be adjusted by increasing or
decreasing, as the case may be, the number of shares of Common Stock included
within the Warrant Shares by the percentage increase or decrease in the total
number of shares of Common Stock outstanding immediately after such
-6-
<PAGE>
event over the total number of shares of Common Stock outstanding immediately
prior to such event and the result so obtained shall be the Warrant Shares then
in effect. The Exercise Price and the Warrant Shares, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described in this Section 3.
4. Adjustment for Reorganization, Consolidation or Merger.
4.1 Reorganization, Consolidation or Merger. In case that, at any time
or from time to time after the Initial Exercise Date, the Corporation shall (a)
effect a reorganization, (b) consolidate with or merge into any other Person, or
(c) transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Corporation, then, in each such case, the Holder, on the exercise of this
Warrant as provided in Section 2 hereof at any time or from time to time after
the consummation of such reorganization, consolidation or merger or (subject to
the limitations on exercise set forth in Section 4.2 below) the effective date
of such dissolution, as the case may be, shall receive, in lieu of the Warrant
Shares issuable on such exercise immediately prior to such consummation or such
effective date, as the case may be, the stock and other securities and property
(including cash) to which the Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if the
Holder had so exercised this Warrant immediately prior thereto, all subject to
successive adjustments thereafter from time to time pursuant to, and in
accordance with, the provisions of Section 3 hereof and this Section 4.
4.2 Dissolution. In the event of any dissolution of the Corporation
following the transfer of all or substantially all of its properties or assets
at any time after the Initial Exercise Date, the Corporation shall retain for a
period of at least thirty (30) days after the effective date of such dissolution
the stock and other securities and property (including cash, where applicable)
(collectively, the "Property") receivable by the Holder pursuant to Section 4.1
hereof upon exercise of this Warrant at any time after the effective date of
such dissolution. If the Holder fails to exercise this Warrant within the thirty
(30) day period following the effective date of such dissolution, then such
Property shall be distributed pro rata to those Persons who were stockholders of
record of the Corporation on the effective date of such dissolution or as
otherwise provided by the Corporation.
4.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any such transfer) referred to
in this Section 4, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable upon the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the Person acquiring all or substantially all of the
properties or assets of the Corporation, whether or not such Person shall have
expressly assumed the terms of this Warrant.
5. Officer's Certificate as to Adjustments. In each case of any
adjustment or readjustment in the number and kind of Warrant Shares, or
property, issuable hereunder from time to time, or the Exercise Price, the
Corporation, at its expense, will promptly cause an officer
-7-
<PAGE>
of the Corporation to compute such adjustment or readjustment in accordance with
the terms of this Warrant and prepare a certificate setting forth such
adjustment or readjustment and showing the facts upon which such adjustment or
readjustment is based. The Corporation will forthwith mail a copy of each such
certificate to the Holder.
6. Notices of Record Date. In the event of
(a) any taking by the Corporation of a record of the holders of Common
Stock for the purpose of determining the holders thereof who are entitled to
receive any shares of Common Stock as a dividend or other distribution or
pursuant to a stock split, or
(b) any reorganization of the Corporation or any transfer of all or
substantially all the assets of the Corporation to or consolidation or merger of
the Corporation with or into any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Corporation,
then and in each such event the Corporation will mail or cause to be mailed to
the Holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or stock split, and stating
the amount and character of such dividend, distribution or stock split, and (ii)
the date on which any such reorganization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least ten
(10) days prior to the date specified in such notice on which any such action is
to be taken.
7. Exchange of Warrant. Subject to the provisions of Section 9 hereof
(if and to the extent applicable), this Warrant shall be exchangeable, upon the
surrender hereof by the Holder at the principal office of the Corporation, for
new warrants of like tenor, each registered in the name of the Holder or in the
name of such other Persons as the Holder may direct (upon payment by the Holder
of any applicable transfer taxes). Each of such new warrants shall be
exercisable for such number of Warrant Shares as the Holder shall direct,
provided that all of such new warrants shall represent, in the aggregate, the
right to purchase the same number of Warrant Shares which may be purchased by
the Holder upon exercise of this Warrant at the time of its surrender.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Corporation or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Corporation at
its expense will execute and deliver, in lieu thereof, a new warrant of like
tenor.
