EXHIBIT 10.27
EXECUTION COPY
--------------
Portions of this Exhibit
have been omitted
pursuant to a request
for confidential
treatment. The omitted
portions are marked
***** and have been
filed separately with
the Commission.
STOCK PURCHASE AGREEMENT
dated as of November 8, 1996
by and between
CELL THERAPEUTICS, INC.
and
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ DEVELOPMENT CORPORATION
(The information below marked by ***** has been
omitted by a request for confidential treatment.
The omitted portion has been separately filed
with the Commission.)
TABLE OF CONTENTS
Page
ARTICLE I
SALE OF PREFERRED STOCK AT THE FIRST CLOSING
--------------------------------------------
SECTION 1.01. Sale...................................................... 1
SECTION 1.02. First Closing............................................. 2
ARTICLE II
SUBSEQUENT SALES OF COMMON STOCK
--------------------------------
SECTION 2.01. Side-By-Side Put Option................................... 2
SECTION 2.02. BMT Milestone Put Option.................................. 3
SECTION 2.03. AML Milestone Put Option.................................. 4
SECTION 2.04. Limitation of Obligation to Purchase Excess Put Shares.... 5
ARTICLE III
STANDSTILL
----------
SECTION 3.01. Standstill by JJDC........................................ 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CTI
-------------------------------------
SECTION 4.01. Organization and Corporate Power.......................... 9
SECTION 4.02. Subsidiaries.............................................. 9
SECTION 4.03. Authorization............................................. 9
SECTION 4.04. Validity of the Shares.................................... 9
SECTION 4.05. Enforceability............................................ 10
SECTION 4.06. Capitalization............................................ 10
SECTION 4.07. Securities Act Compliance................................. 10
SECTION 4.08. Obligations to Issue Securities........................... 10
SECTION 4.09. SEC Reports............................................... 10
.......................................................
SECTION 4.10. Absence of Certain Developments........................... 11
SECTION 4.11. No Undisclosed Liabilities................................ 12
SECTION 4.12. Approvals................................................. 12
SECTION 4.13. Title to Properties....................................... 12
SECTION 4.14. Intellectual Property..................................... 12
SECTION 4.15. Litigation................................................ 13
SECTION 4.16. Taxes..................................................... 13
SECTION 4.17. Compliance With Laws...................................... 13
SECTION 4.18. Labor Matters............................................. 14
SECTION 4.19. Insurance................................................. 14
SECTION 4.20. Leases.................................................... 15
SECTION 4.21. Personal Property......................................... 15
SECTION 4.22. Environmental............................................. 15
SECTION 4.23. Improper Payments......................................... 16
SECTION 4.24. Securities Laws........................................... 16
SECTION 4.25. Brokerage................................................. 16
SECTION 4.26. Disclosure................................................ 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF JJDC
--------------------------------------
SECTION 5.01. Legal Power............................................... 17
SECTION 5.02. Due Execution............................................. 17
SECTION 5.03. Investment Representations................................ 17
ARTICLE VI
CONDITIONS TO CLOSING
---------------------
SECTION 6.01. Condition to JJDC's Obligations at First Closing.......... 19
SECTION 6.02. Condition to JJDC's Obligations at Subsequent Closings.... 19
SECTION 6.03. Conditions to CTI's Obligations at Each Closing........... 20
ARTICLE VII
REGISTRATION OF COMMON STOCK; COVENANTS OF CTI
----------------------------------------------
SECTION 7.01. Definitions............................................... 21
SECTION 7.02. Registration Rights....................................... 22
SECTION 7.03. Registration Expenses..................................... 23
ii
.......................................................
SECTION 7.04. Registration Procedures................................... 24
SECTION 7.05. Indemnification........................................... 26
SECTION 7.06. Reports Under Exchange Act................................ 28
SECTION 7.07. Transferability........................................... 28
SECTION 7.08. Termination of Registration Rights........................ 29
SECTION 7.09. Limitations on Subsequent Registration Rights............. 29
ARTICLE VIII
LOCKUP; REPURCHASE RIGHT
------------------------
SECTION 8.01. Lockup.................................................... 29
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Publicity................................................. 30
SECTION 9.02. Successors and Assigns.................................... 30
SECTION 9.03. Entire Agreement.......................................... 30
SECTION 9.04. Separability.............................................. 30
SECTION 9.05. Amendment and Waiver...................................... 31
SECTION 9.06. Notices................................................... 31
SECTION 9.07. Fees and Expenses......................................... 32
SECTION 9.08. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings................................. 32
SECTION 9.09. Titles and Subtitles...................................... 32
SECTION 9.10. Counterparts.............................................. 32
SECTION 9.11. Incorporation by Reference................................ 32
SECTION 9.12. Survival.................................................. 32
EXHIBITS
Exhibit A Opinion of Counsel
Exhibit B Articles of Amendment to Restated Articles of
Incorporation
iii
EXECUTION COPY
--------------
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of November
---------
8, 1996, by and between CELL THERAPEUTICS, INC., a Washington corporation with
its principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("CTI"), and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ DEVELOPMENT CORPORATION, a New Jersey
---
corporation having its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("JJDC").
----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, CTI and Ortho Biotech Inc. ("Ortho") and a wholly-owned
-----
subsidiary of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a New Jersey corporation ("J&J"), have entered
---
into that certain Collaboration Agreement (the "Collaboration Agreement") of
-----------------------
even date herewith (capitalized terms not otherwise defined herein being used
herein as therein defined); and
WHEREAS, in connection with the Collaboration Agreement, CTI desires
to sell to JJDC, and JJDC desires to purchase from CTI, shares of CTI's Series B
Convertible Preferred Stock, without par value ("Series B Preferred"), and
------------------
shares of CTI's common stock, without par value ("Common Stock"), in each case
------------
on the terms and subject to the conditions set forth in this Agreement. The
shares of Series B Preferred purchased by JJDC hereunder are referred to herein
as the "Series B Shares," and the shares of Common Stock purchased by JJDC
---------------
hereunder are referred to herein as the "Common Shares." The Series B Shares
-------------
and the Common Shares are referred to herein collectively as the "Shares."
------
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto, intending
to be legally bound, do hereby agree as follows:
ARTICLE I
SALE OF PREFERRED STOCK AT THE FIRST CLOSING
--------------------------------------------
SECTION 1.01. Sale. Subject to the terms of this Agreement, at the
----
First Closing (as defined below), CTI agrees to sell to JJDC, and JJDC agrees to
purchase from CTI, 14,925.373 shares of Series B Preferred (the "First Closing
-------------
Shares") at a price per share equal to $335.00, for an aggregate purchase price
------
of $5,000,000. The price paid by JJDC for the purchase of the First Closing
Shares at the First Closing is hereinafter referred
to as "First Closing Purchase Price."
----------------------------
SECTION 1.02. First Closing. (a) The closing of the sale and
-------------
purchase of the First Closing Shares pursuant to Section 1.01 (the "First
-----
Closing") shall be held at 10:00 a.m. (California time) at the offices of
-------
Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on the date hereof or at such other time within five (5)
business days of the Effective Date or at such other place as CTI and JJDC may
agree (the "First Closing Date").
------------------
(b) At the First Closing, subject to the terms and conditions of this
Agreement, CTI shall deliver to JJDC a certificate registered in JJDC's name
representing the First Closing Shares purchased at the First Closing, and JJDC
shall deliver the First Closing Purchase Price to CTI by certified check payable
to CTI or by wire transfer of immediately available funds to an account
specified by CTI.
ARTICLE II
SUBSEQUENT SALES OF COMMON STOCK
--------------------------------
SECTION 2.01. Side-By-Side Put Option. (a) Subject to the terms of
-----------------------
this Agreement, upon the initial closing of a firm commitment underwritten
public offering of Common Stock (the "IPO Closing") for the account of CTI
-----------
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), CTI shall have the option (the "Side-
-------------- ----
By-Side Put Option") to sell to JJDC a number of shares of Common Stock equal to
------------------
not more than ten percent (10%) of the number of shares of Common Stock sold by
CTI in the IPO Closing (the "Side-By-Side Shares"), at a price per share equal
-------------------
to the price per share at which the Common Stock was sold to the public at the
IPO Closing. The number of shares shall be rounded downward to the nearest
whole integer. The aggregate price paid by JJDC for the purchase of the Side-
By-Side Shares concurrent with the IPO Closing is hereinafter referred to as the
"Side-By-Side Purchase Price."
---------------------------
(b) CTI shall provide at least three (3) business days advance written
notice to JJDC of CTI's election to exercise the Side-By-Side Put Option, which
notice shall specify the expected number of Side-By-Side Shares to be sold and
the expected date of such Side-By-Side Closing (as hereinafter defined), which
date shall be no later than five (5) business days after the occurrence of the
IPO Closing after which time the Side-by-Side Put Option shall expire if not
theretofore exercised. If such notice is given prior to the IPO Closing, such
notice shall be contingent upon the occurrence of the IPO Closing.
(c) The closing of the sale and purchase of the Side-By-Side Shares
pursuant to Section 2.01(a) (the "Side-By-Side Closing") shall be held at the
--------------------
offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
2
concurrently with the IPO Closing or at such other time and place as CTI and
JJDC may agree (the "Side-By-Side Closing Date").
-------------------------
(d) At the Side-By-Side Closing, subject to the terms and conditions
of this Agreement, CTI shall deliver to JJDC a certificate registered in JJDC's
name representing the Side-By-Side Shares purchased at the Side-By-Side Closing,
and JJDC shall deliver the Side-By-Side Purchase Price to CTI by certified check
payable to CTI or by wire transfer of immediately available funds to an account
specified by CTI.
SECTION 2.02. BMT Milestone Put Option. (a) Subject to the terms of
------------------------
this Agreement, upon approval by the FDA or the relevant regulatory agency or
authority of the first Drug Approval Application for a Collaboration Product for
a BMT Indication in the United States or a Major Market County (the "BMT
---
Milestone"), CTI shall have the option (the "BMT Milestone Put Option") to sell
--------- ------------------------
to JJDC the BMT Milestone Put Shares (as hereinafter defined) at a price per
share equal to the then applicable Current Market Price (as hereinafter
defined), for an aggregate purchase price of $2,000,000.
(b) CTI shall provide at least five (5) business days advance written
notice (the "BMT Milestone Put Notice") to JJDC of CTI's election to exercise
------------------------
the BMT Milestone Put Option, which notice shall specify the expected number of
BMT Milestone Put Shares to be sold and the date of such BMT Milestone Put Share
Closing (as hereinafter defined), which date shall be no later than ten (10)
business days after the occurrence of the BMT Milestone after which time the BMT
Milestone Put Option will expire if not theretofore exercised.
(c) (i) For purposes of this Section 2.02 the "BMT Milestone Put
-----------------
Shares" shall mean the number of shares of Common Stock, rounded downward
------
to the nearest whole integer, equal to $2,000,000 divided by the Current
Market Price per share of the Common Stock as of the fifth business day
prior to the date of the BMT Milestone Put Share Closing.
(ii) The "Current Market Price" per share of the Common Stock shall be
--------------------
defined as the arithmetic average of the closing prices of the Common Stock
for the thirty (30) Trading Day (as defined below) period ending as of the
Trading Day immediately prior to the date as of which such Current Market
Price is being determined. The closing price for each day shall be, if the
Common Stock is listed and admitted to trading on a national securities
exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the Nasdaq National Market of the Nasdaq Stock
Market, Inc., or such other system then in use, or, if on any such date the
Common Stock is not quoted by
3
any such organization, the average of the closing bid and asked prices as
furnished by the professional market maker making a market in the Common
Stock having the greatest number of actual trades during the relevant
period. If the Common Stock is not publicly held or not so listed or
traded, the "Current Market Price" per share shall mean the fair value per
share of Common Stock as agreed to by CTI and JJDC prior to the expiration
of the periods specified in section 2.02(b) and Section 2.03(b), or, if no
such agreement is reached, the last price at which CTI sold one or more
shares of Common Stock (which shall include sales of preferred stock
convertible into Common Stock at the as converted price on the day of sale)
to a third party (not a corporate partner of CTI) in a bona fide arm's-
---- ----
length transaction. The term "Trading Day" shall mean, if the Common Stock
-----------
is listed or admitted to trading on any national securities exchange, a day
on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of
business and a day on which at least one share of Common Stock is traded
or, if the Common Stock is not so listed or admitted, a business day.
