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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 12, 2008
StemCells, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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000-19871
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94-3078125 |
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(State or other jurisdiction
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(Commission
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(I.R.S. Employer |
of incorporation)
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File Number)
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Identification No.) |
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3155 Porter Drive, Palo Alto, California
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94304 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: 650.475.3100
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
On July 18, 2008, the Securities and Exchange Commission (the Commission) declared effective
the Registration Statement on Form S-3 (File No. 333-151891) of StemCells, Inc. (the Company)
filed on June 24, 2008 with the Commission (the Registration Statement). The Registration
Statement permits the Company to issue, in one or more offerings, shares of common stock, preferred
stock, warrants or debt securities at an aggregate initial offering price not to exceed
$100,000,000.
On November 12, 2008, the Company entered into a placement agency agreement with Susquehanna
Financial Group, LLLP and Dawson James Securities, Inc. as the exclusive co-placement agents,
relating to the sale and issuance by the Company to certain investors (the Purchasers) of
13,793,104 units (the Units), with each Unit consisting of (i) one share of the Companys common
stock, par value $0.01 per share (Common Stock) and (ii) a warrant to purchase 0.75 of a share of
Common Stock, at a purchase price of $1.45 per Unit, pursuant to the Registration Statement (the
Offering). In the aggregate, the Company would issue 13,793,104 shares of Common Stock and
warrants to purchase up to 10,344,828 shares of Common Stock (the Warrants), pursuant to the
terms of the placement agency agreement and the related subscription agreements. The Warrants will
generally be exercisable for a period of five years beginning six months after the date of
issuance, and will carry a price per share equal to $2.30, or 110% of the closing price of the
Common Stock on November 12, 2008 as reported by NASDAQ.
The Company anticipates raising gross proceeds of $20 million. The net offering proceeds to
the Company from the sale of the Units, after deducting the placement agents fees and other
estimated offering expenses payable by the Company, are expected to
be approximately $18.5 million.
The Offering is expected close on or about November 17, 2008, or on such later date as the Company
and the Purchasers may agree, subject to customary closing conditions.
In connection with the Offering, the Company is filing as exhibits to this Current Report on
Form 8-K the following documents:
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as Exhibit 1.1, the Placement Agency Agreement; |
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as Exhibit 4.1, the Form of Warrant;
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as Exhibits 5.1 and 23.1, the legal
opinion and consent of Ropes & Gray LLP
relating to the shares of Common Stock
and the warrants to purchase Common Stock
to be issued and sold in the Offering;
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as Exhibit 99.1, the Form of Subscription Agreement. |
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as Exhibit 99.2, the Press Release. |
The foregoing summary of the terms of the subscription agreement, the warrant and the
placement agency agreement is subject to, and qualified in its entirety by, the form of
subscription agreement, the form of warrant and the placement agency agreement, which are attached
to this Current Report on Form 8-K as Exhibits 99.1, 4.1 and 1.1 respectively and are incorporated
herein by reference.
The Companys press release announcing the Offering is filed as Exhibit 99.2 to this Current
Report on Form 8-K, and is incorporated herein by reference.
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Item 9.01. |
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Financial Statements and Exhibits. |
(d) Exhibits
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Exhibit No. |
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Description |
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1.1
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Placement Agency Agreement dated as of November 12, 2008, by
and between StemCells, Inc. and Susquehanna Financial Group, LLLP
and Dawson James Securities as placement agents. |
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4.1
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Form of Warrant |
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5.1
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Opinion of Ropes & Gray LLP. |
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23.1
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Consent of Ropes & Gray LLP (contained in Exhibit 5.1 above). |
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99.1
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Form of Subscription Agreement |
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99.2
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Press release of StemCells, Inc. dated November 12, 2008. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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November 12, 2008 |
StemCells, Inc.
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/s/ Ken Stratton
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Name: |
Ken Stratton |
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Title: |
General Counsel |
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Exhibit Index
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Exhibit |
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Number |
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Description |
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1.1
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Placement Agency Agreement dated as of November 12, 2008, by and between StemCells, Inc. and
Susquehanna Financial Group, LLLP and Dawson James Securities as placement agents. |
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4.1
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Form of Warrant |
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5.1
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Opinion of Ropes & Gray LLP. |
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23.1
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Consent of Ropes & Gray LLP (contained in Exhibit 5.1 above). |
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99.1
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Form of Subscription Agreement |
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99.2
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Press Release of StemCells, Inc., dated November 12, 2008. |
exv1w1
Exhibit 1.1
StemCells, Inc.
13,793,104 Shares of Common Stock
And
Warrants to Purchase 10,344,828 Shares of Common Stock
Placement Agency Agreement
November 12, 2008
Exhibit 1.1
Placement Agency Agreement
November 12, 2008
Susquehanna Financial Group, LLLP
401 City Avenue
Suite 220
Bala Cynwyd, PA 19004
And
Dawson James Securities, Inc.
925 South Federal Highway, 6th Floor
Boca Raton, FL 33432
Ladies and Gentlemen:
StemCells, Inc., a Delaware corporation (the Company), proposes to issue and sell to
certain investors (collectively, the Investors) up to an aggregate of 13,793,104 shares
(the Shares) of Common Stock, $0.01 par value per share (the Common Stock), of
the Company. In addition, together with each Share sold, the Company shall issue and sell to each
Investor a warrant substantially in the form the warrant attached as Annex I to Exhibit A hereto to
purchase 0.75 shares of the Companys Common Stock per each share issued to such Investor (the
Warrants). The Shares and the Warrants are collectively referred to herein as the
Securities. The Company desires to engage Susquehanna Financial Group, LLLP
(Susquehanna) and Dawson James Securities, Inc. (Dawson James) as the exclusive
placement agents (collectively, the Placement Agents) in connection with such issuance
and sale. The Securities are described in the Prospectus which is referred to below.
The Company has prepared and filed, in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations thereunder (collectively, the Act), with
the Securities and Exchange Commission (the Commission) a registration statement on Form
S-3 (File No. 333-151891) under the Act (the registration statement). Amendments to such
registration statement, if necessary or appropriate, have been similarly prepared and filed with
the Commission in accordance with the Act. Such registration statement, as so amended, has become
effective under the Act.
Except where the context otherwise requires, Registration Statement, as used herein,
means the registration statement, as amended at the time of such registration statements
effectiveness for purposes of Section 11 of the Act, as such section applies to the Placement
Agents (the Effective Time), including (i) all documents filed as a part thereof or
incorporated or deemed to be incorporated by reference therein, (ii) any information contained or
incorporated by reference in a prospectus filed with the Commission pursuant to Rule 424(b) under
the Act, to the extent such information is deemed, pursuant to Rule 430B or Rule 430C under the
Act, to be part of the registration statement at the Effective Time, and (iii) any registration
statement filed
to register the offer and sale of Securities pursuant to Rule 462(b) under the Act.
Except where the context otherwise requires, Prospectus Supplement, as used herein,
means the final prospectus supplement, relating to the Securities, filed by the Company with the
Commission pursuant to Rule 424(b) under the Act on or before the second business day after the
date hereof (or such earlier time as may be required under the Act), in the form furnished by the
Company to you, for use by the Placement Agents and by dealers in connection with the offering of
the Securities.
Except where the context otherwise requires, Prospectus, as used herein, means the
Prospectus Supplement together with the basic prospectus attached to or used with the Prospectus
Supplement.
Except where the context otherwise requires, Basic Prospectus, as used herein, means
the basic prospectus included in the Registration Statement at the time the Registration Statement
became effective under the Act.
Permitted Free Writing Prospectuses, as used herein, means the documents listed on
Schedule A attached hereto.
Applicable Time, with respect to any Investor, means the time of receipt and
acceptance by the Company of an executed Subscription Agreement (as defined below) from such
Investor.
Any reference herein to the registration statement, the Registration Statement, the Basic
Prospectus, the Prospectus Supplement, the Prospectus or any Permitted Free Writing Prospectus
shall be deemed to refer to and include the documents, if any, incorporated by reference, or deemed
to be incorporated by reference, therein (the Incorporated Documents), including, unless
the context otherwise requires, the documents, if any, filed as exhibits to such Incorporated
Documents. Any reference herein to the terms amend, amendment or
supplement with respect to the Registration Statement, the Basic Prospectus, the
Prospectus Supplement, the Prospectus or any Permitted Free Writing Prospectus shall be deemed to
refer to and include the filing of any document under the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (collectively, the Exchange Act) on or
after the initial effective date of the Registration Statement, or the date of the Basic
Prospectus, the Prospectus Supplement, the Prospectus or such Permitted Free Writing Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
As used in this Agreement, business day shall mean a day on which the New York Stock
Exchange (the NYSE) is open for trading. The terms herein, hereof, hereto,
hereinafter and similar terms, as used in this Agreement, shall in each case refer to this
Agreement as a whole and not to any particular section, paragraph, sentence or other subdivision of
this Agreement. The term or, as used herein, is not exclusive.
The Company and each Placement Agent agree as follows:
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1. Agreement to Act as Placement Agents. Upon the basis of the representations and
warranties of the Company and subject to the terms and conditions set forth in this Agreement, the
Company engages each of the Placement Agents, on a commercially reasonable efforts basis, to act as
its exclusive placement agents in connection with the offer and sale, by the Company, of Securities
to the Investors. As compensation for services rendered, at the time of purchase (as defined
below) the Company shall pay to each Placement Agent an amount equal to 3.0% (or 6.0% in the
aggregate) of the gross proceeds received or to be received by the Company from the sale of the
Securities (the Agency Fee). The Shares are being sold to Investors at a price of $1.45
per share, and together with each Share, Investors will receive a Warrant to purchase 0.75 shares
of the Companys Common Stock at an exercise price of $2.30 per share. Each Placement Agent may
retain other brokers or dealers to act as sub-agents on its behalf in connection with the offering
and sale of the Securities.
The Company expressly acknowledges and agrees that each Placement Agents obligations
hereunder are on a reasonable efforts basis, and this Agreement shall not give rise to any
commitment by either Placement Agent or any of its affiliates to underwrite or purchase any of the
Securities or otherwise provide any financing. Neither Placement Agent shall have the authority to
bind the Company in respect of the sale of any Securities. The sale of the Securities shall be
made pursuant to purchase agreements substantially in the form included as Exhibit A hereto
(the Subscription Agreements).
2. Payment and Delivery. Subject to the terms and conditions hereof, payment of the
purchase price for, and delivery of certificates for, the Securities shall be made at the office of
Pillsbury Winthrop Shaw Pittman LLP at 1540 Broadway, New York, New York 10036 (or at such other
place as shall be agreed upon by you and the Company), at 10:00 A.M., New York City time, on
November 17, 2008 (unless another time shall be agreed to by you and the Company). Subject to the
terms and conditions hereof, payment of the purchase price for the Securities (adjusted in the
manner set forth below) shall be made to the Company in the manner set forth below by Federal Funds
wire transfer, against delivery of certificates for the Shares, through the facilities of The
Depository Trust Company (DTC) and certificates for the Warrants, to such persons, and
shall be registered in such name or names and shall be in such denominations, as the Placement
Agents may request at least one business day before the time of purchase. Payment of the purchase
price for the Securities to be purchased by Investors shall be made at the time of purchase by such
Investors directly to the Company. The time at which such payment and delivery are to be made is
hereinafter sometimes called the time of purchase. At the time of purchase, the Company
shall deliver to the Placement Agents, by Federal Funds wire transfer, an amount in cash equal to
the sum of the aggregate Agency Fee and the Placement Agents bona fide estimate of the amount, if
any, of expenses for which the Placement Agents are entitled to reimbursement pursuant hereto,
which estimate shall be evidenced by expense reimbursement invoices provided by the Placement
Agents to the Company prior to the time of purchase. As soon as reasonably practicable after the
time of purchase, the Company or the Placement Agents, as applicable, shall make any necessary
reconciling or additional payment(s) with respect to such estimate in order to effect the
reimbursement to which the Placement Agents are entitled pursuant hereto. Electronic transfer of
the Shares shall be made at the time of purchase in such names and in such denominations as a
Placement Agent shall specify.
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Deliveries of the documents described in Section 6 hereof with respect to the purchase of the
Securities shall be made at the offices of Pillsbury Winthrop Shaw Pittman LLP at 1540 Broadway,
New York, New York 10036, at 9:00 A.M., New York City time, on the date of the closing of the
purchase of the Securities.