-8-
<PAGE>
9. Restrictions on Transfer; Compliance with Securities Act; Mechanics
of Transfer.
9.1 Contractual Transfer Restrictions. Notwithstanding anything
expressed or implied in this Warrant to the contrary, in no event shall the
Holder sell, assign, transfer, endorse, pledge, mortgage, hypothecate or
otherwise convey or dispose of all or any portion of the Warrant, any Warrant
Shares issued from time to time upon exercise of this Warrant, or any interest
in any of the foregoing (other than pursuant to and in conformity with an
effective registration statement under the Securities Act or in accordance with
Rule 144 of the Securities Act of 1933), unless the proposed transferee thereof
shall have executed and delivered to the Corporation a written agreement or
instrument, in form and substance satisfactory to the Corporation, providing for
such proposed transferee's written acknowledgment and agreement that he, she or
it shall be bound by all of the provisions of this Section 9, and providing also
for such representations and warranties made by such proposed transferee in
favor of the Corporation as the Corporation shall reasonably request (including,
without limitation, those that may be required in order to confirm compliance
with applicable securities laws).
9.2 Securities Laws Restrictions. Neither this Warrant nor any of the
Warrant Shares issued from time to time upon exercise of this Warrant may be
offered, sold, assigned, transferred, endorsed, pledged, mortgaged, hypothecated
or otherwise conveyed or disposed of by the Holder, unless (i) any such offer,
sale, assignment, transfer, endorsement, pledge, mortgage, hypothecation or
other conveyance or disposition shall be effected (A) pursuant to and in
conformity with an effective registration statement under the Securities Act (a
"Registered Sale") or any then available exemption from the registration
requirements of the Securities Act, and (B) pursuant to and in conformity with
any applicable state securities or blue sky laws, and (ii) in the case of any
offer, sale, assignment, transfer, endorsement, pledge, mortgage, hypothecation
or other conveyance or disposition other than pursuant to a Registered Sale, if
requested by the Corporation, the Holder shall have obtained and delivered to
the Corporation a written legal opinion of counsel (reasonably satisfactory to
the Corporation as to such counsel and as to the substance of such opinion) to
the effect that any such proposed offer, sale, assignment, transfer,
endorsement, pledge, mortgage, hypothecation or other conveyance or disposition
by the Holder does not violate the registration provisions of the Securities Act
and any applicable state securities or blue sky laws.
9.3 Effect of Violation of Transfer Restrictions; Preventive Measures.
Any offer, sale, assignment, transfer, endorsement, pledge, mortgage,
hypothecation, or other conveyance or disposition of all or any portion of this
Warrant or any Warrant Shares issued from time to time upon exercise of this
Warrant, or of any interest in this Warrant or any of such Warrant Shares, in
violation of this Section 9 shall be null and void. The Corporation may make a
notation on its records or give instructions to any of its transfer agents in
order to implement the restrictions on transfer set forth in this Section 9. The
Corporation shall not incur any liability for any delay in recognizing any
transfer of this Warrant or of any Warrant Shares issued from time to time upon
exercise of this Warrant if the Corporation reasonably believes that any such
transfer may have been or would be in violation of the provisions of the
Securities Act, applicable blue sky laws or this Section 9.