(d) The closing of the sale and purchase of the BMT Milestone Put
Shares ("BMT Milestone Put Share Closing") shall be held at 10:00 a.m.
-------------------------------
(California time) at the offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on the date specified in the BMT
Milestone Put Notice, or at such other time and place as CTI and JJDC may agree.
(e) At the BMT Milestone Put Share Closing, subject to the terms and
conditions hereof, CTI shall deliver to JJDC a certificate registered in JJDC's
name representing the BMT Milestone Put Shares purchased at the BMT Milestone
Put Share Closing, and JJDC shall deliver the purchase price therefor in the
amount of $2,000,000 to CTI by certified check payable to CTI or wire transfer
of immediately available funds to an account specified by CTI.
SECTION 2.03. AML Milestone Put Option. (a) Subject to the terms of
------------------------
this Agreement, upon the approval by the FDA or the relevant regulatory agency
or authority of the First Drug Approval Application for a Collaboration Product
for an AML Indication in the United States or a Major Market Country (the "AML
---
Milestone"), CTI shall have the option (the "AML Milestone Put Option") to sell
--------- ------------------------
to JJDC the AML Milestone Put Shares (as hereinafter defined) at a price per
share equal to the then applicable Current Market Price, for an aggregate
purchase price of $6,000,000.
(b) CTI shall provide at least five (5) business days advance written
notice (the "AML Milestone Put Notice") to JJDC of CTI's election to exercise
------------------------
the AML Milestone Put Option, which notice shall specify the expected number of
AML Milestone Put Shares to be sold and the date of such AML Milestone Put Share
Closing (as hereinafter defined), which date shall be no later than ten (10)
business days after the occurrence of the AML Milestone after which time the AML
Milestone Put Option shall expire if not theretofore exercised.
4
(c) For purposes of this Section 2.03, the "AML Milestone Put Shares"
------------------------
shall mean the number of shares of Common Stock, rounded downward to the nearest
whole integer, equal to $6,000,000 divided by the Current Market Price per share
of the Common Stock as of the fifth business day prior to the date of the AML
Milestone Put Share Closing.
(d) The closing of the sale and purchase of the AML Milestone Put
Shares ("AML Milestone Put Share Closing") shall be held at 10:00 a.m.
-------------------------------
(California time) at the offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on the date specified in the AML
Milestone Put Notice, or at such other time and place as CTI and JJDC may agree.
(e) At the AML Milestone Put Share Closing, subject to the terms and
conditions hereof, CTI shall deliver to JJDC a certificate registered in JJDC's
name representing the AML Milestone Put Shares purchased at the AML Milestone
Put Share Closing, and JJDC shall deliver the purchase price therefor in the
amount of $6,000,000 to CTI by certified check payable to CTI or wire transfer
of immediately available funds to an account specified by CTI.
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
SECTION 2.04. Limitation of Obligation to Purchase Excess Put Shares.
------------------------------------------------------
(a) Notwithstanding any other provision of this Agreement to the contrary, upon
written notice to CTI by JJDC delivered at any time prior to any closing
provided for in Sections 2.01, 2.02, 2.03 or this Section 2.04 (each, a
"Closing" and, collectively, the "Closings"), JJDC's obligation to purchase
------- --------
Excess Put Shares (as hereinafter defined) shall be suspended and JJDC shall not
be obligated to pay to CTI the Excess Put Share Amount (as hereinafter defined)
until such time as the payment by JJDC of the Excess Put Share Amount in
connection with the purchase by JJDC of the shares of Common Stock represented
by such amount, at a price per share calculated at the time of purchase pursuant
to the second sentence of Section 2.04(c) hereof (the "Additional Shares"), when
-----------------
aggregated with all other shares of Common Stock (including shares of Common
Stock issuable upon conversion of any shares of Series B Preferred held by JJDC)
then owned of record by JJDC which were purchased pursuant to this Agreement,
would not constitute more than ***** of the voting power of the then outstanding
capital stock of CTI. In calculating its ownership interest in CTI, JJDC shall
be entitled to rely upon the number of outstanding shares of CTI reported in
CTI's most recently filed report on Form 10-Q, 10-K or 8-K, as the case may be,
filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), most
------------
recently filed Registration Statement pursuant to the Securities Act, or the
most recently issued press release or other information delivered to JJDC by CTI
for the purpose of calculating such ownership. The failure by JJDC to deliver
the written notice specified above in this paragraph with respect to any Excess
Put Shares shall not bar JJDC from subsequently delivering such notice with
respect to any subsequent Excess Put Shares and shall not effect the
applicability of this Section 2.04 with respect to such subsequent shares, even
if at the time of such subsequent delivery, JJDC owns of record more than *****
of the voting power of the then outstanding capital stock of CTI.
5
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
(b) In the event of any change in the number of outstanding shares of
CTI voting securities such that any or all Additional Shares, when purchased
pursuant to this Agreement and aggregated with all other shares of Common Stock
(including shares of Common Stock issuable upon conversion of any shares of
Series B Preferred held by JJDC) then owned of record by JJDC which were
purchased pursuant to this Agreement, would not constitute more than ***** of
the voting power of the then outstanding capital stock of CTI, then CTI shall
have the right to sell such Additional Shares to JJDC upon fifteen (15) calendar
days' advance written notice to JJDC at any time in one or more separate
closings (but not more than two (2) separate closings in any twelve (12) month
period) until all of such Additional Shares have been sold hereunder. Such
notice shall include a certificate executed on behalf of CTI by an executive
officer of CTI certifying that the conditions set forth above in this Section
2.04(b) have been met. JJDC shall promptly (but in any event within ten (10)
calendar days) notify CTI of any disposition of shares purchased pursuant to
this Agreement or other event of which it becomes aware which would cause CTI's
right to sell Additional Shares to be reinstated hereunder.
(c) The closing of each sale of Additional Shares pursuant to Section
2.04(b) shall be held at the time and place specified in CTI's notice delivered
pursuant to Section 2.04(b). Any Additional Shares purchased by JJDC hereunder
shall be purchased by JJDC at a price equal to the Current Market Price in
effect on the date of CTI's notice regarding the sale of such Additional Shares.
(d) The respective time periods during which CTI shall have the right
to exercise its BMT Milestone Put Right and AML Milestone Put Right, to the
extent that any such exercise resulted in Excess Put Shares, shall be tolled and
extended until all such Excess Put Shares are purchased pursuant to this Section
2.04.
(e) For purposes of this Section 2.04, the following terms shall have
the following meanings:
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
(i) "Excess Put Shares" shall mean any shares of Common Stock
-----------------
otherwise issuable to JJDC pursuant to Sections 2.01, 2.02, 2.03 or this
Section 2.04 which, if purchased by JJDC at the time otherwise provided for
under this Agreement and when considered together with all other shares of
Common Stock purchased by JJDC pursuant to this Agreement and then owed of
record by JJDC or its Affiliates (including shares of Common Stock issuable
upon conversion of any shares of Series B Preferred held by JJDC), would
constitute more than ***** of the voting power of the then outstanding
capital stock of CTI. Securities of CTI acquired by JJDC other than
pursuant to this Agreement shall be specifically excluded for purposes of
this Section 2.04 in determining whether or not JJDC is the record holder
of more than ***** of the voting power of the then outstanding capital
stock of CTI. For purposes of this Section 2.04, "JJDC" shall be deemed to
include JJDC and its Affiliates (as defined in the Collaboration
Agreement), including Ortho and J&J.
6
(ii) "Excess Put Share Amount" shall mean the aggregate amount of the
-----------------------
purchase price that would have been paid by JJDC pursuant to this Agreement
for the purchase of any Excess Put Shares, but for the delivery by JJDC of
the notice(s) specified in Section 2.04(a).
ARTICLE III
STANDSTILL
----------
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
SECTION 3.01. Standstill by JJDC. Subject to the terms of this
------------------
Section 3.01, JJDC agrees that, upon execution of this Agreement until the
earlier of (i) ***** from the date hereof, or (ii) ***** following the effective
date of termination of the Collaboration Agreement by Ortho, it will not, nor
will it permit any of its Affiliates (including Ortho and J&J) to, without the
prior written consent of CTI:
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
(a) (i) acquire, directly or indirectly, by purchase or otherwise, of
record or beneficially, other than by the transactions set forth in
Articles I and II of this Agreement, any securities of CTI or rights or
options to acquire any securities from any holder of such securities if
after such acquisition (and giving effect to the exercise of any such
rights or options) JJDC and its Affiliates, including Ortho and J&J, would
own capital stock of CTI having ***** or more of the voting power of the
outstanding capital stock of CTI; provided, however, that neither (1) the
-------- -------
purchase of the Shares pursuant to Articles I and II of this Agreement nor
(2) subsequent reductions in the number of shares of outstanding capital
stock of CTI (or rights or options therefor) shall be deemed to have caused
a violation of this Section 3.01(a)(i);
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
(ii) to the extent JJDC and/or its Affiliates (including Ortho and
J&J) own(s), beneficially or of record, securities of CTI constituting
***** or more of the voting power of the outstanding capital stock of CTI
and such securities include securities of CTI other than those purchased
pursuant to Articles I and II, JJDC and/or its Affiliates (including Ortho
and J&J) shall be deemed to own "Prohibited Securities." JJDC agrees that
---------------------
neither it nor any of its Affiliates (including Ortho and J&J) shall (and
neither it nor any of its Affiliates (including Ortho and J&J) shall be
entitled to) vote any Prohibited Securities with respect to any matter
subject to the vote or written consent of CTI's stockholders (provided,
--------
however, that the foregoing shall not be deemed to limit CTI's remedies in
-------
the event that the Prohibited Securities were acquired in violation of this
Section 3.01); and
(iii) JJDC hereby covenants and agrees that during the term provided
for in Section 3.01(a)(i), it will provide written notice to CTI of any
purchase, sale or other acquisition or disposition, on the open market or
in private transactions, by JJDC or any of its Affiliates (including Ortho
and J&J) of any securities of CTI (or if JJDC or such Affiliates shall
direct any third party to take any such actions on behalf of JJDC
7
or such Affiliates). Such notice shall be transmitted to CTI by facsimile
(with telephonic notice) within three (3) business days after any such
transaction on the open market or within ten (10) business days after any
such private transaction and shall specify the person or entity effecting
the transaction, the date of such transaction, the number of securities and
the price per security with respect to such transaction;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are defined or used in Regulation 14A
of the Exchange Act to vote, or seek to advise or influence any person with
respect to the voting of, any securities of CTI, or become a "participant" in
any "election contest" (as such terms are used or defined in Regulation 14A of
the Exchange Act) relating to the election of directors of CTI; deposit any
securities of CTI in a voting trust or subject them to a voting agreement or
other agreement of similar effect (other than a revocable proxy);
(c) deposit any securities of CTI in a voting trust or subject them to
a voting agreement or other agreement of similar effect (other than a revocable
proxy);
(d) initiate, propose or otherwise solicit any stockholder for the
approval of one or more stockholder proposals at any time, or induce or attempt
to induce any other person to initiate any stockholder proposal;
(e) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) or otherwise act in concert
with any person for the purpose of acquiring, holding, voting or disposing of
any securities of CTI;
(f) request CTI (or its directors, officers, employees or agents),
directly or indirectly, to amend or waive any of the provisions contained in
this Section 3.01; or
(g) take any action individually or jointly with any partnership,
limited partnership, syndicate, or other group or assist any other person,
corporation, entity or group in taking any action it could not take individually
under the terms of this Section 3.01.