3. Representations and Warranties of the Company. The Company represents and warrants
to and agrees with the Placement Agents that:
(a) the Registration Statement has heretofore become effective under the Act or, with
respect to any registration statement to be filed to register the offer and sale of
Securities pursuant to Rule 462(b) under the Act, will be filed with the Commission and
become effective under the Act no later than 10:00 P.M., New York City time, on the date of
determination of the offering price for the Securities to Investors; no stop order of the
Commission preventing or suspending the use of the Basic Prospectus, the Prospectus
Supplement, the Prospectus or any Permitted Free Writing Prospectus, or the effectiveness of
the Registration Statement, has been issued, and no proceedings for such purpose have been
instituted or, to the Companys knowledge, are contemplated by the Commission;
(b) the Registration Statement complied when it became effective, complies as of the
date hereof and, as amended or supplemented, at the time of purchase and at all times during
which a prospectus is required by the Act to be delivered (whether physically or through
compliance with Rule 172 under the Act or any similar rule) in connection with any sale of
Securities, will comply, in all material respects, with the requirements of the Act; the
conditions to the use of Form S-3 in connection with the offering and sale of the Securities
as contemplated hereby have been satisfied; the Registration Statement meets, and the
offering and sale of the Securities as contemplated hereby complies with, the requirements
of Rule 415 under the Act (including, without limitation, Rule 415(a)(5)); the Registration
Statement did not, as of the Effective Time, contain 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; the Basic Prospectus complied at the time it was filed
with the Commission, and complies as of the date hereof, in all material respects with the
requirements of the Act; at no time during the period that begins on the earlier of the date
of the Basic Prospectus and the date the Basic Prospectus was filed with the Commission and
ends at the time of purchase did or will the Basic Prospectus, as then amended or
supplemented, include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and at no time during such period did or will
the Basic Prospectus, as then amended or supplemented, together with any combination of one
or more of the then issued Permitted Free Writing Prospectuses, if any, include an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading; each of the Prospectus Supplement and the Prospectus will comply, as of the date
that it is filed with the Commission, the date of the Prospectus Supplement, the time of
purchase and at all times during which a prospectus is required by the Act to be delivered
(whether physically or
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through compliance with Rule 172 under the Act or any similar rule) in connection with
any sale of Securities, in all material respects, with the requirements of the Act (in the
case of the Prospectus, including, without limitation, Section 10(a) of the Act); at no time
during the period that begins on the earlier of the date of the Prospectus Supplement and
the date the Prospectus Supplement is filed with the Commission and ends at the later of the
time of purchase and the end of the period during which a prospectus is required by the Act
to be delivered (whether physically or through compliance with Rule 172 under the Act or any
similar rule) in connection with any sale of Securities did or will any Prospectus
Supplement or the Prospectus, as then amended or supplemented, include an untrue statement
of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading; at no time during the period that begins on the date of such Permitted Free
Writing Prospectus and ends at the time of purchase did or will any Permitted Free Writing
Prospectus include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company
makes no representation or warranty with respect to any statement contained in the
Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing
Prospectus in reliance upon and in conformity with information concerning the Placement
Agents and furnished in writing by the Placement Agents to the Company expressly for use in
the Registration Statement, the Basic Prospectus, the Prospectus or such Permitted Free
Writing Prospectus; each Incorporated Document, at the time such document was or will be
filed with the Commission or at the time such document became or becomes effective, as
applicable, complied or will comply, as applicable, in all material respects, with the
requirements of the Exchange Act and did not or will not, as applicable, include an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading;
(c) prior to the execution of this Agreement, the Company has not, directly or
indirectly, offered or sold any Securities by means of any prospectus (within the meaning
of the Act) or used any prospectus (within the meaning of the Act) in connection with the
offer or sale of the Securities, in each case other than the Basic Prospectus, the Permitted
Free Writing Prospectuses, if any, and the Prospectus (if the parties utilize the Prospectus
at or prior to the Applicable Time); the Company has not, directly or indirectly, prepared,
used or referred to any Permitted Free Writing Prospectus except in compliance with Rules
164 and 433 under the Act; assuming that such Permitted Free Writing Prospectus is so sent
or given after the Registration Statement was filed with the Commission (and after such
Permitted Free Writing Prospectus was, if required pursuant to Rule 433(d) under the Act,
filed with the Commission), the sending or giving, by the Placement Agents, of any Permitted
Free Writing Prospectus will satisfy the provisions of Rule 164 and Rule 433 (without
reliance on subsections (b), (c) and (d) of Rule 164); the conditions set forth in one or
more of subclauses (i) through (iv), inclusive, of Rule 433(b)(1) under the Act are
satisfied, and the registration statement relating to the offering of the Securities
contemplated hereby, as filed with the Commission on June 24, 2008, includes a prospectus
that, other than by reason of Rule
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433 or Rule 431 under the Act, satisfies the requirements of Section 10 of the Act;
neither the Company nor the Placement Agents are disqualified, by reason of subsection (f)
or (g) of Rule 164 under the Act, from using, in connection with the offer and sale of the
Securities, free writing prospectuses (as defined in Rule 405 under the Act) pursuant to
Rules 164 and 433 under the Act; the Company is not an ineligible issuer (as defined in
Rule 405 under the Act) as of the eligibility determination date for purposes of Rules 164
and 433 under the Act with respect to the offering of the Securities contemplated by the
Registration Statement; the parties hereto agree and understand that the content of any and
all road shows (as defined in Rule 433 under the Act) related to the offering of the
Securities contemplated hereby is solely the property of the Company;
(d) the Securities have been registered with the Commission on Form S-3 under the Act
pursuant to the standards for such Form S-3 in effect prior to October 21, 1992;
(e) as of the date of this Agreement, the Company has an authorized and outstanding
capitalization as set forth in the section of the Prospectus entitled Capitalization (and
any similar sections or information, if any, contained in any Permitted Free Writing
Prospectus), and, as of the time of purchase, the Company shall have an authorized and
outstanding capitalization as set forth in the section of the Prospectus entitled
Capitalization (and any similar sections or information, if any, contained in any
Permitted Free Writing Prospectus) (subject, in each case, to the issuance of shares of
Common Stock upon exercise of stock options and warrants disclosed as outstanding in the
Registration Statement, the Basic Prospectus and the Prospectus and the grant of options
under existing stock option plans described in the Registration Statement, the Basic
Prospectus and the Prospectus); and all of the issued and outstanding shares of capital
stock, including the Common Stock, of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, have been issued in compliance with all
applicable securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right; the Shares are duly listed, and admitted and
authorized for trading, subject to official notice of issuance, on the Nasdaq National
Market (the NASDAQ);
(f) the Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware, with full corporate power and
authority to own, lease and operate its properties and conduct its business as described in
the Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free
Writing Prospectuses, if any, to execute and deliver this Agreement and to issue, sell and
deliver the Securities as contemplated herein;
(g) the Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to be so
qualified or in good standing would not, individually or in the aggregate, either (i) have a
material adverse effect on the business, properties, financial condition, results of
operations or prospects of the Company and the Subsidiary (as defined below) taken as a
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whole, (ii) prevent or materially interfere with consummation of the transactions
contemplated hereby or (iii) result in the delisting of shares of Common Stock from the
NASDAQ (the occurrence of any such effect or any such prevention or interference or any such
result described in the foregoing clauses (i), (ii) and (iii) being herein referred to as a
Material Adverse Effect);
(h) the Company has no subsidiaries (as defined under the Act) other than StemCells
California, Inc. (the Subsidiary); the Company owns all of the issued and
outstanding capital stock of the Subsidiary; other than the capital stock of the Subsidiary,
the Company does not own, directly or indirectly, any shares of stock or any other equity
interests or long-term debt securities of any corporation, firm, partnership, joint venture,
association or other entity, other than the Companys equity interest in ReNeuron Group plc,
as disclosed in the Registration Statement, Basic Prospectus and the Prospectus; complete
and correct copies of the charters and the bylaws of the Company and the Subsidiary and all
amendments thereto have been delivered to you, and no changes therein will be made on or
after the date hereof through and including the time of purchase; the Subsidiary has been
duly incorporated and is validly existing as a corporation in good standing under the laws
of the State of California, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Registration
Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing Prospectuses,
if any; the Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to be so
qualified or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect; all of the outstanding shares of capital stock of the Subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable, have been issued in
compliance with all applicable securities laws, were not issued in violation of any
preemptive right, resale right, right of first refusal or similar right and are owned by the
Company subject to no security interest, other encumbrance or adverse claims; no options,
warrants or other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligation into shares of capital stock or ownership interests in the
Subsidiary are outstanding;
(i) the Securities have been duly and validly authorized by the Company and, when
issued and delivered against payment therefor as provided in the Subscription Agreements,
the Shares will be duly and validly issued, fully paid and non-assessable and the Securities
will not be issued in violation of statutory and contractual preemptive rights, resale
rights, rights of first refusal and similar rights; upon issuance and delivery of the
Warrants pursuant to the Subscription Agreements, the Warrants will constitute valid and
legally binding obligations of the Company and the shares of Common Stock underlying the
Warrants (the Warrant Shares), if and when issued and delivered in accordance with
the terms of the Warrants, will be duly and validly issued, fully paid and non-assessable
and will not be issued in violation of statutory and contractual preemptive rights, resale
rights, rights of first refusal and similar rights; the Securities, when issued and
delivered against payment therefor as provided herein, will be free of any restriction upon
the voting or transfer thereof pursuant to the Companys charter or bylaws or any
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agreement or other instrument to which the Company is a party;
(j) the capital stock of the Company, including the Securities, conforms in all
material respects to each description thereof, if any, contained or incorporated by
reference in the Registration Statement, the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus and the certificates for the Shares are in due and proper
form;
(k) this Agreement and each Subscription Agreement has been duly authorized, executed
and delivered by the Company;
(l) neither the Company nor the Subsidiary is in breach or violation of or in default
under (nor has any event occurred which, with notice, lapse of time or both, would result in
any breach or violation of, constitute a default under or give the holder of any
indebtedness (or a person acting on such holders behalf) the right to require the
repurchase, redemption or repayment of all or a part of such indebtedness under) (A) its
charter or bylaws, or (B) any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any license, lease, contract or other
agreement or instrument to which it is a party or by which it or any of its properties may
be bound or affected, or (C) any federal, state, local or foreign law, regulation or rule,
or (D) any rule or regulation of any self-regulatory organization or other non-governmental
regulatory authority (including, without limitation, the rules and regulations of the
NASDAQ), or (E) any decree, judgment or order applicable to it or any of its properties,
except, with respect to clauses (B), (C), (D) or (E), for such breaches, violations,
defaults and events as would not, individually or in the aggregate, have a Material Adverse
Effect;
(m) the execution, delivery and performance of this Agreement, the issuance and sale of
the Securities, the issuance of the Warrant Shares and the consummation of the transactions
contemplated hereby will not conflict with, result in any breach or violation of or
constitute a default under (nor constitute any event which, with notice, lapse of time or
both, would result in any breach or violation of, constitute a default under or give the
holder of any indebtedness (or a person acting on such holders behalf) the right to require
the repurchase, redemption or repayment of all or a part of such indebtedness under) (or
result in the creation or imposition of a lien, charge or encumbrance on any property or
assets of the Company or the Subsidiary pursuant to) (A) the charter or bylaws of the
Company or the Subsidiary, or (B) any indenture, mortgage, deed of trust, bank loan or
credit agreement or other evidence of indebtedness, or any license, lease, contract or other
agreement or instrument to which the Company or the Subsidiary is a party or by which any of
them or any of their respective properties may be bound or affected, or (C) any federal,
state, local or foreign law, regulation or rule, or (D) any rule or regulation of any
self-regulatory organization or other non-governmental regulatory authority (including,
without limitation, the rules and regulations of the NASDAQ), or (E) any decree, judgment or
order applicable to the Company or the Subsidiary or any of their respective properties,
except, with respect to clause (B), for such conflicts, breaches, violations, defaults and
events as would not, individually or in the aggregate, have a Material Adverse Effect;
- 8 -
(n) except as have been obtained or made, no approval, authorization, consent or order
of or filing with any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or of or with any self-regulatory organization
or other non-governmental regulatory authority, or approval of the stockholders of the
Company, is required in connection with the issuance and sale of the Securities, the
issuance of the Warrant Shares or the consummation by the Company of the transactions
contemplated hereby, other than (i) registration of the Securities and the Warrant Shares
under the Act, which has been effected (or, with respect to any registration statement to be
filed hereunder pursuant to Rule 462(b) under the Act, will be effected in accordance
herewith), (ii) any necessary qualification under the securities or blue sky laws of the
various jurisdictions in which the Securities or Warrant Shares are being offered, (iii)
under the Conduct Rules of the Financial Industry Regulatory Authority, Inc.