-9-
<PAGE>
9.4 Legends.
(a) Each certificate representing any Warrant Shares issued
upon exercise of this Warrant shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, ENDORSED, PLEDGED, MORTGAGED,
HYPOTHECATED OR OTHERWISE CONVEYED OR DISPOSED OF, UNLESS SUCH
SHARES ARE (1) SO REGISTERED OR (2) AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND, IF REQUESTED BY THE COMPANY, A
WRITTEN LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY IS PROVIDED BY THE TRANSFEROR. IF THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERRED PURSUANT
TO AN IN CONFORMITY WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 OR IN ACCORDANCE WITH RULE
144 OF THE SECURITIES ACT OF 1933, SUCH SHARES ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 9 OF A COMMON STOCK PURCHASE WARRANT DATED SEPTEMBER
23, 1998, AND NO TRANSFER OF SUCH SHARES SHALL BE VALID OR
EFFECTIVE IF IT IS NOT EFFECTED IN COMPLIANCE WITH ALL OF SUCH
RESTRICTIONS ON TRANSFER. COPIES OF SUCH COMMON STOCK PURCHASE
WARRANT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF SUCH SHARES TO THE SECRETARY OF CUBIST
PHARMACEUTICALS, INC."
(b) Each certificate representing any Warrant Shares issued
from time to time upon exercise of this Warrant shall also bear any legend
required under any applicable state securities or blue sky laws.
9.5 Survival. The obligations of the Holder (and/or of any transferee
of the Warrant or any Warrant Shares issued from time to time upon exercise of
this Warrant) under this Section 9 shall, with respect to any Warrant Shares
issued from time to time upon exercise of this Warrant, survive the exercise,
expiration or other termination, or transfer, of this Warrant indefinitely.
9.6 Mechanics of Transfer.. Any transfer of all or any portion of this
Warrant, or of any interest therein, that is otherwise in compliance with the
provisions of this Section 9 shall be effected by surrendering this Warrant to
the Corporation at its principal office, together with (i) a duly executed form
of assignment, in the form attached hereto, (ii) if required, the written
agreement or instrument that the proposed transferee is required to execute and
deliver to the Corporation pursuant to Section 9.1 hereof and (iii) payment of
any applicable transfer taxes, if any. In the event of any such transfer of this
Warrant, in whole, the Corporation shall issue a new warrant of like tenor to
the transferee, representing the right to purchase the same number of
-10-
<PAGE>
Warrant Shares which were purchasable by the Holder upon exercise of this
Warrant at the time of its transfer. In the event of any such transfer of any
portion of this Warrant, (i) the Corporation shall issue a new warrant of
like tenor to the transferee, representing the right to purchase the same
number of Warrant Shares which were purchasable by the Holder upon exercise
of the transferred portion of this Warrant at the time of such transfer, and
(ii) the Corporation shall issue a new warrant of like tenor to the Holder,
representing the right to purchase the number of Warrant Shares purchasable
by the Holder upon exercise of the portion of this Warrant not transferred to
such transferee. Until this Warrant or any portion thereof is transferred on
the books of the Corporation, the Corporation may treat the Holder as the
absolute holder of this Warrant and all right, title and interest therein for
all purposes, notwithstanding any notice to the contrary.
10. General.
10.1 Statement on Warrant. Irrespective of any adjustments in the
Exercise Price or the number or kind of Warrant Shares, this Warrant may
continue to express the same Exercise Price and the same number and kind of
Warrant Shares as are stated on the front page hereof.
10.2 Authorized Shares; Reservation of Shares for Issuance. At all
times while this Warrant is outstanding, the Corporation shall maintain its
corporate authority to issue, and shall have authorized and reserved for
issuance upon exercise of this Warrant, such number of shares of Common Stock as
shall be sufficient to perform its obligations under this Warrant (after giving
effect to any and all adjustments to the number and kind of Warrant Shares
purchasable upon exercise of this Warrant).
10.3 No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, sale or
other transfer of any of its assets or properties, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereunder against
impairment. Without limiting the generality of the foregoing, the Corporation
(a) will not increase the par value of any shares of Stock receivable upon the
exercise of this Warrant above the amount payable therefor on such exercise, and
(b) will take all action that may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Stock on the exercise of this Warrant.