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
Notwithstanding the foregoing, if a third party makes a tender offer or exchange
offer for ***** or more of CTI's outstanding voting securities, or CTI publicly
announces a transaction pursuant to which a third party not a shareholder of CTI
on the date hereof is or will acquire, whether through merger, tender offer or
exchange offer, ***** or more of CTI's voting securities or all or substantially
all of CTI's assets, then the restrictions set forth in this Section 3.01 shall
lapse until such time, if any, as such transaction or transactions are withdrawn
or abandoned, at which time such restrictions shall be reinstated. Any
reinstatement of such restrictions shall not affect JJDC's ability to continue
to pursue ant transaction it announced prior to such reinstatement; provided,
--------
that, such announcement did not violate this Section 3.01, and provided further
-------- -------
that such transaction is completed within six (6) months from the date of
announcement.
8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CTI
-------------------------------------
SECTION 4.01. Organization and Corporate Power. CTI is a corporation
--------------------------------
duly incorporated and validly existing under the laws of the State of Washington
and is duly licensed or qualified as a foreign corporation in each other
jurisdiction where the nature of business transacted by it makes such licensing
or qualification necessary. CTI has, and will have at each Closing, the
corporate power and authority, and the legal right, to own and operate its
properties and to carry on its business as currently conducted, to execute,
deliver, and perform this Agreement, to issue, sell and deliver the Shares, to
issue and deliver the shares of Common Stock issuable upon conversion of the
Series B Shares (the "Conversion Shares") and in all other respects to
-----------------
consummate the transactions contemplated hereby and thereby. True and complete
copies of the Articles of Incorporation and By-laws of CTI, as amended to date,
have been made available to JJDC by CTI.
SECTION 4.02. Subsidiaries. CTI does not own any shares of any
------------
corporation or have any ownership or other investment interest, either of
record, beneficially or equitably, in any association, partnership, joint
venture or other legal entity other than wholly-owned subsidiaries which, as of
the date hereof, have conducted no business operations.
SECTION 4.03. Authorization. The execution and delivery by CTI of
-------------
this Agreement, the performance by CTI of its obligations hereunder, and the
issuance, sale and delivery by CTI of the Shares at each Closing pursuant hereto
and the issuance and delivery of the Conversion Shares upon conversion of the
Series B Shares, have been duly authorized by all requisite corporate action,
including without limitation all requisite action on the part of CTI's
shareholders, and will not violate any provision of law, any order of any court
or other agency of government, the Articles of Incorporation or By-laws of CTI,
any judgment award or decree or any provision of any indenture, agreement or
other instrument, to which CTI is a party, or by which it, or any of its
properties or assets, is bound or affected, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under, any
such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of CTI, or result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any Governmental Permit (as hereinafter
defined).
SECTION 4.04. Validity of the Shares. The Shares have been duly
----------------------
authorized by CTI and, when paid for in accordance with this Agreement, will be
validly issued, fully paid and nonassessable shares of Common Stock or Series B
Preferred, as the case may be. The Conversion Shares have been duly reserved
for issuance upon conversion of the Series B Shares and, when so issued, will be
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock. Neither the issuance, sale and delivery of the Shares nor the issuance
and delivery of the Conversion Shares are subject to any
9
preemptive rights of shareholders of CTI or to any right of first refusal or
other similar right in favor of any person.
SECTION 4.05. Enforceability. This Agreement has been duly executed
--------------
and delivered by CTI and, subject to due execution by JJDC, constitutes the
legal, valid and binding obligation of CTI, enforceable against CTI in
accordance with its terms.
SECTION 4.06. Capitalization. As of the date hereof, the authorized
--------------
capital stock of CTI consists of 100,000,000 shares of Common Stock, of which
17,300,574 shares are issued and outstanding as of the date hereof, and
10,000,000 shares of preferred stock, no par value, ("Existing Preferred
------------------
Stock"), of which 146,193.272 shares of have been designated as Series A
-----
Convertible Preferred Stock ("Series A Preferred"), of which 146,193.272 shares
------------------
are issued and outstanding as of the date hereof, and of which 14,925.373 shares
have been designated as Series B Preferred, none of which are issued and
outstanding as of the date hereof. All shares of capital stock outstanding as
of the date hereof have been duly authorized and validly issued, and are fully
paid and nonassessable. 15,000,000 shares of Common Stock have been reserved
for issuance upon conversion of the Series A Preferred, and 1,492,538 shares of
Common Stock have been reserved for issuance upon conversion of the Series B
Preferred. The designations, preferences, limitations and relative rights of
the Series A Preferred and Series B Preferred are set forth in the Articles of
Amendment to the Restated Articles of Incorporation of CTI, as set forth in
Exhibit B annexed hereto (the "Articles of Amendment").
---------------------
SECTION 4.07. Securities Act Compliance. Assuming that JJDC's
-------------------------
representations and warranties contained in Article V of this Agreement are true
and correct, the Shares and Conversion Shares to be issued and delivered to JJDC
pursuant to this Agreement shall be offered, issued and sold in compliance with
the Securities Act and any other applicable United States federal or state
securities laws.
SECTION 4.08. Obligations to Issue Securities. Except (a) for the
-------------------------------
obligations of CTI to JJDC under this Agreement, (b) as otherwise set forth in
the SEC Reports (as defined herein), and (c) for stock options granted to
employees, officers and consultants of CTI subsequent to the date of the SEC
Reports pursuant to CTI's 1994 Equity Incentive Plan, (i) no subscription,
warrant, option, convertible security or other right (contingent or other) to
purchase or acquire any shares of any class of capital stock of CTI is
authorized or outstanding, (ii) there is not any commitment of CTI to issue any
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidences of indebtedness or assets, and
(iii) CTI has no obligation (contingent or other) to purchase, redeem or
otherwise acquire any shares of the capital stock of CTI or any interest therein
or to pay any dividend or make any other distribution in respect thereof.
SECTION 4.09. SEC Reports. (a) CTI has filed all forms, reports and
-----------
documents required to be filed with the Securities and Exchange Commission (the
"SEC") since April 29, 1996 and has made available to JJDC (i) its Registration
---
Statement on Form
10
10, as amended by Amendment No. 2 thereto filed with the SEC on June 28, 1996;
(ii) its Quarterly Report on Form 10-Q for the period ended June 30, 1996; (iii)
all other reports or registration statements filed by CTI with the SEC since
June 28, 1996; and (iv) all amendments and supplements to all such reports and
registration statements filed by CTI with the SEC (the forms, reports and
documents made available by CTI to JJDC being collectively referred to herein as
the "SEC Reports"). The SEC Reports (i) were prepared in accordance with the
-----------
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such amending or
superseding filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each of the financial statements (including, in each case, any
related notes thereto) contained in the SEC Reports was prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
therein or in the notes thereto) and each fairly presented the financial
position of CTI as at the respective dates thereof and the results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount.
SECTION 4.10. Absence of Certain Developments. Except as set forth
-------------------------------
in the SEC Reports, since June 30, 1996, CTI has conducted its business in the
ordinary course and there has not occurred: (i) any change or effect that is or
is reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operations of CTI taken as
a whole; (ii) any amendments or changes in the Articles of Incorporation or By-
laws of CTI, other than an amendment to CTI's By-laws adopted on July 16, 1996;
(iii) any change by CTI in its accounting methods, principles or practices; (iv)
any revaluation by CTI of any of its assets; (v) any sale of a material amount
of property of CTI; (vi) any discharge or satisfaction by CTI of any material
lien, security interest, charge or other encumbrance or any payment by CTI of
any material obligation or liability (fixed or contingent), other than in the
ordinary course of business and consistent with past practice; (vii) any
investment by CTI of a capital nature, whether by purchase of stock or
securities, contributions to capital, property transfers or otherwise, in any
other partnership, corporation or other entity, or any purchase by CTI of any
material property or assets; (viii) any cancellation or compromise by CTI of any
debt or claim other than in the ordinary course of business consistent with past
practice; (ix) any waiver or release by CTI of any rights of material value,
including, without limitation, any Intangible Rights (as hereinafter defined);
(x) any material wage or salary increase by CTI applicable to any group or
classification of employees generally, or any material employment contract with,
loan to, or material transaction of any other nature with, any officer or
employee of CTI; or (xi) any establishment by CTI of any employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974.
11
SECTION 4.11. No Undisclosed Liabilities. Except as and to the
--------------------------
extent (i) reflected in the financial statements contained in the SEC Reports or
(ii) incurred since June 30, 1996 in the ordinary course of business and
consistent with past practice, CTI has no lia bilities or obligations of any
kind or nature, whether secured or unsecured (whether absolute, accrued,
contingent or otherwise, and whether due or to become due), including without
limitation any tax liabilities due or to become due, or whether incurred in
respect of or measured by the assets, sales, income or receipts of CTI for any
period, which liabilities or obligations would be required to be reflected on a
balance sheet of CTI as of December 31, 1995, prepared in accordance with
generally accepted accounting principles.
SECTION 4.12. Approvals. Based in part on the representations made
---------
by JJDC in Article V of this Agreement, no order, authorization, approval or
consent from, or filing with, any federal or state governmental or public body
or other authority having jurisdiction over CTI is required for the valid
execution (where called for), delivery and performance of this Agreement by CTI,
the issuance, sale and delivery of the Shares, or upon conversion of the Series
B Shares, the issuance and delivery of the Conversion Shares, or is required in
order that the business of CTI can be conducted immediately following the date
of the applicable Closing substantially in the same manner as heretofore
conducted, except for (i) those that have been made and obtained, (ii) those
filings under state "blue sky" laws which are now not required to be made or
obtained, and (iii) applicable obligations under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvement Act of 1976 and the rules and regulations thereunder (the "HSR
---
Act").
---
SECTION 4.13. Title to Properties. Except as set forth in the SEC
-------------------
Reports, CTI has good and valid title to all its assets and properties, in each
case free and clear of all liens, charges, security interests or other
encumbrances of any nature whatsoever, other than (x) liens for taxes not yet
due, (y) mechanic's, materialman's and similar statutory liens arising in the
ordinary course of business and which, in the aggregate, would not have a
material adverse effect on the business, properties or condition (financial or
other) of CTI, or (z) security interests securing indebtedness not in default
for the purchase price of or lease rental payments on property purchased or
leased under capital lease arrangements in the ordinary course of business.
SECTION 4.14. Intellectual Property. Except as is set forth in the
---------------------
SEC Reports, CTI complies with its contractual obligations relating to the
protection of such of the patents, trademarks and trade names, trademark and
trade name registrations, logos, servicemark registrations, copyright
registrations, all applications pending on the date hereof for patent or for
trademark, trade name, servicemark or copyright registrations, and all other
material proprietary rights (collectively "Intangible Rights") used by it
-----------------
pursuant to licenses or other contracts, CTI has the right to use its Intangible
Rights for the purposes intended thereby, and to conduct its business as
heretofore conducted, and the consummation of the transactions contemplated
hereby will not alter or impair any such Intangible Rights, and, to the
knowledge of CTI, all such Intangible Rights that are capable of being enforced
are valid, enforceable and in good standing, and no claims have been asserted
with respect to the
12
ownership by CTI of any of the Intangible Rights or otherwise. To the knowledge
of CTI, except as is set forth in the SEC Reports, (i) no person is infringing
an Intangible Right owned by CTI and (ii) CTI is not infringing any valid
patent, copyright or trademark owned by any third party.
SECTION 4.15. Litigation. Except as set forth in the SEC Reports,
----------
there are no material claims, actions, suits, proceedings or investigations
pending or, to the knowledge of CTI, threatened by or against CTI or any of its
properties, assets, rights or businesses. No such pending or threatened claims,
actions, suits, proceedings or investigations, if ad versely determined, would,
individually or in the aggregate, have a material adverse effect on the
business, properties or condition (financial or other) of CTI. Except as set
forth in the SEC Reports, CTI knows of no basis for any other such claim,
action, suit, proceeding or investigation which, if adversely decided, would
have such a material adverse effect. Except as set forth in the SEC Reports,
there are no actions, suits, proceedings or claims pending before or by any
court, arbitrator, regulatory authority or government agency against or
affecting CTI that might enjoin or prevent the consummation of the transactions
contem plated by this Agreement.