(FINRA) or (iv) any necessary qualification with or notice to NASDAQ, which shall
be effected or made in a timely manner;
(o) except as described in the Registration Statement, the Basic Prospectus and the
Prospectus, (i) no person has the right, contractual or otherwise, to cause the Company to
issue or sell to it any shares of Common Stock or shares of any other capital stock or other
equity interests of the Company, (ii) no person has any preemptive rights, resale rights,
rights of first refusal or other rights to purchase any shares of Common Stock or shares of
any other capital stock of or other equity interests in the Company and (iii) no person has
the right to act as an underwriter or placement agent or as a financial advisor to the
Company in connection with the offer and sale of the Securities; no person has the right,
contractual or otherwise, to cause the Company to register under the Act any shares of
Common Stock or shares of any other capital stock of or other equity interests in the
Company, or to include any such shares or interests in the Registration Statement or the
offering contemplated thereby;
(p) each of the Company and the Subsidiary has all necessary licenses, authorizations,
consents and approvals and has made all necessary filings required under any applicable law,
regulation or rule, and has obtained all necessary licenses, authorizations, consents and
approvals from other persons, in order to conduct its business, except where the failure to
have or obtain such licenses, authorizations, consents and approvals, or to make such
filings, would not, individually or in the aggregate, have a Material Adverse Effect;
neither the Company nor the Subsidiary is in violation of, or in default under, or has
received notice of any proceedings relating to revocation or modification of, any such
license, authorization, consent or approval or any federal, state, local or foreign law,
regulation or rule or any decree, order or judgment applicable to the Company or the
Subsidiary, except where such violation, default, revocation or modification would not,
individually or in the aggregate, have a Material Adverse Effect;
(q) except as described in the Registration Statement, the Basic Prospectus and the
Prospectus, there are no actions, suits, claims, investigations or proceedings pending or,
to the Companys knowledge, threatened or contemplated to which the
- 9 -
Company or the Subsidiary or any of their respective directors or officers is or would
be a party or of which any of their respective properties is or would be subject at law or
in equity, before or by any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or before or by any self-regulatory
organization or other non-governmental regulatory authority (including, without limitation,
the NASDAQ), except any such action, suit, claim, investigation or proceeding which, if
resolved adversely to the Company or the Subsidiary, would not, individually or in the
aggregate, have a Material Adverse Effect;
(r) Grant Thornton LLP, whose reports on the consolidated financial statements of the
Company and the Subsidiary are incorporated by reference in the Registration Statement, the
Basic Prospectus and the Prospectus, is an independent registered public accountant as
required by the Act and by the rules of the Public Company Accounting Oversight Board (the
PCAOB);
(s) the financial statements included or incorporated by reference in the Registration
Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus,
together with the related notes and schedules, present fairly the consolidated financial
position of the Company and the Subsidiary as of the dates indicated and the consolidated
results of operations, cash flows and changes in stockholders equity of the Company for the
periods specified and have been prepared in compliance with the requirements of the Act and
Exchange Act and in conformity with U.S. generally accepted accounting principles applied on
a consistent basis during the periods involved; all pro forma financial statements, if any,
and pro forma financial data included or incorporated by reference in the Registration
Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus
comply with the requirements of the Act and the Exchange Act, and the assumptions used in
the preparation of such pro forma financial statements and data are reasonable, the pro
forma adjustments used therein are appropriate to give effect to the transactions or
circumstances described therein and the pro forma adjustments have been properly applied to
the historical amounts in the compilation of those statements and data; the other financial
and statistical data contained or incorporated by reference in the Registration Statement,
the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus are accurately
and fairly presented and prepared on a basis consistent with the financial statements and
books and records of the Company; there are no financial statements (historical or pro
forma) that are required to be included or incorporated by reference in the Registration
Statement, the Basic Prospectus or the Prospectus that are not included or incorporated by
reference as required; the Company and the Subsidiary do not have any material liabilities
or obligations, direct or contingent (including any off-balance sheet obligations), not
described in the Registration Statement, the Basic Prospectus and the Prospectus; and all
disclosures contained or incorporated by reference in the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus regarding non-GAAP
financial measures (as such term is defined by the rules and regulations of the Commission)
comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Act, to
the extent applicable;
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(t) subsequent to the respective dates as of which information is given in the
Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing
Prospectuses, if any, in each case excluding any amendments or supplements to the foregoing
made after the execution of this Agreement, there has not been (i) any material adverse
change, or any development involving a prospective material adverse change, in the business,
properties, management, financial condition or results of operations of the Company and the
Subsidiary taken as a whole, (ii) any transaction which is material to the Company and the
Subsidiary taken as a whole, (iii) any obligation or liability, direct or contingent
(including any off-balance sheet obligations), incurred by the Company or the Subsidiary,
which is material to the Company and the Subsidiary taken as a whole, (iv) any change in the
capital stock or outstanding indebtedness of the Company or the Subsidiary (excluding, for
purposes of this clause (iv), (A) any such changes due to the issuance of shares of Common
Stock upon exercise of stock options and warrants disclosed as outstanding in the
Registration Statement, the Basic Prospectus and the Prospectus or the grant of options
under existing stock option plans described in the Registration Statement, the Basic
Prospectus and the Prospectus, and (B) any incurrence of indebtedness made in the ordinary
course of the Companys business as contemplated by the Registration Statement, the Basic
Prospectus and the Prospectus) or (v) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company or the Subsidiary;
(u) neither the Company nor the Subsidiary is, and at no time during which a prospectus
is required by the Act to be delivered (whether physically or through compliance with Rule
172 under the Act or any similar rule) in connection with any sale of Securities will either
of them be, and, after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof, neither of them will be, an investment company or an
entity controlled by an investment company, as such terms are defined in the Investment
Company Act of 1940, as amended (the Investment Company Act);
(v) the Company and the Subsidiary have good and marketable title to all property (real
and personal) described in the Registration Statement, the Basic Prospectus, the Prospectus
or any Permitted Free Writing Prospectus as being owned by any of them, free and clear of
all liens, claims, security interests or other encumbrances, except to the extent such
liens, claims, security interests or other encumbrances are disclosed in the Registration
Statement, the Basic Prospectus and the Prospectus; all the property described in the
Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing
Prospectus as being held under lease by the Company or the Subsidiary is held thereby under
valid, subsisting and enforceable leases;
(w) except as described in the Registration Statement, the Basic Prospectus and the
Prospectus, the Company and the Subsidiary own, or have obtained valid and enforceable
licenses for, or other rights to use, the inventions, patent applications, patents,
trademarks (both registered and unregistered), tradenames, service names, copyrights, trade
secrets and other proprietary information described in the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus
- 11 -
as being owned or licensed by them or which are necessary for the conduct of their
respective businesses as currently conducted or as proposed (in the Registration Statement,
the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus) to be
conducted (including the commercialization of products or services described in the
Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing
Prospectus as under development), except where the failure to own, license or have such
rights would not, individually or in the aggregate, have a Material Adverse Effect
(collectively, Intellectual Property); except as described in the Registration
Statement, the Basic Prospectus and the Prospectus, (i) there are no third parties who have
or, to the Companys knowledge, will be able to establish rights to any Intellectual
Property, except for, and to the extent of, the ownership rights of the owners of the
Intellectual Property which the Registration Statement, the Basic Prospectus and the
Prospectus disclose is licensed to the Company; (ii) to the Companys knowledge, there is no
infringement by third parties of any Intellectual Property; (iii) there is no pending or, to
the Companys knowledge, threatened action, suit, proceeding or claim by others challenging
the Companys rights in or to any Intellectual Property, and the Company is unaware of any
facts which could form a reasonable basis for any such action, suit, proceeding or claim;
(iv) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding
or claim by others challenging the validity, enforceability or scope of any Intellectual
Property, and the Company is unaware of any facts which could form a reasonable basis for
any such action, suit, proceeding or claim; (v) there is no pending or, to the Companys
knowledge, threatened action, suit, proceeding or claim by others that the Company or the
Subsidiary infringes or otherwise violates, or would, upon the commercialization of any
product or service described in the Registration Statement, the Basic Prospectus, the
Prospectus or any Permitted Free Writing Prospectus as under development, infringe or
violate, any patent, trademark, tradename, service name, copyright, trade secret or other
proprietary rights of others, and the Company is unaware of any facts which could form a
reasonable basis for any such action, suit, proceeding or claim; (vi) the Company and the
Subsidiary have complied with the terms of each agreement pursuant to which Intellectual
Property has been licensed to the Company or the Subsidiary (except where the failure to so
comply would not, individually or in the aggregate, have a Material Adverse Effect), and all
such agreements are in full force and effect; (vii) to the Companys knowledge, there is no
patent or patent application that contains claims that interfere with the issued or pending
claims of any of the Intellectual Property or that challenges the validity, enforceability
or scope of any of the Intellectual Property; (viii) to the Companys knowledge, there is no
prior art that may render any patent application within the Intellectual Property
unpatentable that has not been disclosed to the U.S. Patent and Trademark Office; and (ix)
the manufacture, use or sale of the product candidates described in the Registration
Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus as
under development by the Company or the Subsidiary falls or would fall within the scope of
one or more claims of one or more patents or patent applications owned by, or exclusively
licensed to, the Company or the Subsidiary;
(x) neither the Company nor the Subsidiary is engaged in any unfair labor practice;
except for matters which would not, individually or in the aggregate, have a
- 12 -
Material Adverse Effect, (i) there is no (A) unfair labor practice complaint pending
or, to the Companys knowledge, threatened against the Company or the Subsidiary before the
National Labor Relations Board, and no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending or, to the Companys knowledge,
threatened, (B) strike, labor dispute, slowdown or stoppage pending or, to the Companys
knowledge, threatened against the Company or the Subsidiary and (C) union representation
dispute currently existing concerning the employees of the Company or the Subsidiary, (ii)
to the Companys knowledge, no union organizing activities are currently taking place
concerning the employees of the Company or the Subsidiary and (iii) neither the Company nor
the Subsidiary has violated any federal, state, local or foreign law relating to
discrimination in the hiring, promotion or pay of employees, any applicable wage or hour
laws or any provision of the Employee Retirement Income Security Act of 1974
(ERISA) or the rules and regulations promulgated thereunder concerning the
employees of the Company or the Subsidiary;
(y) the Company and the Subsidiary and their respective properties, assets and
operations are in compliance with, and the Company and the Subsidiary hold all permits,
authorizations and approvals required under, Environmental Laws (as defined below), except
to the extent that failure to so comply or to hold such permits, authorizations or approvals
would not, individually or in the aggregate, have a Material Adverse Effect; there are no
past, present or, to the Companys knowledge, reasonably anticipated future events,
conditions, circumstances, activities, practices, actions, omissions or plans that could
reasonably be expected to give rise to any material costs or liabilities to the Company or
the Subsidiary under, or to interfere with or prevent compliance by the Company or the
Subsidiary with, Environmental Laws; except as would not, individually or in the aggregate,
have a Material Adverse Effect, neither the Company nor the Subsidiary (i) is the subject of
any investigation, (ii) has received any notice or claim, (iii) is a party to or affected by
any pending or, to the Companys knowledge, threatened action, suit or proceeding, (iv) is
bound by any judgment, decree or order or (v) has entered into any agreement, in each case
relating to any alleged violation of any Environmental Law or any actual or alleged release
or threatened release or cleanup at any location of any Hazardous Materials (as defined
below) (as used herein, Environmental Law means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, order, decree, judgment, injunction,
permit, license, authorization or other binding requirement, or common law, relating to
health, safety or the protection, cleanup or restoration of the environment or natural
resources, including those relating to the distribution, processing, generation, treatment,
storage, disposal, transportation, other handling or release or threatened release of
Hazardous Materials, and Hazardous Materials means any material (including,
without limitation, pollutants, contaminants, hazardous or toxic substances or wastes) that
is regulated by or may give rise to liability under any Environmental Law);
(z) the Company and the Subsidiary periodically review the effect of the Environmental
Laws on their respective businesses, operations and properties, in the course of which they
identify and evaluate associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for cleanup, closure of
- 13 -
properties or compliance with the Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential liabilities to
third parties);
(aa) all tax returns required to be filed by the Company or the Subsidiary have been
timely filed or corrected, and all taxes and other assessments of a similar nature (whether
imposed directly or through withholding) including any interest, additions to tax or
penalties applicable thereto due or claimed to be due from such entities have been timely
paid, other than those being contested in good faith and for which adequate reserves have
been provided;
(bb) the Company and the Subsidiary maintain insurance covering their respective
properties, operations, personnel and businesses as the Company reasonably deems adequate;
such insurance insures against such losses and risks to an extent which is adequate in
accordance with customary industry practice to protect the Company and the Subsidiary and
their respective businesses; all such insurance is fully in force on the date hereof and
will be fully in force at the time of purchase; neither the Company nor the Subsidiary has
reason to believe that it will not be able to renew any such insurance as and when such
insurance expires;
(cc) neither the Company nor the Subsidiary has sent or received any communication
regarding termination of, or intent not to renew, any of the contracts or agreements
referred to or described in the Basic Prospectus, the Prospectus or any Permitted Free