10.4 No Rights as Stockholder. The Holder shall not be entitled to vote
or to receive dividends or to be deemed the holder of Stock that may at any time
be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder any of the
rights of a stockholder of the Corporation or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance or reclassification of stock, change of par value
or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings (except to
-11-
<PAGE>
the extent otherwise provided in this Warrant), or to receive dividends or
subscription rights, until the Holder shall have exercised the Warrant in
accordance with the provisions hereof.
10.5 Notices. (i) Any notices, reports or other correspondence
(hereinafter collectively referred to as "correspondence") required or permitted
to be given hereunder shall be sent by courier (overnight or same day) or
telecopy or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. The date of giving any notice shall
be the date of its actual receipt.
(ii) All correspondence to the Company shall be addressed
as follows:
Cubist Pharmaceuticals, Inc.
24 Emily Street
Cambridge, MA 02139
Attention: Scott M. Rocklage,
President and Chief Executive Officer
Telecopier: (617) 576-0232
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Justin P. Morreale, Esq.
and
Julio E. Vega, Esq.
Telecopier: (617) 951-8736
(iii) All correspondence to the Holder, at the Holder's
address appearing in the books maintained by the Corporation.
10.6 Amendment and Waiver. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Corporation and the Holder.
10.7 Governing Law. This Warrant shall be construed in accordance with
and governed by the laws of The Commonwealth of Massachusetts.
10.8 Covenants To Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Corporation shall bind its successors and assigns, whether so expressed
or not.
-12-
<PAGE>
10.9 Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
10.10 Construction. The definitions of this Warrant shall apply equally
to both the singular and the plural forms of the terms defined. Wherever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The section and paragraph headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
10.11 Remedies. The Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Corporation agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Warrant or where any provision hereof is validly asserted as a defense,
the successful party to such action or proceeding shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
executed in its corporate name by one of its officers thereunto duly authorized,
all as of the day and year first above written.
CUBIST PHARMACEUTICALS, INC.
By: /s/ Scott M. Rocklage
----------------------------------------
Name: Scott M. Rocklage
Title: President and Chief Executive
Officer
-13-
<PAGE>
FORM OF SUBSCRIPTION
(To be executed upon exercise of Warrant)
To: CUBIST PHARMACEUTICALS, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to exercise thereunder,
_______ shares of [common stock, $0.001 par value per share ("Common
Stock")/DESCRIBE OTHER STOCK], of Cubist Pharmaceuticals, Inc., a Delaware
corporation, and tenders herewith payment of $__________, representing the
aggregate purchase price for such shares based on the price per share provided
for in such Warrant. Such payment is being made in lawful money of the United
States by certified or bank cashier's check or wire transfer.
Please issue a certificate or certificates for such shares of [Common
Stock/other Stock] in the following name or names and denominations and deliver
such certificate or certificates to the person or persons listed below at their
respective addresses set forth below:
If said number of shares of [Common Stock/other Stock] shall not be all
the shares of [Common Stock/other Stock] issuable upon exercise of the attached
Warrant, a new Warrant is to be issued in the name of the undersigned for the
balance remaining of such shares of [Common Stock/other Stock] less any fraction
of a share of [Common Stock/other Stock] paid in cash.
Dated: ____________, 19__ __________________________________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant or with the name of the assignee appearing
in the assignment form below.
<PAGE>
FORM OF NET ISSUE EXERCISE ELECTION
(To be executed upon net issue exercise of Warrant)
To: CUBIST PHARMACEUTICALS, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to exercise thereunder,