SECTION 4.16. Taxes. CTI has duly and timely filed or caused to be
-----
filed (or obtained valid, currently effective extensions for filing) all
federal, state, local and foreign income, franchise, excise, payroll, sales and
use, property, withholding and other tax returns, reports, estimates and
information and other statements or returns (collectively "Tax Returns")
-----------
required to be filed by or on behalf of it pursuant to any applicable federal,
state, local or foreign tax laws for all years and periods for which such Tax
Returns have become due. All such Tax Returns were correct as filed and
correctly reflect the federal, state, local and foreign income, franchise,
excise, payroll, sales and use, property, withholding and other taxes, duties,
imposts and governmental charges (and charges in lieu of any thereof), together
with interest, any additions to tax and penalties (collectively "Taxes")
-----
required to be paid or collected by (or allocable to) CTI. CTI (i) has paid or
caused to be paid all Taxes as shown on Tax Returns filed by it or on any
assessment received by it and (ii) has properly and fully accrued on its audited
and interim unaudited financial statements all Taxes for any period from the
date of the last reporting period covered by such Tax Returns. There is no
audit pending or threatened in writing, and, to the knowledge of CTI, there is
no dispute or claim being threatened by any relevant taxing authority concerning
any Tax Return or liabili ty for Taxes. Without limiting the foregoing, CTI has
withheld or collected from each payment made to each of its employees (or has
otherwise paid or made provision for) the amount of all Taxes (including, but
not limited to, federal income taxes, federal Insurance Contribution Act taxes,
state and local income and wage taxes, payroll taxes, worker's compensation and
unemployment compensation taxes) required to be withheld or collected therefrom,
and CTI has paid (or caused to be paid) the same in respect of its employees
when due.
SECTION 4.17. Compliance With Laws. (a) CTI has all material govern
--------------------
mental licenses, franchises and permits ("Governmental Permits") required under
--------------------
applicable
13
law for the conduct of its business as currently conducted, including, without
limitation, all such licenses, franchises and permits as are required for
laboratory use, manufacturing, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances.
(b) The business of CTI is being conducted in material compliance with
all applicable laws, ordinances, rules and regulations of all governmental
authorities relating to CTI's properties or applicable to its business,
including, without limitation, the terms of all Governmental Permits, federal
securities laws, and laws relating to safe working conditions, laboratory and
manufacturing practices (including current Good Manufacturing Practices
prescribed by the U.S. Food and Drug Administration ("FDA")), the experimental
---
use of animals and the use and disposal of hazardous or potentially hazardous
substances (including, without limitation, radioactive compounds and solvents).
CTI has not received any notice from any third party of any alleged violation of
any of the foregoing.
(c) Neither CTI nor any of its properties, operations or businesses is
subject to any order, judgment, injunction or decree. To the knowledge of CTI,
no action has been taken or recommended by any governmental or regulatory
official, body or authority, either to revoke, withdraw or suspend any
certificate of need or any license to operate CTI.
SECTION 4.18. Labor Matters. (a) No collective bargaining agreement
-------------
is applicable to any employees of CTI. There are no disputes between CTI and
any such employees that might reasonably be expected to materially adversely
affect the conduct of its business or any unresolved labor union grievances or
unfair labor practice or labor arbitra tion proceedings pending, or to the
knowledge of CTI, threatened, relating to the business of CTI. To the knowledge
of CTI, there are no organizational efforts presently being made or threatened
involving any of such employees. CTI has not received notice of any claim that
CTI has failed to comply with any laws relating to employment, including any
provisions thereof relating to wages, hours, collective bargaining, the payment
of social security and other payroll or similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that CTI is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing except for routine non-material grievances.
(b) There are no proceedings pending or, to the knowledge of CTI,
threat ened before the National Labor Relations Board with respect to any
employees of CTI. There are no discrimination charges (relating to sex, age,
religion, race, national origin, ethnicity, handicap or veteran status) pending
before any Federal or state agency or authority against CTI.
SECTION 4.19. Insurance. CTI is a named insured under all policies
---------
of fire, liability, workers' compensation, malpractice and professional
liability and other forms of insurance providing insurance coverage to or for
CTI. All premiums with respect to such policies covering all periods have been
paid. No notice of cancellation or termination has
14
been received with respect to any such policy. All such policies are in full
force and effect and will remain in full force and effect to and including the
later to occur of the BMT Milestone Put Share Closing or the AML Milestone Put
Share Closing, and coverage thereunder will continue to be in effect, without
limit as to time, for occurrences prior to such closings.
SECTION 4.20. Leases. All real property leased by CTI is used and
------
operated by CTI in material compliance and conformity with all applicable
leases. CTI has not received notice of any material violation of any applicable
zoning or building regulation, ordinance or other law, order, regulation or
requirement relating to the respective real estate assets of CTI and, to the
knowledge of CTI, there are no such material violations.
SECTION 4.21. Personal Property. All tangible personal property,
-----------------
fixtures and equipment comprising the assets of CTI are in a good state of
repair (ordinary wear and tear excepted) and operating condition, in all
material respects, and are sufficient and adequate to conduct its business on
the date hereof.
SECTION 4.22. Environmental. For the purposes of this Section 4.22,
-------------
the following terms shall have the following meanings:
"Environmental Law" means any federal, state, provincial or local
-----------------
statute, law, ordinance, rule or regulation of the United States and any
other jurisdiction within the United States now effective and any order, to
which CTI is a party or is otherwise directly bound, of the United States
or other jurisdiction within the United States now effective relating to:
(a) pollution or protection of the environment, including natural
resources; or (b) exposure of persons, including employees, to Hazardous
Substances.
"Hazardous Substances" means any substance, whether liquid, solid or
--------------------
gas (a) listed, identified or designated as hazardous or toxic under any
Environmental Law, (b) which, applying criteria specified in any
Environmental Law, is hazardous or toxic, or (c) the use or disposal of
which is regulated under Environmental Law.
(a) No Hazardous Substances have been, or have been threatened to be,
discharged, released or emitted into the air, water, surface water, ground
water, land surface or subsurface strata or transported to or from the property
of CTI except in accordance with Environmental Law and except for incidental
release of Hazardous Substances in amounts or concentrations which would not
reasonably be expected to give rise to any claims or liabili ties against CTI
under Environmental Law.
(b) CTI has not received any notification from a governmental agency
that there is any material violation of any Environmental Law with respect to
the business and properties of CTI and CTI has not received any notification
from a governmental agency pursuant to Section 104, 106 or 107 of the
Comprehensive Environmental Response
15
Compensation and Liability Act, as amended.
SECTION 4.23. Improper Payments. (a) Neither CTI nor, to the
-----------------
knowledge of CTI, any officer, director, employee or agent of CTI, nor any other
person or entity acting on behalf of CTI, acting alone or together, has (i)
received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from any customer, governmental employee or other person or
entity with whom CTI has conducted business activities directly or indirectly,
or (ii) directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, governmental employee or other person or entity who is
or may be in a position to help or hinder the business of CTI (or assist CTI in
connection with any actual or proposed transac tion) which, under current law,
in the case of either clause (i) or clause (ii) above, would reasonably be
expected to subject CTI to any damage or penalty in any civil, criminal or
governmental litigation or proceeding.
(b) To the knowledge of CTI, no employee, officer or director of CTI,
has been debarred under (S)306(a) or (S)306(b) of the Federal Food, Drug and
Cosmetic Act or has, within the last five years, been convicted of (x) a
criminal offense relating to the development or approval process of any drug
product, or (y) a felony involving bribery, payment of illegal gratuities,
fraud, perjury, false statements, racketeering, blackmail, extortion,
falsification or destruction of records, or interference with, obstruction of an
investigation into, or prosecution of, any criminal offense or a conspiracy to
commit, aid or abet such felony.
SECTION 4.24. Securities Laws. No person authorized by CTI as agent,
---------------
broker, dealer or otherwise in connection with the offering or sale of the
Shares, or any similar securities, has taken or will take any action (including,
without limitation, any offer or sale of any securities under circumstances
which would require the integration of such securities with the Shares being
issued and sold hereunder under the Securities Act or the rules and regulations
of the SEC thereunder), which would subject such offer and sale to the
registration provisions of the Securities Act.
SECTION 4.25. Brokerage. All negotiations relative to this
---------
Agreement, and the transactions contemplated hereby, have been carried out by
CTI directly with JJDC, without the intervention of any person on behalf of CTI
in such manner as to give rise to any claim by any person against JJDC for a
finder's fee, brokerage commission or similar pay ment.
SECTION 4.26. Disclosure. This Agreement, and any other exhibits or
----------
schedules delivered in connection herewith or therewith do not contain any
untrue statement of a material fact by CTI or omit to state a material fact
necessary to the make the statements herein or therein by CTI in view of the
circumstances under which they were made not misleading.
16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF JJDC
--------------------------------------
JJDC hereby represents and warrants to CTI as follows:
SECTION 5.01. Legal Power. JJDC has, and will have at each Closing,
-----------
the requisite corporate power and authority to execute and deliver into this
Agreement, and to carry out and perform its obligations under the terms of this
Agreement.
SECTION 5.02. Due Execution. This Agreement has been duly
-------------
authorized, executed and delivered by JJDC, and, upon due execution and delivery
by CTI, this Agreement will be a valid and binding agreement of JJDC, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles.
SECTION 5.03. Investment Representations.
--------------------------
(a) JJDC is acquiring the Shares for its own account, not as nominee
or agent, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act.
(b) JJDC understands that (i) the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom and, that
such securities may not be sold, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration; (ii)
each certificate representing the Shares will be endorsed with the following
legends:
A) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT."
B) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS AND CONDITIONS,
17
INCLUDING RESTRICTIONS ON TRANSFERABILITY, OF THAT CERTAIN STOCK PURCHASE
AGREEMENT, DATED AS OF NOVEMBER 7, 1996. A COPY OF SUCH STOCK PURCHASE
AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO CELL THERAPEUTICS, INC. AT ITS
PRINCIPAL PLACE OF BUSINESS"; and
C) Any legend required to be placed thereon by CTI's By-laws or
under applicable state securities laws;
and (iii) CTI will instruct any transfer agent not to register the transfer of
Shares (or any portion thereof) unless the conditions specified in the foregoing
legends are satisfied.
(c) JJDC has been furnished with such materials and has been given
access to such information relating to CTI as it has requested, and JJDC has
been afforded the opportunity to ask such questions of, and to receive answers
from, CTI with respect to CTI and the Shares as it has found necessary to make
an informed investment decision, and has determined that the Shares are a
suitable investment.
(d) JJDC is an investor in securities of companies in the development
stage and acknowledges that it can bear the economic risk of its investment and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares.
(e) JJDC recognizes that CTI has incurred substantial accumulated net
losses to date and expects to continue to incur operating losses. JJDC also
recognizes that an investment in CTI involves substantial risk and could afford
a complete loss of such investment.
(f) JJDC is not subscribing for the Shares as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting.
(g) JJDC is an "accredited investor" as such term is defined in Rule
501 of the General Rules and Regulations prescribed by the Commission pursuant
to the Securities Act and was not formed for the specific purpose of acquiring
the Shares.
(h) JJDC acknowledges that CTI is entering into this Agreement in
reliance upon JJDC's representations and warranties in this Agreement,
including, without limitation, those set forth in this Section 5.03.
18
ARTICLE VI
CONDITIONS TO CLOSING
---------------------
SECTION 6.01. Condition to JJDC's Obligations at First Closing. The
------------------------------------------------
obligation of JJDC to purchase the Shares at the First Closing is subject to the
fulfillment to JJDC's satisfaction on or before the First Closing of each of the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by CTI in Article IV hereof shall be true and correct in all
material respects (except for those qualified by materiality which shall be true
and correct in all respects) on and as of the First Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of the First Closing Date.