Writing Prospectus, or referred to or described in, or filed as an exhibit to, the
Registration Statement or any Incorporated Document, and no such termination or non-renewal
has been threatened by the Company or the Subsidiary or, to the Companys knowledge, any
other party to any such contract or agreement, except where the terminations or non-renewals
of such contracts or agreements would not, individually or in the aggregate, have a Material
Adverse Effect;
(dd) the Company and the Subsidiary maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in accordance
with managements general or specific authorization; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with managements general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any differences;
(ee) the Company has established and maintains and evaluates disclosure controls and
procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act) and
internal control over financial reporting (as such term is defined in Rule 13a-15 and
15d-15 under the Exchange Act); such disclosure controls and procedures are designed to
ensure that material information relating to the Company, including its consolidated
subsidiary, is made known to the Companys Chief Executive
- 14 -
Officer and its Chief Financial Officer by others within those entities, and such
disclosure controls and procedures are effective to perform the functions for which they
were established; the Companys independent auditors and the Audit Committee of the Board of
Directors of the Company have been advised of: (i) all significant deficiencies, if any, in
the design or operation of internal controls which could adversely affect the Companys
ability to record, process, summarize and report financial data; and (ii) all fraud, if any,
whether or not material, that involves management or other employees who have a role in the
Companys internal controls; all material weaknesses, if any, in internal controls have been
identified to the Companys independent auditors; since the date of the most recent
evaluation of such disclosure controls and procedures and internal controls, there have been
no significant changes in internal controls or in other factors that could significantly
affect internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses; the Company remediated the material weakness,
significant deficiencies and ineffectiveness of internal controls over financial reporting
disclosed in the Companys Annual Report on Form 10-K filed with the Commission on March 15,
2005; all significant deficiencies and material weaknesses (as such terms are defined in
PCAOB Auditing Standard No. 2) of the Company, if any, have been disclosed in the
Registration Statement, the Basic Prospectus and the Prospectus; the principal executive
officers (or their equivalents) and principal financial officers (or their equivalents) of
the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act) and any related rules and regulations promulgated by the
Commission, and the statements contained in each such certification are complete and
correct; the Company, the Subsidiary and the Companys directors and officers are each in
compliance in all material respects with all applicable effective provisions of the
Sarbanes-Oxley Act and the rules and regulations of the Commission and the NASDAQ
promulgated thereunder;
(ff) all statistical or market-related data included or incorporated by reference in
the Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free
Writing Prospectus are based on or derived from sources that the Company believes to be
reliable and accurate, and the Company has obtained the written consent to the use of such
data from such sources to the extent required;
(gg) neither the Company nor the Subsidiary nor, to the Companys knowledge, any
employee or agent of the Company or the Subsidiary has made any payment of funds of the
Company or the Subsidiary or received or retained any funds in violation of any law, rule or
regulation (including, without limitation, the Foreign Corrupt Practices Act of 1977), which
payment, receipt or retention of funds is of a character required to be disclosed in the
Registration Statement, the Basic Prospectus or the Prospectus;
(hh) the Subsidiary is not currently prohibited, directly or indirectly, from paying
any dividends to the Company, from making any other distribution on the Subsidiarys capital
stock, from repaying to the Company any loans or advances to the Subsidiary from the Company
or from transferring any of the Subsidiarys property or assets to the Company, except as
described in the Registration Statement, the Basic
- 15 -
Prospectus and the Prospectus;
(ii) the preclinical tests and clinical trials that are described in, or the results of
which are referred to in, the Registration Statement, the Basic Prospectus, the Prospectus
or any Permitted Free Writing Prospectus were and, if begun and still pending, are being
conducted in all material respects in accordance with protocols, if any, filed with the
appropriate regulatory authorities for each such test or trial, as the case may be, and with
standard medical and scientific research procedures; the description of the results of such
tests and trials contained in the Registration Statement, the Basic Prospectus, the
Prospectus or any Permitted Free Writing Prospectus are accurate and complete in all
material respects and fairly present the data derived from such tests and trials, and the
Company and the Subsidiary have no knowledge of any other studies or tests the results of
which are inconsistent with, or otherwise call into question, the results described or
referred to in the Registration Statement, the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus; except as disclosed in the Registration Statement, the
Basic Prospectus and the Prospectus, neither the Company nor the Subsidiary has received any
notices or other correspondence from the Food and Drug Administration of the U.S. Department
of Health and Human Services or any committee thereof or from any other U.S. or foreign
government or drug or medical device regulatory agency (the Regulatory Agencies)
prohibiting the commencement or requiring the termination, suspension or modification of any
preclinical tests or clinical trials that are described or referred to in the Registration
Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus;
and the Company and the Subsidiary have each operated and currently are in compliance in all
material respects with all applicable rules, regulations and policies of the Regulatory
Agencies;
(jj) the issuance and sale of the Securities and the Warrant Shares as contemplated
hereby will not cause any holder of any shares of capital stock, securities convertible into
or exchangeable or exercisable for capital stock or options, warrants or other rights to
purchase capital stock or any other securities of the Company to have any right to acquire
any shares of preferred stock of the Company;
(kk) since September 30, 2007, the Company has not received any notice from the NASDAQ
regarding the delisting of the Common Stock from the NASDAQ;
(ll) neither the Company nor the Subsidiary nor, to the Companys knowledge, any of
their respective directors, officers, affiliates or controlling persons has taken, directly
or indirectly, any action designed, or which has constituted or might reasonably be expected
to cause or result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities;
(mm) to the Companys knowledge, there are no affiliations or associations between (i)
any member of FINRA and (ii) the Company or any of the Companys officers, directors or 5%
or greater security holders or any beneficial owner of the Companys unregistered equity
securities that were acquired at any time on or after the 180th day immediately preceding
the date the Registration Statement was initially filed
- 16 -
with the Commission, except as disclosed in the Registration Statement, the Basic
Prospectus and the Prospectus;
(nn) the Company has not offered, or caused any Placement Agent to offer, Securities to
any person with the intent to influence unlawfully (A) a customer or supplier of the Company
or the Subsidiary to alter the customers or suppliers level or type of business with the
Company or the Subsidiary or (B) a trade journalist or publication to write or publish
favorable information about the Company or the Subsidiary or any of their respective
products or services; and
(oo) except pursuant to this Agreement or as would not, individually or in the
aggregate, have a Material Adverse Effect, neither the Company nor the Subsidiary has
incurred any liability for any finders or brokers fee or agents commission in connection
with the execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby or by the Registration Statement.
In addition, any certificate signed by any officer of the Company or the Subsidiary and
delivered to the Placement Agents or counsel for the Placement Agents in connection with the
offering of the Securities shall be deemed to be a representation and warranty by the Company, as
to matters covered thereby, to the Placement Agents.
4. Certain Covenants of the Company. The Company hereby agrees:
(a) to furnish such information as may be required and otherwise to cooperate in
qualifying the Securities and the Warrants Shares for offering and sale under the securities
or blue sky laws of such states or other jurisdictions as you may designate and to maintain
such qualifications in effect so long as you may request for the distribution of the
Securities and the Warrant Shares; provided, however, that the Company shall
not be required to qualify as a foreign corporation or to consent to the service of process
under the laws of any such jurisdiction (except service of process with respect to the
offering and sale of the Securities and the Warrant Shares); and to promptly advise you of
the receipt by the Company of any notification with respect to the suspension of the
qualification of the Securities and the Warrant Shares for offer or sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose;
(b) to make available to the Placement Agents, as soon as practicable after this
Agreement becomes effective, and thereafter from time to time to furnish to the Placement
Agents, as many copies of the Prospectus (or of the Prospectus as amended or supplemented if
the Company shall have made any amendments or supplements thereto after the effective date
of the Registration Statement) as the Placement Agents may reasonably request; in case
delivery (whether physically or through compliance with Rule 172 under the Act or any
similar rule) of a prospectus in connection with the sale of the Securities and the Warrant
Shares is required after the nine-month period referred to in Section 10(a)(3) of the Act,
and after the time a post-effective amendment to the Registration Statement is required
pursuant to Item 512(a) of Regulation S-K under the Act, the Company will promptly prepare,
at its expense, such amendment or amendments
- 17 -
to the Registration Statement and the Prospectus as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act or Item 512(a) of Regulation
S-K under the Act, as the case may be;
(c) if, at the time this Agreement is executed and delivered, it is necessary for a
post-effective amendment to the Registration Statement, or a Registration Statement under
Rule 462(b) under the Act, to be filed with the Commission and become effective before the
Securities and the Warrant Shares may be sold, the Company will use its best efforts to
cause such post-effective amendment or such Registration Statement to be filed and become
effective as soon as possible, and the Company will advise you promptly and, if requested by
you, will confirm such advice in writing, (i) when such post-effective amendment or such
Registration Statement has become effective, and (ii) if Rule 430A under the Act is used,
when the Prospectus is filed with the Commission pursuant to Rule 424(b) under the Act
(which the Company agrees to file in a timely manner in accordance with such Rules);
(d) if, at any time during the period when a prospectus is required by the Act to be
delivered (whether physically or through compliance with Rule 172 under the Act or any
similar rule) in connection with any sale of Securities and the Warrant Shares, the
Registration Statement shall cease to comply with the requirements of the Act with respect
to eligibility for the use of the form on which the Registration Statement was filed with
the Commission, to (i) promptly notify you, (ii) promptly file with the Commission a new
registration statement under the Act, relating to the Securities and the Warrant Shares, or
a post-effective amendment to the Registration Statement, which new registration statement
or post-effective amendment shall comply with the requirements of the Act and shall be in a
form satisfactory to you, (iii) use its best efforts to cause such new registration
statement or post-effective amendment to become effective under the Act as soon as
practicable, (iv) promptly notify you of such effectiveness and (v) take all other action
necessary or appropriate to permit the offering and sale of the Securities and the Warrant
Shares to continue as contemplated in the Prospectus; all references herein to the
Registration Statement shall be deemed to include each such new registration statement or
post-effective amendment, if any;
(e) if the period during which a prospectus is required by the Act to be delivered
(whether physically or through compliance with Rule 172 under the Act or any similar rule)
in connection with any sale of Securities and the Warrant Shares shall extend to or beyond
July 18, 2011, to (i) file with the Commission, prior to July 18, 2011, a new registration
statement under the Act relating to the Securities and the Warrant Shares, which new
registration statement shall comply with the requirements of the Act (including, without
limitation, Rule 415(a)(6) under the Act) and shall be in a form satisfactory to you; and
(ii) use its best efforts to cause such new registration statement to become effective under
the Act as soon as practicable, but in any event within 180 days after July 18, 2011 and
promptly notify you of such effectiveness; the Company shall take all other action necessary
or appropriate to permit the offering and sale of the Securities and the Warrant Shares to
continue as contemplated in the Prospectus; all references herein to the Registration
Statement shall be deemed to include each such new
- 18 -
registration statement, if any;
(f) to advise you promptly, confirming such advice in writing, of any request by the
Commission for amendments or supplements to the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus, or for additional
information with respect thereto, or of notice of institution of proceedings for, or the
entry of a stop order, suspending the effectiveness of the Registration Statement and, if
the Commission should enter a stop order suspending the effectiveness of the Registration
Statement, to use its best efforts to obtain the lifting or removal of such order as soon as
possible; to advise you promptly of any proposal to amend or supplement the Registration
Statement, the Basic Prospectus or the Prospectus, and to provide you and Placement Agents
counsel copies of any such documents for review and comment a reasonable amount of time
prior to any proposed filing and to file no such amendment or supplement to which you shall
object in writing;
(g) subject to Section 4(f) hereof, to file promptly all reports and documents and any
preliminary or definitive proxy or information statement required to be filed by the Company
with the Commission in order to comply with the Exchange Act for so long as a prospectus is
required by the Act to be delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with any sale of Securities and the Warrant
Shares; and to provide you, for your review and comment, with a copy of such reports and
statements and other documents to be filed by the Company pursuant to Section 13, 14 or
15(d) of the Exchange Act during such period a reasonable amount of time prior to any
proposed filing, and to file no such report, statement or document to which you shall have
objected in writing; and to promptly notify you of such filing;
(h) to advise the Placement Agents promptly of the happening of any event within the
period during which a prospectus is required by the Act to be delivered (whether physically
or through compliance with Rule 172 under the Act or any similar rule) in connection with
any sale of Securities and the Warrant Shares, which event could require the making of any
change in the Prospectus then being used so that the Prospectus would not include an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made, not
misleading, and to advise the Placement Agents promptly if, during such period, it shall
become necessary to amend or supplement the Prospectus to cause the Prospectus to comply
with the requirements of the Act, and, in each case, during such time, subject to Section
4(f) hereof, to prepare and furnish, at the Companys expense, to the Placement Agents
promptly such amendments or supplements to such Prospectus as may be necessary to reflect
any such change or to effect such compliance;
(i) to make generally available to its security holders, and to deliver to you, an
earnings statement of the Company (which will satisfy the provisions of Section 11(a) of the
Act) covering a period of twelve months beginning after the effective date of the
Registration Statement (as defined in Rule 158(c) under the Act) as soon as is reasonably
practicable after the termination of such twelve-month period but in any case not later
- 19 -
than March 15, 2009;