_______ shares (the "Purchased Warrant Shares") of [common stock, $0.001 par
value per share ("Common Stock")/DESCRIBE OTHER STOCK], of Cubist
Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"). The aggregate
exercise price payable by the undersigned in connection with the purchase of the
Purchased Warrant Shares is $__________. Pursuant to Section 2.1(b) of the
attached Warrant, the undersigned hereby elects to make payment of such
aggregate exercise price by surrendering the right to receive _______ of the
Purchased Warrant Shares (the "Surrendered Purchased Warrant Shares"). The
aggregate fair market value of the Surrendered Purchased Warrant Shares is
$____________. The net number of Purchased Warrant Shares issuable by the
Corporation (after giving effect to the surrender by the undersigned of the
Surrendered Purchased Warrant Shares) in connection with such exercise shall be
__________ shares (the "Net Issue Purchase Warrant Shares").
Please issue a certificate or certificates for the Net Issue Purchased
Warrant Shares in the following name or names and denominations and deliver such
certificate or certificates to the person or persons listed below at their
respective addresses set forth below:
If the Net Issue Purchased Warrant Shares shall not be all the shares
of [Common Stock/other Stock] issuable upon exercise of the attached Warrant, a
new Warrant is to be issued in the name of the undersigned for the balance
remaining of such shares of [Common Stock/other Stock] less any fraction of a
share of [Common Stock/other Stock] paid in cash.
Dated: ____________, 19__ __________________________________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant or with the name of the assignee appearing
in the assignment form below.
<PAGE>
FORM OF ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, _____________________________________ hereby sells,
assigns and transfers unto _________________ the attached Warrant [__% of the
attached Warrant], together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________________ attorney
to transfer said Warrant [said percentage of said Warrant] on the books of
CUBIST PHARMACEUTICALS, INC., a Delaware corporation, with full power of
substitution in the premises.
If not all of the attached Warrant is to be so transferred, a new
Warrant is to be issued in the name of the undersigned for the balance of said
Warrant.
Dated: ____________, 19__ _________________________________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant.
<PAGE>
Schedule to Exhibit 10.3
The Company has also issued CSPW to each of the investors below. These
Common Stock Purchase Warrants are identical to the Common Sock Purchase Warrant
issued to Sofinov Societe Financiere d'Innovation Inc., except that the name of
the Initial Warrant Holder, the Number of Initial Warrant Shares and the Warrant
Number is as set forth below next to each investor's name. Pursuant to
Instruction 2 to Item 601 of Regulation S-K the company has omitted the full
text of these Common Stock Purchase Warrants.
<TABLE>
<CAPTION>
Number of Initial
Initial Warrant Holder Warrant Shares Warrant Number
---------------------- -------------- --------------
<S> <C> <C>
ROVENT II LIMITED PARTNERSHIP 166,667 CBST 1998W-2
BIOTECHNOLOGY DEVELOPMENT FUND, L.P. 40,740 CBST 1998W-3
BIOTECHNOLOGY DEVELOPMENT FUND III, L.P. 14,816 CBST 1998W-4
BIOCAPITAL INVESTMENTS LIMITED PARTNERSHIP 75,000 CBST 1998W-5
CLARION CAPITAL CORPORATION 77,778 CBST 1998W-6
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. 133,334 CBST 1998W-7
SPECIAL SITUATIONS FUND III, L.P. 233,334 CBST 1998W-8
SPECIAL SITUATIONS CAYMAN FUND, L.P. 77,778 CBST 1998W-9
INTERNATIONAL BIOTECHNOLOGY TRUST plc 111,112 CBST 1998W-10
H & Q HEALTHCARE INVESTORS 200,001 CBST 1998W-11
H & Q LIFE SCIENCES INVESTORS 133,333 CBST 1998W-12
LANCASTER INVESTMENT PARTNERS 50,000 CBST 1998W-13
CPR (USA) INC. 50,000 CBST 1998W-14
NEW YORK LIFE INSURANCE COMPANY 444,444 CBST 1998W-15
PORTER PARTNERS, L.P. 50,000 CBST 1998W-16
MICHAEL T. JACKSON TRUSTEE, 63,334 CBST 1998W-17
NEW TECHNOLOGIES FUND
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 19,043,987
<SECURITIES> 2,041,848
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,275,253
<PP&E> 7,063,454
<DEPRECIATION> 3,619,775
<TOTAL-ASSETS> 27,121,575
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0
0
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<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