(b) Performance. CTI shall have performed and complied in all
-----------
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the First Closing.
(c) Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares to JJDC pursuant to this Agreement shall have been duly obtained and
shall be effective on and as of the First Closing, and the sale and issuance of
such Shares at the First Closing shall be legally permitted by all laws and
regulations to which JJDC and CTI are subject.
(d) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the First Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to JJDC and JJDC's counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
(e) Collaboration Agreement. The Collaboration Agreement shall have
-----------------------
been executed and delivered by CTI and shall be in full force and effect.
(f) Opinion of Company Counsel. JJDC shall have received from counsel
--------------------------
for CTI reasonably acceptable to JJDC an opinion or opinions addressed to JJDC
in substantially the form attached hereto as Exhibit A dated the date of the
First Closing.
(g) Compliance Certificate. The Chief Executive Officer of CTI shall
----------------------
deliver to JJDC at the First Closing a certificate certifying on behalf of CTI
that the conditions specified in Sections 6.01(a), (b) and (c) hereof have been
fulfilled.
SECTION 6.02. Condition to JJDC's Obligations at Subsequent Closings.
------------------------------------------------------
The obligation of JJDC to purchase the Shares at each Closing subsequent to the
First
19
Closing is subject to the fulfillment to JJDC's satisfaction on or before such
Closing of each of the following conditions.
(a) Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares to JJDC pursuant to this Agreement shall have been duly obtained and
shall be effective on and as of such Closing, and the sale and issuance of such
Shares at such Closing shall be legally permitted by all laws and regulations to
which JJDC and CTI are subject.
(b) Collaboration Agreement. The Collaboration Agreement shall be in
-----------------------
full force and effect; provided, however, that in no event shall JJDC be
-------- -------
obligated to purchase Shares hereunder with respect to which CTI's put rights
pursuant to Sections 2.01, 2.02, or 2.03 shall not have been effective on or
before the date of delivery by Ortho of notice of termination of the
Collaboration Agreement pursuant to Article XIV thereof.
(c) HSR Act. All waiting periods applicable to such Closing under the
-------
HSR Act (including any extension thereof by reason of a request for additional
information) shall have expired or been terminated and no action shall have been
instituted, or shall be threatened or pending, by the United States Justice
Department or the Federal Trade Commission (the "FTC") challenging or seeking to
---
enjoin the consummation of the transactions contemplated at such Closing, which
action shall not have been withdrawn or terminated.
(d) Representations and Warranties. The representations and
------------------------------
warranties made by CTI in Section 4.01, 4.09 and 4.24 of Article IV hereof shall
be true and correct in all material respects (except for those qualified by
materiality which shall be true and correct in all respects) on and as of the
date of such subsequent closing date with the same force and effect as though
such representations and warranties had been made on and as of such date.
(e) Performance. CTI shall have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the date of such
closing.
(f) Compliance Certificate. The Chief Executive Officer of CTI shall
----------------------
deliver to JJDC at such closing a certificate certifying on behalf of CTI that
the conditions specified in Section 6.02(a) through (e) hereof have been
fulfilled.
(g) Opinion of Company Counsel. JJDC shall have received a bring-down
--------------------------
to the Closing date of opinion number 8 specified on Exhibit A, from counsel for
CTI reasonably acceptable to JJDC.
SECTION 6.03. Conditions to CTI's Obligations at Each Closing. CTI's
-----------------------------------------------
obligation to issue and sell the Shares at each Closing is subject to the
fulfillment to CTI's
20
satisfaction on or prior to the date of such Closing of each of the following
conditions, any of which may be waived by CTI:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties made by JJDC in Article V hereof shall be true and correct in all
material respects on and as of the date of such Closing with the same force and
effect as though such representations and warranties had been made on and as of
the date of such Closing.
(b) Qualifications, Legal Investment. All authorizations, approvals,
--------------------------------
and permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
sale and issuance of the Shares at such Closing pursuant to this Agreement shall
have been duly obtained and shall be effective on and as of the date of such
Closing, and the sale and issuance of the Shares at such Closing shall be
legally permitted by all laws and regulations to which JJDC and CTI are subject.
(c) HSR Act. All waiting periods applicable to such Closing under the
-------
HSR Act (including any extension thereof by reason of a request for additional
information) shall have expired or been terminated and no action shall have been
instituted, or shall be threatened or pending, by the United States Justice
Department or the FTC challenging or seeking to enjoin the consummation of the
transactions contemplated at such Closing, which action shall not have been
withdrawn or terminated, provided that this condition shall not be applicable to
--------
the First Closing.
ARTICLE VII
REGISTRATION OF COMMON STOCK; COVENANTS OF CTI
----------------------------------------------
SECTION 7.01. Definitions. Unless the context otherwise requires,
-----------
the terms defined in this Article VII shall have the meanings herein specified
for all purposes of this Agreement, applicable to both singular and plural forms
of any of the terms herein defined.
"Holder" of any security means the record or beneficial owner of such
------
security or any permitted assignee thereof.
The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration for ordering of the
effectiveness of such registration statement by the Commission.
"Registrable Securities" means (i) the Shares (including, regardless
----------------------
of whether issued, all of the Shares to be issued under Article II, unless both
CTI and JJDC otherwise agree), (ii) the Conversion Shares, and (iii) any Common
Stock issued or issuable with
21
respect to the Shares by way of a stock dividend or stock split or in connection
with a combination of shares, reclassification, recapitalization, merger or
consolidation or reorganization, provided, however, that such shares of Common
-------- -------
Stock shall no longer be treated as "Registrable Securities" if (A) they have
been sold by a Holder in a transaction in which its registration rights under
this Agreement are not assigned, (B) a registration statement with respect to
the sale of such Registrable Securities shall have become effective under the
Securities Act and such Registrable Securities shall have been disposed of in
accordance with such registration statement, (C) such Registrable Securities
shall have been sold to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (D) such Registrable Securities shall be
eligible for sale by the holder thereof in a single transaction exempt from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Rule 144 thereunder, without compliance with any of the restrictions set
forth in paragraphs (c), (e), (f) and (h) of Rule 144 (or any successor
provision), (E) such Registrable Securities shall have been otherwise
transferred, new certificates for such Registrable Securities not bearing a
legend restricting further transfer shall have been delivered by CTI and
subsequent disposition of such Registrable Securities shall not be subject to
registration or qualification under the Securities Act or any state securities
or blue sky law then in force, or (F) such Registrable Securities shall have
ceased to be outstanding.
SECTION 7.02. Registration Rights. (a) Subject to the provisions of
-------------------
this Agreement, not later than the first to occur of (i) twelve (12) months
after the final closing date of an initial public offering of the Common Stock
of CTI to the general public covered by a registration statement under the
Securities Act (the "IPO Closing Date"), (ii) September 30, 1998 and (iii)
----------------
concurrently with the registration of any Conversion Shares into which the
Series A Preferred is convertible, CTI shall use its best efforts to effect the
registration under the Securities Act of all Registrable Securities pursuant to
one or more registration statements which may be required from time to time
hereunder to effect the registration of all Registrable Securities; provided,
--------
however, that a Holder may inform CTI in writing that it wishes to exclude all
-------
or a portion of its Registrable Securities from such registration.
(b) Subject to the provisions of this Agreement (including but not
limited to Sections 7.02(c) and (d)), but without limitation of CTI's obligation
under 7.02(a) above, each time subsequent to the twelfth (12th) month after the
IPO Closing Date that CTI shall determine to file a registration statement under
the Securities Act (other than pursuant to Section 7.02(a) or (b) hereof and
other than on Form ▇-▇, ▇-▇, or a registration statement on Form S-1 covering
solely any employee benefit plan) in connection with the proposed offer and sale
for money of any of its securities either for its own account, or on behalf of
any other security holder, CTI agrees to give written notice of its
determination to all Holders of Registrable Securities. Upon the written
request of a Holder of any shares of Registrable Securities given within twenty
(20) days after the receipt of such written notice from CTI, CTI agrees to cause
all such Registrable Securities, the Holders of which have so requested
registration hereof, to be included in such registration statement and to use
its best efforts to cause such registration statement to become effective under
the Securities Act, all to the
22
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Registrable Securities to be so registered.
(c) If the registration of which CTI gives written notice pursuant to
Section 7.02(b) is for a public offering involving an underwriting, CTI agrees
to so advise the Holders as a part of its written notice. In such event the
right of any Holder to registration pursuant to Section 7.02(b) shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting agree to enter into (together with CTI and
the other Holders distributing their securities through such underwriting) an
underwriting agreement with the underwriter or underwriters selected for such
underwriting by CTI.
(d) Notwithstanding any other provision of this Section 7.02, if the
managing underwriter referred to in Section 7.02(c) advises CTI and the Holders
of the Registrable Securities requesting participation in such registration in
writing that in its good faith judgment the number of shares of Registrable
Securities and the other securities requested to be registered under Section
7.02(b) exceeds the number of shares of Registrable Securities and other
securities which can be sold in such offering, then (i) the number of shares of
Registrable Securities so requested to be included in the offering shall be
reduced to that number of shares which in the good faith judgment of the
managing underwriter can be sold in such offering (provided, that in no event
--------
shall the number of shares to be issued or sold by CTI or any other security
holder of CTI participating in such offering pursuant to demand or "piggyback"
registration rights entered into prior to the date hereof be reduced, which
shares shall have priority over the Registrable Securities), and (ii) such
reduced number of shares shall be allocated among all participating Holders of
Registrable Securities sought to be included in such underwriting in proportion,
as nearly as practicable, to the respective number of shares of Registrable
Securities held by such Holders at the time of filing the registration
statement, provided that any such exclusion or "cut back" of the Registrable
--------
Securities sought to be included in such underwriting shall be made pro rata
based on the proportion of the Registrable Securities requested to be included
to the total shares of stock to be included in the registration (excluding
shares to be issued or sold directly by CTI or any other security holder of CTI
participating in such offering pursuant to demand or "piggyback" registration
rights entered into prior to the date hereof which grant such holders priority
over the Registerable Securities).
SECTION 7.03. Registration Expenses. CTI shall pay all reasonable
---------------------
registration expenses incurred in effecting the registration of Registrable
Securities pursuant to this Article VII including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of outside counsel for CTI, blue sky fees and
expenses, and the reasonable expense of any special audits incident to or
required by any such registration, but not including underwriting discounts,
commissions and expenses, and not including fees and disbursements of outside
counsel for the participating Holders.
23
SECTION 7.04. Registration Procedures. If and whenever CTI is
-----------------------
required by the provisions of this Article VII to effect the registration of
Registrable Securities under the Securities Act, CTI will, as expeditiously as
possible:
(a) prepare and file with the Commission a registration statement
which includes all Registrable Securities, other than any Registrable Securities
excluded by holders pursuant to Section 7.02(a) or (b), and use its best efforts
to cause such registration statement to become and remain effective until the
distribution described in the registration statement has been completed (CTI
agrees to provide each Holder with draft copies of such registration statement
in advance of such filing);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective with
respect to all Registrable Securities for the longer of (i) one hundred twenty
(120) days after the date of the actual purchase of Registrable Securities by
JJDC (ii) one hundred twenty (120) days after the expiration of the lock-up
referred to in Section 8.01 of this Agreement and (iii) any period during which
CTI shall keep any registration statement effective pursuant to any registration
rights agreement to which CTI is a party as of the date hereof, and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of Registrable Securities covered by such registration statement
whenever a Holder shall desire to sell or otherwise dispose of the same;
(c) furnish to each participating Holder (and to each underwriter, if
any, of Registrable Securities) such number of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents, as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such state securities or
blue sky laws of such jurisdiction as each participating Holder shall reasonably
request and do any and all other acts and things which may be necessary under
such securities or blue sky laws to enable such Holder to consummate the public
sale or other disposition of the Registrable Securities in such jurisdictions,
except that CTI shall not for any purpose be required to consent generally to
service of process or qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) in the event that a registration involves an underwriting, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offer;
(f) notify the participating Holders at any time when a prospectus
relating to any Registrable Securities covered by such registration statement is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the
24
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and promptly file such
amendments and supplements as may be necessary so that, as thereafter delivered
to such Holders of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and use its best efforts
to cause each such amendment and supplement to become effective;
(g) notify the Holders of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. CTI will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time;
(h) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Article VII, on the date such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Article VII, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing CTI for the purpose of such registration, in form and substance as
is customarily given by counsel to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of CTI, in form and substance as is
customarily given by independent certified public accountants to underwriters in
any underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration for Registrable Securities;
(i) use its best efforts to cause all such Registrable Securities to
be listed on the principal securities exchange or market, if any, on which the
Common Stock is then listed; and
(j) make generally available to its security holders as soon as
practicable. but not later than 90 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve (12) month period beginning not
later than the first day of CTI's fiscal quarter next following the effective
date of the Registration Statement.