(j) to furnish to you two copies of the Registration Statement, as initially filed with
the Commission, and of all amendments thereto (including all exhibits thereto and documents
incorporated by reference therein);
(k) to furnish to you as early as practicable prior to the time of purchase, but not
later than two business days prior thereto, a copy of the latest available unaudited interim
and monthly consolidated financial statements, if any, of the Company and the Subsidiary
which have been read by the Companys independent registered public accountants, as stated
in their letter to be furnished pursuant to Section 6(c) hereof;
(l) to apply the net proceeds from the sale of the Securities in the manner set forth
under the caption Use of proceeds in the Basic Prospectus and in the Prospectus
Supplement;
(m) to pay all costs, expenses, fees and taxes in connection with (i) the preparation
and filing of the Registration Statement, the Basic Prospectus, the Prospectus Supplement,
the Prospectus, the Permitted Free Writing Prospectuses and any amendments or supplements
thereto, and the printing and furnishing of copies of each thereof to the Placement Agents
and to dealers (including costs of mailing and shipment), (ii) the registration, issue, sale
and delivery of the Securities and the Warrant Shares including any stock or transfer taxes
and stamp or similar duties payable upon the sale, issuance or delivery of the Securities
and the Warrant Shares to the Placement Agents, (iii) the producing, word processing and/or
printing of this Agreement and any closing documents (including compilations thereof) and
the reproduction and/or printing and furnishing of copies of each thereof to the Placement
Agents and (except closing documents) to dealers (including costs of mailing and shipment),
(iv) the qualification of the Securities and the Warrant Shares for offering and sale under
state or foreign laws and the determination of their eligibility for investment under state
or foreign law (including the legal fees and filing fees and other disbursements of counsel
for the Placement Agents) and the printing and furnishing of copies of any blue sky surveys
or legal investment surveys to the Placement Agents and to dealers, (v) any listing of the
Shares on any securities exchange or qualification of the Shares for quotation on the NASDAQ
and any registration thereof under the Exchange Act, (vi) any filing for review of the
offering of the Securities and the Warrant Shares by FINRA, including the legal fees and
filing fees and other disbursements of counsel to the Placement Agents relating to FINRA
matters, (vii) the fees and disbursements of any transfer agent or registrar for the
Securities and the Warrant Shares, (viii) the costs and expenses of the Company relating to
presentations or meetings undertaken in connection with the marketing of the offering and
sale of the Securities to prospective investors and the Placement Agents sales forces,
including, without limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with the road show
presentations, travel, lodging and other expenses incurred by the officers of the Company
and any such consultants, and the cost of any aircraft chartered by the Company in
connection with the road show, and (ix) the performance of
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the Companys other obligations hereunder;
(n) to comply with Rule 433(d) under the Act (without reliance on Rule 164(b) under the
Act) and with Rule 433(g) under the Act;
(o) beginning on the date hereof and ending on, and including, the date that is 90 days
after the date of the Prospectus Supplement (the Lock-Up Period), without the
prior written consent of Susquehanna, not to (i) issue, sell, offer to sell, contract or
agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or
agree to dispose of, directly or indirectly, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning of Section
16 of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, with respect to, any Common Stock or any other securities of the Company that
are substantially similar to Common Stock, or any securities convertible into or
exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing,
(ii) file or cause to become effective a registration statement under the Act relating to
the offer and sale of any Common Stock or any other securities of the Company that are
substantially similar to Common Stock, or any securities convertible into or exchangeable or
exercisable for, or any warrants or other rights to purchase, the foregoing, (iii) enter
into any swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock or any other securities of the
Company that are substantially similar to Common Stock, or any securities convertible into
or exchangeable or exercisable for, or any warrants or other rights to purchase, the
foregoing, whether any such transaction is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise or (iv) publicly announce an intention to effect any
transaction specified in clause (i), (ii) or (iii), except, in each case, for (A) the
registration of the offer and sale of the Securities and Warrant Shares as contemplated by
this Agreement, (B) issuances of Common Stock upon the exercise of options or warrants
disclosed as outstanding in the Registration Statement, the Basic Prospectus and the
Prospectus, (C) the issuance of employee stock options not exercisable during the Lock-Up
Period pursuant to stock option plans described in the Registration Statement, the Basic
Prospectus and the Prospectus, (D) the issuance, other than pursuant to stock option plans
described in the Registration Statement, the Basic Prospectus or the Prospectus, of options
and warrants for Common Stock to directors, officers, employees or consultants of the
Company, as compensation for services rendered or to be rendered by them to the Company,
provided such options and warrants are not exercisable during the Lock-Up Period and (E) the
issuance of Common Stock or securities convertible into or exercisable for Common Stock in
connection with a partnership, research, licensing, collaboration, joint venture or similar
arrangement, or an acquisition of any other business or entity, or any stock, assets or
technology thereof (any such arrangement or transaction, a Strategic Transaction),
provided that, in each case, (x) the aggregate number of shares of Common Stock issued or
issuable (or underlying convertible or exercisable securities issued or issuable) pursuant
to Strategic Transactions in reliance upon this clause (E) does not exceed 20% of the number
of shares of Common Stock outstanding immediately prior to the Strategic Transaction (or the
first Strategic Transaction, if more than one) and (y) each recipient of such shares of
Common Stock or
- 21 -
securities convertible into or exercisable for Common Stock has theretofore executed a
binding lock-up agreement agreeing with Susquehanna not to transfer, directly or indirectly,
any such shares or securities (or shares of Common Stock underlying such securities) during
the Lock-Up Period; provided, however, that if (a) during the period that begins on the date
that is fifteen (15) calendar days plus three (3) business days before the last day of the
Lock-Up Period and ends on the last day of the Lock-Up Period, the Company issues an
earnings release or material news or a material event relating to the Company occurs; or (b)
prior to the expiration of the Lock-Up Period, the Company announces that it will release
earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up
Period, then the restrictions imposed by this Section 4(o) shall continue to apply until the
expiration of the date that is fifteen (15) calendar days plus three (3) business days after
the date on which the issuance of the earnings release or the material news or material
event occurs;
(p) prior to the time of purchase, to issue no press release or other communication
directly or indirectly and hold no press conferences with respect to the Company or the
Subsidiary, the financial condition, results of operations, business, properties, assets, or
liabilities of the Company or the Subsidiary, or the offering of the Securities, without
your prior consent;
(q) not, at any time at or after the execution of this Agreement, to, directly or
indirectly, offer or sell any Securities by means of any prospectus (within the meaning of
the Act), or use any prospectus (within the meaning of the Act) in connection with the
offer or sale of the Securities, in each case other than the Prospectus;
(r) not to, and to cause the Subsidiary not to, take, directly or indirectly, any
action designed, or which will constitute, or has constituted, or might reasonably be
expected to cause or result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities and the Warrant
Shares;
(s) to use its best efforts to cause the Shares to be listed for quotation on the
NASDAQ and to maintain the listing of the Common Stock, including the Shares, on the NASDAQ;
and
(t) to maintain a transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar for the Common Stock.
5. Reimbursement of Placement Agents Expenses. If this Agreement is terminated by
any Placement Agent pursuant to Section 7, if any of the conditions set forth in Section 6 are not
satisfied in accordance with Section 6 or if the sale of the Securities to the Investors is not
consummated because of any refusal, inability or failure on the part of the Company to perform any
agreement or obligation, or to comply with any provision, of this Agreement or any Subscription
Agreement, then the Company shall, in addition to paying the amounts described in Section 4(m)
hereof, reimburse Susquehanna for all of its reasonable out-of-pocket expenses, including the fees
and disbursements of its counsel, up to an aggregate amount of $75,000.
- 22 -
6. Conditions of Placement Agents Obligations. The obligations of the Placement
Agents hereunder are subject to the accuracy of the representations and warranties on the part of
the Company on the date hereof and at the time of purchase and the performance by the Company of
its obligations hereunder and to the following additional conditions precedent:
(a) The Company shall furnish to you at the time of purchase opinions of Ropes & Gray
LLP, counsel for the Company, addressed to the Placement Agents, and dated the time of
purchase, and in form and substance satisfactory to the Placement Agents, substantially in
the form set forth in Exhibits C-1 and C-2 hereto.
(b) The Company shall furnish to you at the time of purchase, an opinion of Mintz Levin
Cohn Ferris Glovsky and Popeo P.C., special counsel for the Company with respect to patents
and proprietary rights, addressed to the Placement Agents, and dated the time of purchase,
and in form and substance satisfactory to the Placement Agents, substantially in the form
set forth in Exhibit D hereto.
(c) The Company shall furnish to you at the time of purchase, an opinion of Ropes &
Gray LLP, special counsel for the Company with respect to regulatory matters, addressed to
the Placement Agents, and dated the time of purchase, and in form and substance satisfactory
to the Placement Agents, substantially in the form set forth in Exhibit E hereto.
(d) You shall have received from Grant Thornton LLP letters dated, respectively, the
date of this Agreement, the date of the Prospectus Supplement and the time of purchase, and
addressed to the Placement Agents in the forms satisfactory to the Placement Agents, which
letters shall cover, without limitation, the various financial disclosures contained in the
Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing
Prospectuses, if any.
(e) You shall have received at the time of purchase, the favorable opinion of Pillsbury
Winthrop Shaw Pittman LLP, counsel for the Placement Agents, dated the time of purchase, in
form and substance reasonably satisfactory to the Placement Agents.
(f) No Prospectus or amendment or supplement to the Registration Statement or the
Prospectus shall have been filed to which you shall have objected in writing.
(g) The Registration Statement and any registration statement required to be filed,
prior to the sale of the Securities, under the Act pursuant to Rule 462(b) shall have been
filed and shall have become effective under the Act. The Prospectus Supplement shall have
been filed with the Commission pursuant to Rule 424(b) under the Act at or before 5:30 PM,
New York City time, on the second full business day after the date of this Agreement (or
such earlier time as may be required under the Act).
(h) Prior to and at the time of purchase, (i) no stop order with respect to the
effectiveness of the Registration Statement shall have been issued under the Act or
proceedings initiated under Section 8(d) or 8(e) of the Act; (ii) the Registration Statement
- 23 -
and all amendments thereto shall not contain 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; (iii) none of the Basic Prospectus or the Prospectus, and
no amendment or supplement thereto, shall include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading; and (iv) none of the
Permitted Free Writing Prospectuses, if any, shall include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
(i) The Company will, at the time of purchase, deliver to you a certificate of its
Chief Executive Officer and its Chief Financial Officer, dated the time of purchase, in the
form attached as Exhibit F-1 hereto and a certificate of its Secretary in the form
attached as Exhibit F-2 hereto;
(j) The Company shall, on the Closing, deliver to the Placement Agents a certificate of
its Chief Financial Officer regarding certain statistical data and other information
contained in the Registration Statement, the Basic Prospectus, the Prospectus and any
Permitted Free Writing Prospectus, in a form reasonably satisfactory to the Placement
Agents;
(k) You shall have received the agreement (a Lock-Up Agreement), in the form
set forth as Exhibit B hereto, of each of the Companys directors and officers
(within the meaning of Rule 16a-1(f) under the Exchange Act), and each such Lock-Up
Agreement shall be in full force and effect at the time of purchase.
(l) The Company shall have furnished to you such other documents and certificates as to
the accuracy and completeness of any statement in the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus as of the time of
purchase as you may reasonably request on the basis of any change in circumstances or
potential change in circumstances from the time of execution of this Agreement until the
time of purchase which affects or could reasonably be expected to affect, or otherwise calls
into question, the accuracy and completeness of any such statement.
(m) The Shares shall have been approved for quotation on the NASDAQ, subject only to
notice of issuance at or prior to the time of purchase.
(n) FINRA shall not have raised any objection with respect to the fairness or
reasonableness of the placement agency, or other arrangements of the transactions,
contemplated hereby.
7. Effective Date of Agreement; Termination. This Agreement shall become effective
when the parties hereto have executed and delivered this Agreement.
The obligations of the Placement Agents hereunder shall be subject to termination
- 24 -
in the absolute discretion of the Placement Agents, if (1) since the time of execution of this
Agreement or the earlier respective dates as of which information is given in the Registration
Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing Prospectuses, if
any, there has been any change or any development involving a prospective change in the business,
properties, management, financial condition or results of operations of the Company and the
Subsidiary taken as a whole, the effect of which change or development is, in the sole judgment of
the Placement Agents, so material and adverse as to make it impractical or inadvisable to proceed
with the offering or the delivery of the Securities on the terms and in the manner contemplated in
the Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing
Prospectuses, if any, or (2) since the time of execution of this Agreement, there shall have
occurred: (A) a suspension or material limitation in trading in securities generally on the NYSE or
the NASDAQ; (B) a suspension or material limitation in trading in the Companys securities on the
NASDAQ; (C) a general moratorium on commercial banking activities declared by either federal or New
York State authorities or a material disruption in commercial banking or securities settlement or
clearance services in the United States; (D) an outbreak or escalation of hostilities or acts of
terrorism involving the United States or a declaration by the United States of a national emergency
or war; or (E) any other calamity or crisis or any change in financial, political or economic
conditions in the United States or elsewhere, if the effect of any such event specified in clause
(D) or (E), in the sole judgment of the Placement Agents, makes it impractical or inadvisable to
proceed with the offering or the delivery of the Securities on the terms and in the manner
contemplated in the Registration Statement, the Basic Prospectus, the Prospectus and the Permitted
Free Writing Prospectuses, if any, or (3) since the time of execution of this Agreement, there
shall have occurred any downgrading, or any notice or announcement shall have been given or made
of: (A) any intended or potential downgrading or (B) any watch, review or possible change that does
not indicate an affirmation or improvement in the rating accorded any securities of or guaranteed
by the Company or the Subsidiary by any nationally recognized statistical rating organization, as
that term is defined in Rule 436(g)(2) under the Act.