It shall be a condition precedent to the obligations of CTI to take any action
pursuant to this Agreement with respect to each Holder that such Holder shall
furnish to CTI such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities as shall
be reasonably required to effect the registration of the
25
Registrable Securities and shall execute such documents in connection with such
registration as CTI may reasonably request.
SECTION 7.05. Indemnification. In the event Registrable Securities
---------------
are registered pursuant to this Article VII.
(a) To the extent permitted by law, CTI will indemnify and hold
harmless each Holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of this Agreement and any
underwriter (within the meaning of the Securities Act) with respect to the
Registrable Securities, and each officer, director, employee and agent thereof
and each person, if any, who otherwise controls such Holder or underwriter
(within the meaning of the Securities Act), against any losses or claims,
damages, expenses or liabilities, joint or several, to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or allegedly untrue statement of any material fact contained in the
registration statement for the Registrable Securities, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or any document incident to the registration or
qualification of any Registrable Securities, 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 allegedly necessary to make the statements therein not
misleading or any violation or alleged violation by CTI of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and,
subject to Section 7.05(c), will reimburse such Holder, any underwriter,
officer, director, employee, agent 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 7.05(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, expense,
liability or action if such settlement is effected without the written consent
of CTI, nor shall CTI be liable under this Section 7.05(a) to such Holder, such
underwriter, officer, director, employee, agent or controlling person for any
such loss, claim, damage, expense, liability or action to the extent that it
arises out of, or is based upon, an untrue statement or allegedly untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and conformity with information
furnished in writing expressly for use in connection with such registration by
such Holder, such underwriter, officer, director, employee, agent or such
controlling person.
(b) To the extent permitted by law, each Holder of Registrable
Securities which are included in a registration statement pursuant to the
provisions of this Agreement will indemnify and hold harmless CTI, each of its
employees, agents, directors and officers, each person, if any, who controls CTI
within the meaning of the Securities Act, and any underwriter (within the
meaning of the Securities Act) against any losses, claims, damages, or
liabilities to which CTI or any such person or underwriter may become subject,
under the
26
Securities Act, the Exchange Act or other federal or state law or otherwise,
insofar as such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of, or are based upon any untrue or allegedly untrue
statement of any material fact contained in a registration statement for the
Registrable Securities, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or any document
incident to the registration or qualification of any Registrable Securities, 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 allegedly necessary to make the
statements therein not misleading; in each case to the extent that such untrue
statement or allegedly untrue statement or omission or alleged omission was made
in such registration statement, preliminary prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with information
furnished in writing by such Holder expressly for use in connection with such
registration; provided, however, that the indemnity agreement contained in this
-------- -------
Section 7.05(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, expense, liability or action if such settlement is effected
without the written consent of such Holder; and, subject to Section 7.05(c),
such Holder will reimburse CTI or any such person or underwriter for any legal
or other expenses reasonably incurred by CTI or any such person or underwriter
in connection with investigating or defending such loss, claim, damage,
liability, expense or action.
(c) Promptly after receipt by an indemnified party under this Section
7.05 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 7.05, notify the indemnifying party in writing of the commencement
thereof and generally summarize such action. The indemnifying party shall have
the right to participate in and to assume the defense thereof and shall not be
responsible for legal fees or costs incurred by any indemnified person
thereafter; provided that an indemnifying party shall not have the right to
--------
direct the defense of such an action on behalf of an indemnified party if such
indemnified party has reasonably concluded that there may be defenses available
to it that are different from or additional to those available to the
indemnifying party and, in such event, the indemnifying party shall bear the
fees and expenses of only one (1) separate counsel for all indemnified parties.
The failure to notify an indemnifying party promptly of the commencement of any
such action if prejudicial to the ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 7.05, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise than under this Section 7.05.
(d) To the extent permitted by law, the indemnification provided for
under this Section 7.05, will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling person (within the meaning of the Securities Act) of
such indemnified party and will survive the transfer of any securities.
27
(e) If for any reason the foregoing indemnity is unavailable to an
indemnified party, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses, claims,
damages, liabilities or expense (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other or (ii) if the allocation provided by
claim (i) above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such proportion
as is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. Notwithstanding the
foregoing, no underwriter, if any shall be required to contribute any amount in
excess of the amount by which the total price at which the securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 7.06. Reports Under Exchange Act. With a view to making
--------------------------
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit a Holder to sell Registrable Securities to the public without
registration, and with a view to making it possible for any such Holder to
register the Registrable Securities pursuant to a registration on Form S-3, CTI
agrees, at all times after the IPO Closing Date to:
(a) make and keep public information available at all times, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of CTI under the Securities Act and the Exchange Act; and
(c) furnish to a Holder owning any Registrable Securities upon request
(i) a written statement by CTI that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, or that it
qualifies as a registrant whose Registrable Securities may be resold pursuant to
Form S-3 if it so qualifies, (ii) a copy of the most recent annual or quarterly
report of any CTI and such other reports and documents filed by CTI with the
Commission and (iii) any other information reasonably requested by such Holder
to permit such Holder to sell shares of Registrable Securities pursuant to Rule
144 or any other rule or regulation under the Securities Act which permits the
sale of securities without registration.
SECTION 7.07. Transferability. The right to cause CTI to register
---------------
Registrable Securities granted by CTI to the Holders under this Agreement may be
assigned
28
by any Holder to a transferee or assignee of at least 25% of the outstanding
Registrable Securities (subject to appropriate adjustment for stock splits,
stock dividends, reclassification and consolidations), provided that CTI must
--------
receive written notice prior to or at the time of said transfer, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such rights are being assigned. The limitations set forth
in this Article VII with respect to registration rights shall apply to all
transferees or assignees of Registrable Securities.
SECTION 7.08. Termination of Registration Rights. The provisions of
----------------------------------
this Article VII (other than Section 7.05) shall terminate (i) upon the tenth
anniversary of the date hereof or (ii) if earlier as to any Registrable
Securities held by an individual Holder, at such time as all Registrable
Securities held by such Holder can be sold in a single transaction, without
compliance with the registration and prospectus delivery requirement of the
Securities Act, pursuant to Rule 144 thereunder, without any restrictions as set
forth in paragraphs (c), (e), (f) and (h) of Rule 144.
SECTION 7.09. Limitations on Subsequent Registration Rights. From
---------------------------------------------
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
7.02(a) hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of its securities will not reduce the amount of
the Registrable Securities of the Holder which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the date set forth in Section 7.02(a) or within 120
days of the effective date of any registration effected pursuant to Section
7.02(a).
ARTICLE VIII
LOCKUP; REPURCHASE RIGHT
------------------------
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
SECTION 8.01. Lockup. JJDC agrees that during the time period
------
commencing as of the date hereof and ending on the earliest of ***** neither it
nor any of its Affiliates (including Ortho and J&J) shall, directly or
indirectly, sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to Affiliates who agree in writing to be similarly
bound) any of the shares of Common Stock purchased by JJDC pursuant to this
Agreement and owned beneficially or of record during such periods by JJDC or its
Affiliates. In order to enforce the foregoing restrictions, CTI may impose stop-
transfer instructions with respect to
29
(The information below marked by ***** has been omitted by a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.)
such shares during such periods. Nothing in this Section 8.01 shall limit
JJDC's ability to sell any of its shares of CTI Common Stock pursuant to an
effective registration statement covering the same or to tender or sell its
shares of CTI Common Stock to a non-Affiliate third party in connection with a
tender offer or any other transaction or series of related transactions in which
a third party (including a "group" within the meaning of Section 13(d)(3) of the
Exchange Act, but excluding any Affiliate of JJDC, including Ortho and J&J)
acquires or becomes the beneficial owner of (i) more than ***** of the
outstanding voting securities of CTI or the surviving entity, whether by merger,
consolidation, reorganization, or other similar means, or (ii) all or
substantially all of the assets of CTI; provided that in the case of any such
--------
tender or sale, JJDC or one of its Affiliates shall contact CTI's Chief
Executive Officer, President, Chief Financial Officer or Executive Vice
President, Finance and Administration, by telephone a reasonable time (but not
less than five (5) days in advance) of such tender or sale by JJDC or its
Affiliates). JJDC will give CTI five days written notice of its first sale (or
first sale order placed, regardless of whether executed) after a termination
under clause (iii) above.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Publicity. The provisions of Section 10.06 of the
---------
Collaboration Agreement with respect to publicity shall apply equally to this
Agreement.
SECTION 9.02. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto.
SECTION 9.03. Entire Agreement. This Agreement, the Collaboration
----------------
Agreement, any other agreements delivered concurrently herewith and the exhibits
hereto and thereto, and the other documents delivered pursuant hereto and
thereto, constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other party in any manner by any representations, warranties, covenants,
or agreements except as specifically set forth herein or therein. Nothing in
this Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
SECTION 9.04. Separability. In the event any provision of this
------------
Agreement shall be invalid, illegal, or unenforceable, it shall to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
30
SECTION 9.05. Amendment and Waiver. Except as otherwise provided
--------------------
herein, any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely), with the written consent of CTI and JJDC. Any amendment or
waiver effected in accordance with this Section 9.05 shall be binding upon any
holder of any securities purchased under this Agreement (including securities
into which such securities have been converted), each future holder of all such
securities, and CTI.
SECTION 9.06. Notices. All notices hereunder shall be in writing and
-------
shall be deemed given if delivered personally or by facsimile transmission
(receipt verified), telexed, mailed by registered or certified mail (return
receipt requested), postage prepaid, or sent by express courier service, to CTI
at the addresses provided for in Section 17.08 of the Collaboration Agreement
and to JJDC at the addresses set forth below (or at such other address for a
Party as shall be specified by like notice; provided that notices of a change of
--------
address shall be effective only upon receipt thereof):
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Development Corporation
▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Attention: Executive Committee Member Responsible for the
Pharmaceutical Group
▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
Office of General Counsel
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
31
SECTION 9.07. Fees and Expenses. CTI and JJDC shall bear their own
-----------------
expenses and legal fees incurred on their behalf with respect to this Agreement
and the transactions contemplated hereby, except for registration expenses, if
any, which shall be allocated as set forth in Article VII.
SECTION 9.08. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. The parties to this
-------------------------
Agreement acknowledge that in connection with the future exercise by CTI, if
applicable, of its rights pursuant to Article II, the parties may be required to
file Notification Forms or otherwise comply with the provisions of the HSR Act.
Each party agrees that in connection with any such exercise by CTI it will act
in good faith to analyze and evaluate its resulting obligations under the HSR
Act. In the event either party reasonably determines that its required to make
any filing under the HSR Act in connection with such exercise, it will so notify
the other party, and the other party will reasonably cooperate with the filing
party, and each party will expeditiously comply with its filing requirements.
Notwithstanding any other provision of this Agreement, the time periods during
which CTI is entitled to exercise its rights pursuant to Article II shall be
tolled for the duration of any application HSR Act waiting period (and any
related investigative period imposed by the FTC with respect to any such
filing).
SECTION 9.09. Titles and Subtitles. The titles of the sections and
--------------------
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
SECTION 9.10. Counterparts. This Agreement may be executed in
------------
counterparts and by facsimile, each of which shall be deemed an original, but
both of which together shall constitute one instrument.
SECTION 9.11. Incorporation by Reference. All Exhibits appended to
--------------------------
this Agreement are herein incorporated by reference and made a part hereof.
SECTION 9.12. Survival. The warranties, representations, agreements,
--------
covenants and undertaking of CTI or JJDC contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and each
closing hereunder and shall in no may be affected by on investigation of the
subject matter thereof made by or on behalf of CTI or JJDC.
32
The foregoing Agreement is hereby executed as of the date first above
written.
CELL THERAPEUTICS, INC.
By:____________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Title: President and Chief Executive Officer
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ DEVELOPMENT
CORPORATION
By:____________________________________________
Name:
Title:
33
EXHIBIT A
---------
FORM OF OPINION
1. CTI is a validly existing corporation in good standing under the laws
of the State of Washington.
2. CTI has the requisite corporate power to execute and perform the
Agreement and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company.
3. The Stock Purchase Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except as rights to indemnity under Section 7.05 of the Stock Purchase
Agreement may be limited by applicable laws and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
4. The Shares issuable pursuant to the Stock Purchase Agreement have been
duly authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Stock Purchase Agreement, such Shares will be
validly issued, outstanding, fully paid and nonassessable. The Series B Shares
will be entitled to the designations, preferences and rights relative to the
other shares of capital stock of CTI as set forth in the Articles of Amendment
attached hereto.
5. The execution and delivery of the Stock Purchase Agreement by the
Company and the issuance of the Shares pursuant thereto do not violate any
provisions of the Company's Articles of Incorporation or Bylaws, and do not
constitute a material default under the provisions of any material agreement to
which the Company is a party or by which it is bound, and do not violate or
contravene (a) any governmental statute, rule or regulation applicable to the
Company or (b) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company and of which we have knowledge,
the violation or contravention of which would materially and adversely affect
the Company, its assets, financial condition or operations.
6. The issuance of the Conversion Shares upon conversion of the Series B
Shares has been duly authorized by all requisite corporate action, and the
Conversion Shares have been duly reserved for issuance upon such conversion
(which aggregate number of shares of Common Stock, is, based upon the Conversion
Price (as defined in such Articles of Amendment) as of the date hereof,
1,492,538) and, when so issued, such Conversion Shares will be validly issued,
fully paid and nonassessable. Neither the issuance, sale and delivery of the
Shares nor the issuance and delivery of the Conversion Shares is subject to any
preemptive rights of shareholders of the Company or, to our knowledge, to any
right of first refusal or other similar right in favor of any person.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Stock Purchase
Agreement or that might result, either individually or in the aggregate, in any
material adverse change in the assets, financial condition, or operations of the
Company.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the issuance by the Company of Shares at
the Closing, have been made or obtained.
2
EXHIBIT B
---------
ARTICLES OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
CELL THERAPEUTICS, INC.
ESTABLISHING A SERIES OF PREFERRED STOCK
Cell Therapeutics, Inc., a Washington corporation, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
M.D., its duly elected and qualified President, hereby provides the following
information and delivers to the Secretary of State of the State of Washington
for filing, in duplicate, these Articles of Amendment Establishing a Series of
Preferred Stock, pursuant to RCW 23B.06.020, RCW 23B.10.020, and RCW 23B.10.060.
1. NAME. The name of the Corporation is Cell Therapeutics, Inc.
2. TEXT OF AMENDMENTS. Pursuant to the Corporation's Restated Articles of
Incorporation, the amendments establish the designation, preferences,
limitations and relative rights of a series of Preferred Stock. The amendments
will comprise "Paragraph (b) -- Series B Convertible Preferred Stock" of
Article 2. Following is the text of each amendment adopted:
"SECTION 1. DESIGNATION AND AMOUNT. There is hereby established a
series of preferred stock of the Corporation which shall be designated as the
Series B Convertible Preferred Stock (herein the "Series B Preferred"). The
number of shares of Series B Preferred shall be 14,925.373.
SECTION 2. RANK. All shares of Series B Preferred shall rank junior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all of the Corporation's now issued Series A Convertible
Preferred Stock (the "Series A Preferred"). All shares of Series B Preferred
shall rank prior, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, to all of the Corporation's now or hereafter issued
Common. The term "Common" shall mean the Common Stock, without par value, of
the Corporation as the same exists at the date hereof or as such stock may be
constituted from time to time.
SECTION 3. DIVIDENDS. No dividends or other distributions shall be
made with respect to the Series B Preferred until all dividends on the Series A
Preferred have been paid or set apart. The holders of the Series B Preferred
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available
therefor, dividends at the rate of $33.50 per share per annum on each
outstanding share of Series B Preferred, payable in preference and priority to
any payment of any dividend on the Common. No dividends or other distributions
shall be made with respect to the Common, until all dividends on the Series B
Preferred have been paid or set apart. Such dividends on the Series B Preferred
shall not be cumulative and no right to such dividends shall accrue to holders
of Series B Preferred unless and until declared by the Board of Directors.
SECTION 4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
(a) After payment of the "Preference Amount" (as defined in
Paragraph (a) -- Series A Convertible Preferred Stock" of Article 2 of the
Corporation's Restated Articles of Incorporation, and referred to herein as
the "Series A Preference Amount") has been made to the holders of the
Series A Preferred, the holders of Series B Preferred then outstanding
shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of
the Common, by reason of their ownership of such stock, an amount for each
share of Series B Preferred then held by them equal to $335.00
appropriately adjusted for any combinations, consolidations, stock
distributions or stock dividends or splits with respect to such shares plus
all declared but unpaid dividends thereon (hereinafter such amount shall be
referred to as the "Series B Preference Amount"). If upon the occurrence
of such event of liquidation, dissolution or winding up, the assets and
property legally available to be distributed among the holders of the
Series B Preferred shall be insufficient to permit the payment to such
holders of the Series B Preference Amount, then the entire assets and
property of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series B Preferred in
accordance with the Series B Preference Amount.
(b) After payment has been made to the holders of the Series A
Preferred and the holders of the Series B Preferred of the full amounts to
which they shall be entitled as aforesaid, all remaining assets available
for distribution, if any, shall be distributed ratably among the holders of
the Common, the Series A Preferred and the Series B Preferred in proportion
to the shares of Common then held by them and the shares of Common which
they then have the right to acquire upon conversion of the shares of Series
A Preferred and Series B Preferred, as the case may be, then held by them.
(c) For purposes of this Section 4, a merger or consolidation of
the Corporation with or into any other corporation or corporations, or the
merger of any other corporation or corporations into the Corporation, in
which consolidation or merger the shareholders of the Corporation receive
distributions in cash or securities of another corporation or corporations
as a result of such consolidation or merger, or a sale of all or
substantially all of the assets of the Corporation, shall not be treated as
2
a liquidation, dissolution or winding up of the Corporation, unless both
(i) the shareholders of this Corporation receive in such consolidation,
merger or sale of assets less than fifty percent (50%) of the voting equity
securities of the successor or surviving corporation and (ii) the amount of
cash and/or securities received by the shareholders of this Corporation is
less than the total liquidation preference of the Series B Preferred as set
forth in Section 4(a), in which case such consolidation, merger or sale of
assets shall be treated as a liquidation, dissolution or winding up. The
valuation of any securities or other property other than cash received by
the Corporation in any transaction covered by this Section 4(c) shall be
computed at the fair value thereof at the time of receipt as determined in
good faith by the Board of Directors.
(d) The holders of Series B Preferred shall have no priority or
preference with respect to distributions made by the Corporation in
connection with the repurchase of shares of Common issued to or held by
employees, directors or consultants upon termination of their employment or
services pursuant to agreements providing for the right of said repurchase
between the Corporation and such persons.
SECTION 5. CONVERSION. The holders of the Series B Preferred shall
have conversion rights (the "Conversion Rights") as follows:
(a) Right to Convert. Each share of Series B Preferred shall be
----------------
convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any
transfer agent for the Series B Preferred into such number of fully paid
and nonassessable shares of Common as is determined by dividing $335.00 by
the Series B Conversion Price (as hereinafter defined) in effect at the
time of conversion. The Series B Conversion Price shall initially be
$3.35, subject to adjustment as provided in subsection (d) below.
(b) Automatic Conversion.
--------------------
(i) Each share of Series B Preferred shall automatically be
converted into shares of Common at the then effective Series B Conversion
Price (after making any adjustment required by Section 5(d)) upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering the offer and sale of Common for
the account of the Corporation to the public at a price per share (prior to
underwriter discounts and commissions and other offering expenses) of not
less than $5.00 (subject to adjustment in the event of any
recapitalization, stock split, stock dividend or other similar event) and
an aggregate offering price to the public of not less than $20,000,000. In
the event of the automatic conversion of the Series B Preferred upon a
public offering as aforesaid, the person(s) entitled to receive the Common
issuable upon such automatic conversion of Series B Preferred shall not be
deemed to have converted such Series B Preferred
3
until immediately prior to the closing of such sale of securities, and
after giving effect to any adjustment of the Series B Conversion Price
required by Section 5(d).
(ii) Each share of Series B Preferred shall automatically be
converted into shares of Common at the then effective Series B Conversion
Price upon the written consent of holders of not less than 66.67% of the
then outstanding shares of Series B Preferred voting together as a single
class.
(iii) Each share of Series B Preferred shall automatically be
converted into shares of Common at the then effective Series B Conversion
Price immediately prior to the closing of any merger or consolidation of
the Corporation that is not treated as a liquidation, dissolution or
winding up under Section 4(c) if the shareholders of the Corporation
receive distributions of equity securities of another corporation as a
result of such consolidation or merger and (i) such class of equity
securities has been continuously registered under Section 12 of the
Securities Exchange Act of 1934, as amended, over the six month period
ending with the closing of such merger or consolidation, (ii) such equity
securities are listed on the New York Stock Exchange or any other national
securities exchange, or are quoted on the Nasdaq National Market, (iii) the
average Closing Price per share of such class of equity securities as
calculated for the last 30 trading days (the "Trading Period") ending on
the fifth trading day prior to the closing of such merger or consolidation
equals or exceeds $5.00, (iv) such class of equity securities has an
aggregate market float of not less than $20,000,000, and (v) such equity
securities are issued in a transaction of the type specified in paragraph
(a) of Rule 145 under the Securities Act and are registered on Form S-4 or
an equivalent form promulgated under the Securities Act. As used herein,
the term "Closing Price" for any day in question shall be the last reported
sales price regular way or, in case no such reported sales take place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the New York Stock Exchange Composite Tape or, if
not listed on the New York Stock Exchange, on the principal national
securities exchange on which such equity securities are listed or admitted
to trading or, if not listed or admitted to trading on a national
securities exchange, the last sale price regular way for such equity
securities as published by the Nasdaq National Market ("Nasdaq"), or if no
such sale takes place on such day, the average between the closing bid and
asked prices for such class of equity securities as published by Nasdaq.
The term "trading day" shall mean a day on which the market used for
calculating the Closing Price is open for the transaction of business and
on which there has been at least one share of Common traded.
(c) Mechanics of Conversion. No fractional shares of Common
-----------------------
shall be issued upon conversion of Series B Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series B Conversion Price for such series of Series B Preferred.