If the Placement Agents elect to terminate this Agreement as provided in this Section 7, the
Company shall be notified promptly in writing.
If the sale of the Securities, as contemplated by this Agreement and the Subscription
Agreements, is not carried out for any reason permitted under this Agreement or the Subscription
Agreements, or if such sale is not carried out because the Company shall be unable to comply with
any of the terms of this Agreement or the Subscription Agreements, the Company shall not be under
any obligation or liability under this Agreement (except to the extent provided in Sections 4(m), 5
and 8 hereof), and the Placement Agents shall be under no obligation or liability to the Company
under this Agreement (except to the extent provided in Section 8 hereof).
8. Indemnity and Contribution.
(a) The Company agrees (i) to indemnify, defend and hold harmless each Placement Agent,
their respective, directors, officers, employees and agents, and each person, if any, who
controls such Placement Agent within the meaning of Section 15 of
- 25 -
the Act or Section 20 of the Exchange Act, and the successors and assigns of all of the
foregoing persons, from and against any loss, damage, expense, liability or claim (or
actions in respect thereof as contemplated below) which such Placement Agent or any such
person may incur under the Act, the Exchange Act, the common law or otherwise, insofar as
such loss, damage, expense, liability or claim (or actions in respect thereof as
contemplated below) arises out of or is based (A) in whole or in part upon any inaccuracy in
the representations and warranties of the Company contained herein, (B) in whole or in part
upon any failure of the Company to perform its obligations hereunder or under law, (C) upon
any untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430B or Rule 430C under the Act, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary to make the
statements therein not misleading, (D) upon any untrue statement or alleged untrue
statement of a material fact contained in the Basic Prospectus (as amended or supplemented),
any Permitted Free Writing Prospectus, the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances under which they were
made, not misleading, or (E) in whole or in part upon any act or failure to act or alleged
act or failure to act by the Placement Agents in reliance upon (A), (B), (C) or (D), and in
connection with or relating in any manner to the Securities or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by clause (A), (B), (C)
or (D) above, provided that the Company shall not be liable under this clause (E) to the
extent that a court of competent jurisdiction shall have determined by a final judgment that
such loss, claim, damage, liability or action resulted primarily from any such acts or
failures to act undertaken or omitted to be taken by such Placement Agent through its bad
faith or willful misconduct; and (ii) to reimburse each Placement Agent, its respective
officers, directors, employees, agents and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by the Placement Agents) as
such expenses are reasonably incurred by such Placement Agent, or its respective officers,
directors, employees and agents or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage, liability, expense
or action; provided, however, that the foregoing indemnity agreement shall not apply to any
loss, claim, damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information furnished to the
Company by the Placement Agents expressly for use in the Registration Statement, any
Permitted Free Writing Prospectus, or the Prospectus (or any amendment or supplement
thereto). The indemnity agreement set forth in this Section 8(a) shall be in addition to
any liabilities that the Company may otherwise have.
(b) Each Placement Agent, severally and not jointly, agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within the meaning
of the Act or the Exchange Act, against any loss, claim, damage, liability or
- 26 -
expense, as incurred, to which the Company or any such director, officer or controlling
person may become subject, insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon any untrue
or alleged untrue statement of a material fact contained in the Registration Statement, any
Permitted Free Writing Prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, and only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Permitted Free Writing Prospectus or the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with written
information furnished to the Company by such Placement Agent expressly for use therein; and
to reimburse the Company or any such director, officer or controlling person for any legal
and other expense reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The Company hereby
acknowledges that the only information that the Placement Agents have furnished to the
Company expressly for use in the Registration Statement, any Permitted Free Writing
Prospectus or the Prospectus (or any amendment or supplement thereto) are the statements set
forth in Section 9.
(c) Promptly after receipt by an indemnified party under this Section 8 of notice of
the commencement of any action, such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party under this Section 8, notify the indemnifying
party in writing of the commencement thereof; but the failure to so notify the indemnifying
party a) will not relieve it from liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and b) will not, in
any event, relieve the indemnifying party from any liability other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends to seek indemnity
from an indemnifying party, the indemnifying party will be entitled to participate in, and,
to the extent that it shall elect, jointly with all other indemnifying parties similarly
notified, by written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that a conflict may arise between the
positions of the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying party to
such indemnified party of such indemnifying partys election so to assume the defense of
such action and approval
- 27 -
by the indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the indemnified
party shall have employed separate counsel in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (other than local counsel), reasonably
approved by the indemnifying party, representing the indemnified parties who are parties to
such action) or (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(d) The indemnifying party under this Section 8 shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party against any loss, claim, damage, liability or expense by reason of
such settlement or judgment. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement, compromise or consent to the entry of
judgment in any pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or consent (i)
includes an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or on behalf
of any indemnified party.
(e) If the indemnification provided for in Section 8(a) or (b), as applicable, is for
any reason unavailable to or otherwise insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, liabilities or expenses referred to therein, then
each indemnifying party shall contribute to the aggregate amount paid or payable by such
indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or
expenses referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Placement Agents, on the
other hand, from the placement of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company, on the one hand, and the Placement
Agents, on the other hand, in connection with the statements or omissions contained in the
Registration Statement, the Basic Prospectus (as amended or supplemented), any Permitted
Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto) or
inaccuracies in the representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand, and the
Placement Agents, on the other hand, in connection with the placement of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
- 28 -
proportions as the total net proceeds from the placement of the Securities pursuant to
this Agreement (before deducting expenses) received by the Company, and the total
compensation received by the Placement Agents bear to the aggregate proceeds from the
placement of the Securities. The relative fault of the Company, on the one hand, and the
Placement Agents, on the other hand, shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company, on the one hand,
or the Placement Agents, on the other hand, and the parties relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 8(c), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action or claim.
The Company and the Placement Agents agree that it would not be just and equitable if
contribution pursuant to this Section 8(e) were determined by pro rata allocation (even if
the Placement Agents were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred to in this
Section 8(e).
(f) Notwithstanding the provisions of Section 8(e), no Placement Agent shall be
required to contribute any amount in excess of the compensation received by such Placement
Agent in connection with the placement contemplated by this Agreement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Placement Agents obligations to contribute pursuant to Section 8(e)
are several, and not joint, in proportion to their respective percentage allocations of the
compensation payable by the Company pursuant to Section 1 hereof. For purposes of Section
8(e), each director, officer, employee and agent of a Placement Agent and each person, if
any, who controls a Placement Agent within the meaning of the Act or the Exchange Act shall
have the same rights to contribution as such Placement Agent, and each director of the
Company, each officer of the Company who signed the Registration Statement and each person,
if any, who controls the Company within the meaning of the Act or the Exchange Act shall
have the same rights to contribution as the Company.
9. Information Furnished by the Placement Agents. The statements set forth under the
caption Plan of distributionPrice stabilization in the Prospectus Supplement, only insofar as
such statements relate to the stabilization activities that may be undertaken by the Placement
Agents, constitute the only information furnished by the Placement Agents, as such information is
referred to in Sections 3 and 8 hereof.
10. Notices. Except as otherwise herein provided, all statements, requests, notices
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and agreements shall be in writing or by telegram or facsimile and, if to the Placement
Agents, shall be sufficient in all respects if delivered or sent to Susquehanna Financial Group,
LLLP, 401 City Avenue, Suite 220, Bala Cynwyd, PA 19004, Attention: James Ramp, Head of Investment
Banking, with a copy to General Counsel at the same address, if to Dawson James Securities, Inc.,
925 S. Federal Hwy, 6th Floor, Boca Raton, FL 33432, Attention: Albert Poliak, President
and, if to the Company, shall be sufficient in all respects if delivered or sent to the Company at
the offices of the Company at 3155 Porter Drive, Palo Alto, CA 94304, Attention: Martin McGlynn,
President and Chief Executive Officer, with a copy to Ropes & Gray LLP, One International Place,
Boston, MA 02110-2624, Attention: Geoffrey Davis.
11. Governing Law; Construction. This Agreement and any claim, counterclaim or
dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement
(Claim), directly or indirectly, shall be governed by, and construed in accordance with,
the laws of the State of New York. The section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
12. Submission to Jurisdiction. Except as set forth below, no Claim may be commenced,
prosecuted or continued in any court other than the courts of the State of New York located in the
City and County of New York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such matters, and the Company
consents to the jurisdiction of such courts and personal service with respect thereto. The Company
hereby consents to personal jurisdiction, service and venue in any court in which any Claim arising
out of or in any way relating to this Agreement is brought by any third party against the Placement
Agents or any indemnified party. The Placement Agents and the Company (on its behalf and, to the
extent permitted by applicable law, on behalf of its stockholders and affiliates) waive all right
to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) in any way arising out of or relating to this Agreement. The Company agrees that a
final judgment in any such action, proceeding or counterclaim brought in any such court shall be
conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction
of which the Company is or may be subject, by suit upon such judgment.
13. Parties at Interest. The Agreement herein set forth has been and is made solely
for the benefit of the Placement Agents and the Company and to the extent provided in Section 8
hereof the controlling persons, partners, directors and officers referred to in such Section 8, and
their respective successors, assigns, heirs, personal representatives and executors and
administrators. No other person, partnership, association or corporation (including a purchaser,
as such purchaser, from the Company) shall acquire or have any right under or by virtue of this
Agreement.
14. No Fiduciary Relationship. The Company hereby acknowledges that each Placement
Agent is acting solely as a Placement Agent in connection with the purchase and sale of the
Companys securities. The Company further acknowledges that each Placement Agent is acting
pursuant to a contractual relationship created solely by this Agreement entered into on an arms
length basis, and in no event do the parties intend that a Placement Agent act or be responsible as
a fiduciary to the Company, its management, stockholders or creditors or any
- 30 -
other person in connection with any activity that a Placement Agent may undertake or have
undertaken in furtherance of the purchase and sale of the Companys securities, either before or
after the date hereof. Each Placement Agent hereby expressly disclaims any fiduciary or similar
obligations to the Company, either in connection with the transactions contemplated by this
Agreement or any matters leading up to such transactions, and the Company hereby confirms its
understanding and agreement to that effect. The Company and each Placement Agent agree that they
are each responsible for making their own independent judgments with respect to any such
transactions and that any opinions or views expressed by a Placement Agent to the Company regarding
such transactions, including, but not limited to, any opinions or views with respect to the price
or market for the Companys securities, do not constitute advice or recommendations to the Company.
The Company hereby waives and releases, to the fullest extent permitted by law, any claims that
the Company may have against any Placement Agent with respect to any breach or alleged breach of
any fiduciary or similar duty to the Company in connection with the transactions contemplated by
this Agreement or any matters leading up to such transactions.
15. Counterparts. This Agreement may be signed by the parties in one or more
counterparts which together shall constitute one and the same agreement among the parties.
16. Successors and Assigns. This Agreement shall be binding upon the Placement Agents
and the Company and their successors and assigns and any successor or assign of any substantial
portion of the Companys and the Placement Agents respective businesses and/or assets.
[The Remainder of This Page Intentionally Left Blank; Signature Page Follows]
- 31 -
If the foregoing correctly sets forth the understanding between the Company and the Placement
Agents, please so indicate in the space provided below for that purpose, whereupon this Agreement
and your acceptance shall constitute a binding agreement between the Company and the Placement
Agents.
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Very truly yours,
StemCells, Inc.
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By: |
/s/ Martin M. McGlynn
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Name: |
Martin M. McGlynn |
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Title: |
President and CEO |
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Accepted and agreed to as of the date
first above written
Susquehanna Financial Group, LLLP
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By:
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/s/ Evonne Sepsis
Name: Evonne Sepsis
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Title: Managing Director |
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Dawson James Securities, Inc.
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By:
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/s/ Albert Poliak
Name: Albert Poliak
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Title: President |
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SCHEDULE A
PERMITTED FREE WRITING PROSPECTUSES
None.
exv4w1
Exhibit 4.1
STEMCELLS, INC.
WARRANT TO PURCHASE COMMON STOCK
To Purchase 2,586,207 Shares of Common Stock
Date of Issuance: November 12, 2008
VOID AFTER MAY 12, 2014
THIS CERTIFIES THAT, for value received, , or permitted registered assigns
(the Holder), is entitled to subscribe for and purchase at the Exercise Price (defined below)
from StemCells, Inc., a Delaware corporation (the Company), up to 2,586,207 shares of the common
stock of the Company, par value $0.01 per share (the Common Stock). This warrant is one of a
series of warrants issued by the Company as of the date hereof (individually a Warrant;
collectively, Company Warrants) pursuant to that certain subscription agreement between the
Company and the Holder, dated as of November 12, 2008 (the Subscription Agreement).
1. DEFINITIONS. Capitalized terms used herein but not otherwise defined herein
shall have their respective meanings as set forth in the Subscription Agreement. As used herein,
the following terms shall have the following respective meanings:
(a) Exercise Period shall mean the period commencing with the date occurring six months
after the date hereof and ending five years and six months from the date hereof, unless sooner
terminated as provided below.
(b) Exercise Price shall mean $2.30 per share, subject to adjustment pursuant to
Section 4 below.
(c) Exercise Shares shall mean the shares of Common Stock issuable upon exercise of this
Warrant.
(d) Trading Day shall mean (i) any day on which the Common Stock is listed or quoted and
traded on its primary Trading Market, (ii) if the Common Stock is not then listed or quoted and
traded on any eligible market (meaning any of the NYSE, AMEX or NASDAQ), then a day on which
trading occurs on the OTC Bulletin Board (or any successor thereto), or (iii) if trading does not
occur on the OTC Bulletin Board (or any successor thereto), any business day.
2. EXERCISE OF WARRANT.
2.1 STANDARD EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by delivery of the following
to the Company at its address set forth on the signature page hereto (or at such other address as
it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto; and
(b) Payment of the Exercise Price either (i) in cash or by check (subject to the
limitations in Section 2.4 below), or (ii) pursuant to net exercise terms outlined under
Section 2.2 below.
Execution and delivery of the Notice of Exercise shall have the same effect as cancellation of
the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining
number of Exercise Shares, if any. Holder agrees to provide this Warrant, or an affidavit of lost
security in accordance with Section 9, to the Company within five days after the delivery
of the Notice of Exercise.
Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holders prime broker with the Depository
Trust Company through its
Exhibit 4.1
Deposits and Withdrawal at Custodian (DWAC) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified by the Holder in the Notice of
Exercise within three Trading Days from the delivery to the Company of the Notice of Exercise,
surrender of this Warrant and payment of the aggregate Exercise Price as set forth above. This
Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the
Company. The Exercise Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date this Warrant has been exercised by payment to the Company of the
Exercise Price.
If by the close of the fifth Trading Day after delivery of an Notice of Exercise, the Company
fails to deliver to the Holder a certificate representing the required number of Exercise Shares in
the manner required pursuant to this Section 2, and such failure to deliver the Exercise
Shares is caused by the Companys failure to use commercially reasonable efforts to comply with
this Section 2 and/or the covenants in Section 3.1 herein, and if after such fifth
Trading Day and prior to the receipt of such Exercise Shares, the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Exercise Shares which the Holder anticipated receiving upon such exercise (a
Buy-In), then the Company shall, within three Trading Days after the Holders request and in the
Holders sole discretion, either (1) pay in cash to the Holder an amount equal to the Holders
total purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased (the Buy-In Price), at which point the Companys obligation to deliver such certificate
(and to issue such Exercise Shares) shall terminate or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Exercise Shares and pay cash
to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Exercise Shares, times (B) the closing bid price on the date of exercise.
The person in whose name any certificate or certificates for Exercise Shares are to be issued
upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on
the date on which this Warrant was surrendered and payment of the Exercise Price was made,
irrespective of the date of delivery of such certificate or certificates, except that, if the date
of such surrender and payment is a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.
To the extent permitted by law, the Companys obligations to issue and deliver Exercise Shares
in accordance with the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any person or entity or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other person or entity of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person or entity, and irrespective
of any other circumstance which might otherwise limit such obligation of the Company to the Holder
in connection with the issuance of Exercise Shares. Nothing herein shall limit a Holders right to
pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Companys
failure to timely deliver certificates representing shares of Common Stock upon exercise of this
Warrant as required pursuant to the terms hereof.
2.2 NET EXERCISE. If during the Exercise Period, the issuance of the Exercise
Shares to the Holder is not covered by the Registration Statement, as defined in the Subscription
Agreement, or any other effective registration statement under the Securities Act of 1933, as
amended, and the fair market value of one share of the Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), the Holder shall be permitted to exercise
this Warrant by electing to receive (and the Company shall be permitted satisfy its obligation to
issue the shares to be issued on exercise of this Warrant by issuing to the Holder) shares equal to
the value (as determined below) of this Warrant (or the portion thereof being canceled), in lieu of
paying the Exercise Price in immediately available funds. Upon delivery of a properly endorsed
Notice of Exercise, the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
2
Exhibit 4.1
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Where X =
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the number of shares of Common Stock to be issued to the Holder |
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Y =
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the number of shares of Common Stock for which the Warrant is
then being exercised |
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A =
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the fair market value of one share of the Companys Common
Stock (at the date of such calculation) |
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B =
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Exercise Price in effect at the time of exercise |
For purposes of the above calculation, the fair market value of one share of Common Stock
shall mean (i) the average of the closing sales prices for the shares of Common Stock on the NASDAQ
Global Market or other trading market where such security is listed or traded as reported by
Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by
the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then
reporting sales prices of such security) (collectively, Bloomberg) for the ten (10) consecutive
trading days immediately preceding such date, or (ii) if the NASDAQ Global Market is not the
principal trading market for the shares of Common Stock, the average of the reported sales prices
reported by Bloomberg on the principal trading market for the Common Stock during the same period,
or, if there is no sales price for such period, the last sales price reported by Bloomberg for such
period, or (iii) if neither of the foregoing applies, the last sales price of such security in the
over-the-counter market on the pink sheets or bulletin board for such security as reported by
Bloomberg, or if no sales price is so reported for such security, the last bid price of such
security as reported by Bloomberg or (iv) if fair market value cannot be calculated as of such date
on any of the foregoing bases, the fair market value shall be as determined by the Board of
Directors of the Company in the exercise of its good faith judgment.
2.3 ISSUANCE OF NEW WARRANTS. Upon any partial exercise of this Warrant, the
Company, at its expense, will forthwith and, in any event within five Trading Days, issue and
deliver to the Holder a new warrant or warrants of like tenor, registered in the name of the
Holder, exercisable, in the aggregate, for the balance of the number of shares of Common Stock
remaining available for purchase under this Warrant.
2.4 EXERCISE LIMITATIONS; HOLDERS RESTRICTIONS. A Holder shall not have the
right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise, such Holder (together with such
Holders affiliates) would beneficially own in excess of 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to such issuance. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its
affiliates shall include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other shares of Common Stock or Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by such Holder or any of its affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 2.4, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act, it being acknowledged by a Holder that the Company is not
representing to such Holder that such calculation is in compliance with Section 13(d) of the
Exchange Act and such Holder is solely responsible for any schedules or other filings required to
be filed under the Exchange Act. To the extent that the limitation contained in this Section
2.4 applies, the determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be
each Holders determination of whether
3
Exhibit 4.1
this Warrant is exercisable (in relation to other securities owned by such Holder) and of
which portion of this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall be entitled to rely on the Holders determination and shall have
no obligation to verify or confirm the accuracy of such determination. For purposes of this
Section 2.4, in determining the number of outstanding shares of Common Stock, a Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x) the Companys most
recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Companys Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company, including this Warrant, by such Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The provisions of this Section
2.4 may be waived by such Holder, at the election of such Holder, upon not less than 61 days
prior notice to the Company, and the provisions of this Section 2.4 shall continue to apply
until such 61st day (or such later date, as determined by such Holder, as may be specified in such
notice of waiver).
3. COVENANTS OF THE COMPANY.
3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and agrees that all
Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from
all taxes, liens and charges with respect to the issuance thereof.
The Company further covenants and agrees that the Company will at all times during the
Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented by this Warrant. If at
any time during the Exercise Period the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such purposes.
3.2 NO IMPAIRMENT. The Company will not, by amendment of its Certificate 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 Company,
and will at all times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may be necessary or appropriate in order to protect
the exercise rights of the Holder against impairment.
3.3 NOTICES OF RECORD DATE AND CERTAIN OTHER EVENTS. In the event of any taking
by the Company of a record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other distribution, the Company
shall provide to the Holder, at least ten (10) days prior to the date on which any such record is
to be taken for the purpose of such dividend or distribution, a notice specifying such date. In the
event of any voluntary dissolution, liquidation or winding up of the Company, the Company shall
provide to the Holder, at least ten (10) days prior to the date of the occurrence of any such
event, a notice specifying such date. In the event the Company authorizes or approves, enters into
any agreement contemplating, or solicits stockholder approval for any Fundamental Transaction, as
defined in Section 6 herein, the Company shall provide to the Holder, at least ten (10) days prior
to the date of the occurrence of such Fundamental Transaction, a notice specifying such date.
Notwithstanding the foregoing, the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such notice.
4. ADJUSTMENT OF EXERCISE PRICE AND EXERCISE SHARES.
(a) If the Company, at any time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that
is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, or (iii) combines outstanding shares
4
Exhibit 4.1
of Common Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution, and any adjustment
pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the
effective date of such subdivision or combination. The form of this Warrant need not be changed
because of any adjustment in the number of Exercise Shares subject to this Warrant.
(b) If the Company, at any time while this Warrant is outstanding, distributes to holders
of Common Stock, (i) Common Stock or any shares of stock or other securities which are at any time
directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options
to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution (other than a dividend or distribution covered in Section 4(a) above); (ii)
any cash paid or payable otherwise than as a cash dividend; or (iii) any other asset, then and in
each such case, the Holder hereof will, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (ii) and (iii) above) which such Holder would
hold on the date of such exercise had such Holder been the holder of record of such Common Stock as
of the date on which holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.
(c) Upon the occurrence of each adjustment pursuant to this Section 4, the Company
at its expense will, at the written request of the Holder, promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment,
including a statement of the adjusted Exercise Price and adjusted number or type of Exercise Shares
or other securities issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Companys transfer agent.
5. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of
this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after aggregation,
the exercise would result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash
equal to the product resulting from multiplying the then current fair market value of an Exercise
Share by such fraction.
6. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding,
(i) the Company effects any merger or consolidation of the Company with or into another entity, in
which the shareholders of the Company as of immediately prior to the transaction own less than a
majority of the outstanding stock of the surviving entity, (ii) any tender offer or exchange offer
(whether by the Company or another person or entity) is completed pursuant to which the holders of
more than the 50% of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the person or persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer) are permitted to tender or
exchange their shares for other securities, cash or property, or (iii) the Company effects any sale
of all or substantially all of its assets in one or a series of related transactions, or (iv) the
Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other securities, cash or
property (other than as a result of a subdivision or combination of shares of Common Stock covered
by Section 4 above), (v) the Company consummates a stock purchase agreement or other
business combination (including, without limitation, a reorganization, recapitalization, spin-off
or scheme of arrangement) with another person whereby such other person acquires more than the 50%
of the outstanding shares of Common Stock (not including any shares of Common Stock held by the
other person or other persons making or party to, or associated or affiliated with the other
persons making or party to, such stock purchase agreement or other business combination), or (vi)
any person or group (as these terms are used for purposes of Sections 13(d) and
5
Exhibit 4.1
14(d) of the Securities Exchange Act of 1934, as amended) becomes the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock (each, a Fundamental Transaction), the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as
it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of the number of Exercise
Shares then issuable upon exercise in full of this Warrant (the Alternate Consideration). To the
extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holders right to exercise such warrant into Alternate
Consideration. In lieu of the Alternate Consideration, the Holder shall have the right to require
the Company to redeem this Warrant, for a purchase price, payable in cash on the closing date of
such Fundamental Transaction, equal to the Black Scholes Value of the remaining unexercised portion
of this Warrant on the closing date of such Fundamental Transaction. Black Scholes Value means
the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the
OV function on Bloomberg determined as of the day immediately following the public announcement
of the applicable Fundamental Transaction and reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as
of such date, (ii) an expected volatility equal to the lesser of (x) 60-day volatility or (y)
100-day volatility, in each case obtained from the HVT function on Bloomberg, provided however, the
expected volatility used to calculate such value shall not exceed eighty (80%) percent and (iii) an
underlying price per share used in such calculation equal to the sum of the price per share being
offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in the
Fundamental Transaction. The terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or surviving entity to comply with the
provisions of this Section 6 and ensuring that this Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
7. NO STOCKHOLDER RIGHTS. Other than as provided in Section 3.3 or
otherwise herein, the Holder, solely in such Holders capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share capital of the
Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon
the Holder, solely in such Holders capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock, consolidation, merger,
conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Exercise Shares which such Holder is then
entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
8. TRANSFER OF WARRANT. Subject to compliance with any applicable laws, this
Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached hereto to any
transferee designated by Holder. If this Warrant is to be transferred, the Holder shall surrender
this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 2.3), registered as the Holder may request,
representing the right to purchase the number of Exercise Shares being transferred by the Holder
and, if less then the total number of Exercise Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 2.3) to the Holder representing the right to
purchase the number of Exercise Shares not being transferred.