Any declared but unpaid dividends on any share of
4
Series B Preferred that is converted into Common pursuant to this Section 5
shall, simultaneously upon conversion of such share of Series B Preferred,
automatically be converted into such number of fully paid and nonassessable
shares of Common as is determined by dividing the amount of declared but
unpaid dividends on such converted share of Series B Preferred by the
Series B Conversion Price in effect at the time of conversion. Before any
holder of Series B Preferred shall be entitled to convert the same into
full shares of Common, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series B Preferred, and shall give written notice to
the Corporation at such office that he elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
-------- -------
Section 5(b), the outstanding shares of all Series B Preferred shall be
converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, further,
-------- -------
that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common issuable upon such automatic conversion
unless either the certificates evidencing such shares of Series B Preferred
are delivered to the Corporation or its transfer agent as provided above,
or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates.
The Corporation shall, as soon as practicable after such
delivery, or after such agreement and indemnification, issue and deliver at
such office to such holder of Series B Preferred, a certificate or
certificates for the number of shares of Common to which he shall be
entitled as aforesaid and a check payable to the holder in the aggregate
amount of any cash amounts payable as the result of a conversion into
fractional shares of Common. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such
surrender of the shares of Series B Preferred to be converted, or in the
case of automatic conversion on the date of the closing of the offering or
the effective date of such written consent (as the case may be), and the
person or persons entitled to receive the shares of Common issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common on such date.
Upon the conversion of any outstanding shares of Series B
Preferred into Common pursuant to this Section 5, all such shares of Series
B Preferred shall resume the status of authorized but unissued shares of
Series B Preferred.
(d) Adjustments to Series B Conversion Price.
----------------------------------------
(1) In the event the Corporation at any time or from time to
time effects a subdivision or combination of its outstanding Common into a
greater or lesser number of shares without a proportionate and
corresponding subdivision or
5
combination of its outstanding Series B Preferred, then and in each such
event the Series B Conversion Price shall be decreased or increased
proportionately.
(2) In the event the Corporation at any time or from time to
time shall make or issue, or fix a record date for the determination of
holders of Common entitled to receive, a dividend or other distribution
payable in additional shares of Common or other securities or rights
(hereinafter referred to as "Common Stock Equivalents") convertible into or
entitling the holder thereof to receive additional shares of Common without
payment of any consideration by such holder for such Common Stock
Equivalents or the additional shares of Common, then and in each such event
the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common issuable in payment of such dividend
or distribution or upon conversion or exercise of such Common Stock
Equivalents shall be deemed to be issued and outstanding as of the time of
such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date. In each such event the Series
B Conversion Price shall be proportionately decreased as of the time of
such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date.
(3) If at any time after the first date of which a share of
Series B Preferred is first issued ("Original Issue Date"), the Corporation
shall issue or sell Equity Securities, as defined in subsection (i) below,
at a consideration per share that is less than the Series B Conversion
Price in effect immediately prior to the time of such issue or sale (the
"Lower Price"), then forthwith upon such issue or sale, the Series B
Conversion Price of each share of Series B Preferred shall be adjusted to a
price (calculated to the nearest cent) determined by multiplying such
Series B Conversion Price as in effect immediately prior to issuance or
sale by a fraction:
(A) the numerator of which is an amount equal to the sum
of (x) the number of shares of Common outstanding immediately prior to
such issue or sale, (y) the number of shares of Common issuable upon
conversion or exchange of any obligations or of any shares of stock of
the Corporation outstanding immediately prior to such issue or sale,
and (z) an amount equal to the aggregate "consideration actually
received" by the Corporation upon such issue or sale divided by the
then existing Series B Conversion Price, and
(B) the denominator of which is the sum of the number of
shares of Common outstanding immediately after such issue or sale and
the number of shares of Common issuable upon conversion or exchange of
any obligations or of any shares of stock of the Corporation
outstanding immediately after such issue or sale.
For purposes hereof the following provisions shall be applicable:
6
(i) The term "Equity Securities" shall mean any shares
of Common, or any obligation, any share of stock or other security of the
Corporation convertible into or exchangeable or exercisable for Common, or
any security of the Corporation convertible into or exchangeable or
exercisable for such convertible or exchangeable securities, except for (1)
Common issued or issuable after the Original Issue Date to officers,
directors, full-time employees or consultants of the Corporation pursuant
to stock grant, stock purchase and/or stock option plans or any other stock
incentive program, agreement or arrangement approved by the Board of
Directors, (2) shares of Common issued upon exercise of warrants to
purchase Common that may be hereinafter issued in connection with debt
financings or equipment lease financing transactions, (3) shares issued
pursuant to Section 5(d)(1), 5(d)(2), (4) shares of Common issued upon
conversion of the Series B Preferred and (5) shares of Common issued as a
dividend or distribution on the Series B Preferred; provided, however, that
-------- -------
the aggregate number of shares of Common that the Corporation may issue or
sell at a Lower Price that would be excluded from the definition of "Equity
Securities" pursuant to clauses (1) and (2) of this subsection (i) shall
not exceed 750,000 shares.
(ii) In the case of an issue or sale for cash of shares
of Common the "consideration actually received" by the Corporation therefor
shall be deemed to be the amount of cash received, before deducting
therefrom any commissions or expenses paid by the Corporation.
(iii) In case of the issuance (otherwise than upon
conversion or exchange of obligations or shares of stock of the
Corporation) of additional shares of Common for a consideration other than
cash or a consideration partly other than cash, the amount of the
consideration other than cash received by the Corporation for such shares
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors.
(iv) In case of the issuance by the Corporation in any
manner of any rights to subscribe for or to purchase shares of Common, or
any options for the purchase of shares of Common or stock convertible into
Common, all shares of Common or stock convertible into Common to which the
holders of such rights or options shall be entitled to subscribe for or
purchase pursuant to such rights or options shall be deemed "issued" and
"outstanding" as of the date of the offering of such rights or the granting
of such options, as the case may be, and the minimum aggregate
consideration named in such rights or options for the shares of Common or
stock convertible into Common covered thereby, plus the consideration, if
any, received by the Corporation for such rights or options, shall be
deemed to be the "consideration actually received" by the Corporation (as
of the date of the offering of such rights or the granting of such options,
as the case may be) for the issuance of such shares.
7
(v) In case of the issuance or issuances by the Corporation
in any manner of any obligations or of any shares of stock of the
Corporation that shall be convertible into or exchangeable for Common, all
shares of Common issuable upon the conversion or exchange of such
obligations or shares shall be deemed "issued" and "outstanding" as of the
date such obligations or shares are issued, and the amount of the
"consideration actually received" by the Corporation for such additional
shares of Common shall be deemed to be the total of (1) the amount of
consideration received by the Corporation upon the issuance of such
obligations or shares, as the case may be, plus (2) the minimum aggregate
consideration, if any, other than such obligations or shares, receivable by
the Corporation upon such conversion or exchange, except in adjustment of
dividends.
(vi) The amount of the "consideration actually received" by
the Corporation upon the issuance of any rights or options referred to in
subsection (iv) above or upon the issuance of any obligations or shares
which are convertible or exchangeable as described in subsection (v) above,
and the amount of the consideration, if any, other than such obligations or
shares so convertible or exchangeable, receivable by the Corporation upon
the exercise, conversion or exchange thereof shall be determined in the
same manner provided in subsections (ii) and (iii) above with respect to
the consideration received by the Corporation in case of the issuance of
additional shares of Common; provided, however, that if such obligations or
shares of stock so convertible or exchangeable are issued in payment or
satisfaction of any dividend upon any stock of the Corporation other than
Common, the amount of the "consideration actually received" by the
Corporation upon the original issuance of such obligations or shares of
stock so convertible or exchangeable shall be deemed to be the fair value
of such obligations or shares of stock, as of the date of the adoption of
the resolution declaring such dividend, as determined by the Board of
Directors at or as of that date. On the expiration of any rights or options
referred to in subsection (iv), or the termination of any right of
conversion or exchange referred to in subsection (v), or any change in the
number of shares of Common deliverable upon exercise of such options or
rights or upon conversion of or exchange of such convertible or
exchangeable securities, the Series B Conversion Price then in effect shall
forthwith be readjusted to such Series B Conversion Price as would have
been obtained had the adjustments made upon the issuance of such option,
right or convertible or exchangeable securities been made upon the basis of
the delivery of only the number of shares of Common actually delivered or
to be delivered upon the exercise of such rights or options or upon the
conversion or exchange of such securities.
(vii) In the event this Corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons or options or
rights not referred to in this Section 5(d)(3), then, in each such case,
the holders of the Series B Preferred shall be entitled to the
distributions provided for in Section 3 above, and no adjustment to the
Series B
8
Conversion Price provided for in this Section 5(d)(3) shall be applicable.
(4) Except as provided in Section 6(b), the Corporation will
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5(d) and
in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Series B
Preferred against impairment.
(5) Upon the occurrence of each adjustment or readjustment of
the Series B Conversion Price for any series pursuant to Section 5(d), the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder
of shares of such series of Series B Preferred a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series B Preferred, furnish or
cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Series B Conversion Price at
the time in effect, and (iii) the number of shares of Common and the
amount, if any, of other property which at the time would be received upon
the conversion of Series B Preferred.
(6) In the event that this Corporation shall propose at any
time:
(i) to declare any dividend or distribution upon its Common,
whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common outstanding involving a change in the Common; or
(iv) to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all its property or business,
or to liquidate, dissolve or wind up;
then, in connection with each such event, the Corporation shall send to the
holders of
9
the Series B Preferred at least twenty (20) days prior written notice of
the date on which a record shall be taken for such dividend, distribution
or subscription rights (and specifying the date on which the holders of
Common shall be entitled thereto) or for determining rights to vote in
respect of the matters referred to in (iii) and (iv) above; and in the case
of the matters referred to in (iii) and (iv) above, at least twenty (20)
days prior written notice of the date when the same shall take place (and
specifying the date on which the holders of Common shall be entitled to
exchange their Common for securities or other property deliverable upon the
occurrence of such event). Each such notice shall be given by first class
mail, postage prepaid, addressed to the holders of Series B Preferred at
the address for each such holder as shown on the books of the Corporation.
SECTION 6. VOTING RIGHTS.
(a) Except as otherwise required by law, each share of Series B
Preferred issued and outstanding shall have the number of votes equal to
the number of shares of Common into which such share of Series B Preferred
could be converted at the record date for determination of the shareholders
entitled to vote on such matters, or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not
separately as a class. The holder of each share of Series B Preferred
shall be entitled to notice of any shareholders' meeting in accordance with
the bylaws of the Corporation. Fractional votes by the holders of Series B
Preferred shall not, however, be permitted and any fractional voting rights
shall (after aggregating all shares into which shares of Series B Preferred
held by each holder could be converted) be rounded to the nearest whole
number. The holders of Series B Preferred shall not be entitled to
cumulative voting rights.
(b) So long as any shares of Series B Preferred shall be
outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of at least 66.67% of
such outstanding shares of Series B Preferred, voting together as a single
class:
(i) amend the Corporation's Articles of Incorporation so as to
adversely affect the voting powers or other rights or preferences of the
Series B Preferred;
(ii) authorize or issue shares of any class or series of stock
not authorized herein having any preference or priority as to dividends or
assets superior to or on a parity with any such preference or priority of
the Series B Preferred, or authorize or issue shares of stock of any class
or any bonds, debenture, notes or other obligations convertible into or
exchangeable for, or having rights to purchase, any shares of stock of the
Corporation having any preference or priority as
10
to dividends or assets superior to or on a parity with any such preference
or priority of the Series B Preferred; or
(iii) reclassify any shares of Common or any other shares of
the Corporation into shares having any preference or priority as to
dividends or assets superior to or on a parity with any such preference or
priority of the Series B Preferred."
3. ADOPTION. The foregoing amendments to the Restated Articles of
Incorporation of the Corporation were duly adopted pursuant to the Washington
Business Corporation Act at a meeting of the Board of Directors of the
Corporation held on November 7, 1996. Pursuant to the Washington Business
Corporation Act and the Corporation's Restated Articles of Incorporation, no
shareholder action was required to effect these amendments.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to Restated Articles of Incorporation to be executed in duplicate as of
November __, 1996.
CELL THERAPEUTICS
By:
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
President
Attest:
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary
11