9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to reasonable bond and indemnity
or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include
the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost,
stolen, mutilated or destroyed.
6
Exhibit 4.1
10. DISPUTE. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Exercise Shares, the Company shall promptly issue to the
Holder the number of Exercise Shares that are not disputed and resolve such dispute in accordance
with this Section 10. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Exercise Shares, the Company shall provide notice to the
Holder of the disputed determinations or arithmetic calculations within two Trading Days of receipt
of the Notice of Exercise giving rise to such dispute, as the case may be. If the Holder and the
Company are unable to agree upon such determination or calculation of the Exercise Price or the
Exercise Shares within three Trading Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within two Trading Days provide submit (a)
the disputed determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of
the Exercise Shares to the Companys independent, outside accountant. The Company shall cause at
its expense the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the results no later than
ten Trading Days from the time it receives the disputed determinations or calculations. Such
investment banks or accountants determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error.
11. NOTICES, ETC. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next Trading Day, (c) five days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address listed on the signature
page hereto and to Holder at the applicable address set forth on the applicable signature page to
the Subscription Agreement or at such other address as the Company or Holder may designate by ten
(10) days advance written notice to the other parties hereto.
12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
13. GOVERNING LAW; WAIVER OF JURY TRIAL. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York. The Holder and the Company hereby
submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated thereby. The Holder and the Company irrevocably and
unconditionally waive any objection to the laying of venue of any suit or proceeding arising out of
or relating to this Warrant in Federal and state courts in the Borough of Manhattan in The City of
New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such
court that any such suit or proceeding in any such court has been brought in an inconvenient forum.
EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or waived (either
generally or in a particular instance and either retroactively or prospectively) with the written
consent of the Company and the Holder. The Company shall give prompt written notice to the Holder
of any amendment hereof or waiver hereunder that was effected without the Holders written consent.
No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such term, condition or
provision.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
Exhibit 4.1
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized
officer as of November 12, 2008.
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STEMCELLS, INC. |
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3155 Porter Drive
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Exhibit 4.1
NOTICE OF EXERCISE
TO: STEMCELLS, INC.
(1) [ ] The undersigned registered holder hereby elects to purchase [
] shares of the common stock, par value $0.01 (the Common Stock), of STEMCELLS, INC. (the
Company) pursuant to the terms of the attached Warrant, and tenders herewith payment of the
exercise price in full, together with all applicable transfer taxes, if any, subject to the
limitations set forth in Section 2.4 of the Warrant.
[ ] The undersigned hereby elects to purchase [ ] shares of Common Stock
of the Company pursuant to the terms of the net exercise provisions set forth in Section
2.2 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.
(2) Please issue the certificate for shares of Common Stock in the name of:
Print or type name
Social Security or other Identifying Number
Street Address
City State Zip Code
(3) If such number of shares shall not be all the shares purchasable upon the exercise of
the Warrants evidenced by this Warrant, a new warrant certificate for the balance of such Warrants
remaining unexercised shall be registered in the name of and delivered to:
Print or type name
Social Security or other Identifying Number
Street Address
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Exhibit 4.1
City State Zip Code
Dated:
(Date)
10
Exhibit 4.1
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not
use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned
to
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(Please Print) |
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Dated: , 200[ ] |
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Holders Signature: |
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Holders Address: |
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NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face
of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations
and those acting in a fiduciary or other representative capacity should file proper evidence of
authority to assign the foregoing Warrant.
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exv5w1
Exhibit 5.1
November 12, 2008
StemCells, Inc.
3155 Porter Drive
Palo Alto, California 94394
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Re:
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Registration Statement on Form S-3 (Registration No. 333-151891), initially
filed on June 24, 2008 with the Securities and Exchange Commission (the Commission)
and declared effective on July 18, 2008. |
Ladies and Gentlemen:
This opinion is furnished to you in connection with the above-referenced registration statement
(the Registration Statement), the base prospectus dated July 18, 2008 (the Base
Prospectus) and the prospectus supplement dated November 12, 2008 (together with the Base
Prospectus, the Prospectus). The Prospectus relates to the offering by StemCells, Inc.
(the Company) of (i) 13,793,104 shares (the Shares) of the Companys common
stock, par value $0.01 per share (the Common Stock) and (ii) warrants (the
Warrants) to purchase 10,344,828 shares of the Common Stock (the Warrant
Shares), which Shares, Warrants and Warrant Shares are covered by the Registration Statement.
We understand that the Shares, Warrants and Warrant Shares are to be offered and sold in the manner
described in the Prospectus.
We have acted as counsel for the Company in connection with the issuance of the Shares, Warrants
and Warrant Shares. For purposes of this opinion, we have examined and relied upon such documents,
records, certificates and other instruments as we have deemed necessary.
The opinions expressed below are limited to the Delaware General Corporation Law, including the
applicable provisions of the Delaware Constitution and the reported cases interpreting those laws.
Based upon and subject to the foregoing, we are of the opinion that (i) the Shares, when sold as
described in the Prospectus, will be duly authorized, validly issued, fully paid and
non-assessable, (ii) provided that the Warrants have been duly executed and delivered by the
Company and duly delivered to the purchasers thereof against payment therefor, then the Warrants,
when issued and sold as described in the Prospectus, will be valid and legally binding obligations
of the Company, enforceable against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
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StemCells, Inc.
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November 12, 2008 |
proceeding at law or in equity) and implied covenants of good faith and fair dealing, and (iii) the
Warrant Shares, when issued and sold as described in the Prospectus, will be duly authorized,
validly issued, fully paid and non-assessable.
We hereby consent to your filing this opinion as an exhibit to a Current Report on Form 8-K to be
incorporated by reference in the Registration Statement and to the use of our name under the
caption Legal Matters in the Prospectus contained therein. Our consent shall not be deemed an
admission that we are experts whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Commission thereunder.
This opinion may be used only in connection with the offer and sale of the Shares, Warrants and
Warrant Shares while the Registration Statement remains effective.
Very truly yours,
/s/ Ropes & Gray LLP
Ropes & Gray LLP
exv99w1
Exhibit 99.1
Subscription Agreement
StemCells, Inc.
3155 Porter Drive
Palo Alto, CA 94304
Ladies and Gentlemen:
The undersigned, (the Investor), hereby confirms its agreement
with you as follows:
1. This Subscription Agreement (the Subscription Agreement) is made as of November
12, 2008 between StemCells, Inc., a Delaware corporation (the Company), and the Investor.
2. The Company and the Investor have agreed that the Investor will purchase from the Company
and the Company will issue and sell to the Investor 3,448,276 shares (the Shares) of
common stock of the Company (the Common Stock), at a purchase price of $1.45 per Share,
or an aggregate purchase price of $5,000,000.20 (the Purchase Price). In addition, the
Company will issue and sell to each Investor a warrant to purchase 2,586,207 shares of the
Companys Common Stock issued to such Investor, in substantially the form attached hereto as Annex
I (the Warrants). The Shares and the Warrants are collectively referred to herein as the
Securities. The Investor acknowledges that the offering of the Securities is not a firm
commitment underwriting.
3. The offering and sale of the Securities (the Offering) are being made pursuant to
(i) an effective Registration Statement on Form S-3 (including the Prospectus contained therein
dated July 18, 2008 (the Basic Prospectus), the Registration Statement) filed
by the Company with the Securities and Exchange Commission (the Commission), (ii) if
applicable, certain free writing prospectuses (as that term is defined in Rule 405 under the
Securities Act of 1933, as amended (the Act)), that have been or will be filed with the
Commission and delivered to the Investor on or prior to the date hereof, and (iii) a Prospectus
Supplement (the Prospectus Supplement), containing certain supplemental information
regarding the Securities, the Company and the terms of the Offering that will be filed with the
Commission and delivered to the Investor along with the Companys counterpart to this Subscription
Agreement (or made available to the Investor by the filing by the Company of an electronic version
thereof with the Commission). The Registration Statement also covers the issuance of the Shares to
be issued on exercise of the Warrants.
4. The completion of the purchase and sale of the Securities (the Closing) shall
occur on November 17, 2008. At the Closing, the Company shall deliver to the Investor, using
customary book-entry procedures, the number of Securities as set forth above in Section 2, and the
Investor shall deliver, or cause to be delivered, to the Company by Federal Funds wire transfer the
full amount of the Purchase Price for the Securities being purchased.
5. This Subscription Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York, without giving effect to the principles of
Exhibit 99.1
conflicts of
law.
6. This Subscription Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.
7. A prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as
amended, may be obtained, when available, from the Company at 3155 Porter Drive, Palo Alto, CA
94304, Attention: Chief Executive Officer.
8. The Company confirms that it has entered into a Placement Agency Agreement (the
Placement Agency Agreement) with Susquehanna Financial Group, LLLP and Dawson James
Securities, Inc. (together, the Placement Agents) that contains certain representations,
warranties, covenants and agreements of the Company that may be relied upon by the Investor, which
shall be a third party beneficiary thereof. A copy of the Placement Agency Agreement is available
upon request.
9. The Company further confirms and the Investor acknowledges that the Investors obligation
to purchase the Securities is subject to the condition that the Placement Agents shall not have (a)
terminated the Placement Agency Agreement or (b) determined that the conditions to closing in the
Placement Agency Agreement have not been satisfied. The Investor confirms that its obligations are
expressly not conditioned on the purchase by any other investors of Securities that they have
agreed to purchase from the Company.
10. The Investor represents that it has received (or otherwise had made available to it by the
filing by the Company of an electronic version thereof with the Commission) the Basic Prospectus,
which is a part of the Companys Registration Statement and the documents incorporated by reference
therein, prior to or in connection with the receipt of this Subscription Agreement. The Investor
acknowledges that, prior to the delivery of this Subscription Agreement to the Company, the
Investor will receive certain additional information regarding the Offering, including pricing
information (the Offering Information). The Offering Information may be provided to the
Investor by any means permitted under the Act, including in the Prospectus Supplement (delivered to
the Investor or made available to it by the filing of an electronic version thereof with the
Commission), a free writing prospectus or oral communications.
11. No offer by the Investor to buy Securities will be accepted and no part of the Purchase
Price will be delivered to the Company until the Investor has received the Offering Information and
the Company has accepted such offer by countersigning a copy of this Subscription Agreement, and
any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any
time prior to the Company (or the Placement Agents on behalf of the Company) sending (orally, in
writing or by electronic mail) notice of its acceptance of such offer. This Subscription Agreement
will constitute only an indication of interest and will involve no obligation or commitment of any
kind until the Investor has been delivered the
Offering Information and this Subscription Agreement is accepted and countersigned by or on
behalf of the Company.
Exhibit 99.1
12. The Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the Company or any of its
affiliates, (b) it is not a FINRA member or an Associated Person (as such term is defined under the
FINRA Membership and Registration Rules Section 1011) as of the Closing, and (c) neither the
Investor nor any group of Investors (as identified in a public filing made with the Commission) of
which the Investor is a part in connection with the Offering of the Shares, acquired, or obtained
the right to acquire, 20% or more of the Common Stock (or securities convertible into or
exercisable for Common Stock) or the voting power of the Company on a post-transaction basis.
Exceptions:
(If no exceptions, write none. If left blank, response will be deemed to be none.)
[The remainder of this page has been intentionally left blank.]
Exhibit 99.1
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Aggregate Purchase Price:$ |
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Please acknowledge that the foregoing correctly confirms the agreement between us by signing in the
space provided below for that purpose.
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ACKNOWLEDGED AND AGREED
StemCells, Inc.
exv99w2
Exhibit 99.2
STEMCELLS, INC. ANNOUNCES $20 MILLION EQUITY FINANCING
PALO ALTO, Calif. November 12, 2008 StemCells, Inc. (NASDAQ: STEM) announced today that it has
entered into agreements to raise approximately $20 million in gross proceeds through the sale of
approximately 13.8 million shares of its common stock to selected institutional investors at a
price of $1.45 per share. The investors will also receive warrants to purchase approximately 10.3
million shares of common stock at an exercise price of $2.30 per share. The shares and warrants are
being offered as a registered direct offering under the Companys effective shelf registration
statement previously filed with the Securities and Exchange Commission (SEC). StemCells, Inc.
expects to receive total proceeds, net of offering expenses and placement agency fees, of
approximately $18.5 million.
The offering is expected to close on November 17, 2008, subject to customary closing conditions.
The net proceeds of the financing will be used for general corporate purposes, including working
capital, product development and capital expenditures, as well as for other strategic purposes.
Susquehanna Financial Group, LLLP and Dawson James Securities, Inc. served as placement agents.
The securities may only be offered by means of a prospectus supplement and accompanying prospectus,
forming a part of the effective registration statement, a copy of which may be obtained, when
available, at the SECs website at http://www.sec.gov, or from Susquehanna Financial Group, LLLP,
401 City Avenue
Suite 220, Bala Cynwyd, PA 19004 or Dawson James Securities, Inc., 925 South Federal Highway, 6th
Floor, Boca Raton, FL 33432.
This press release does not and shall not constitute an offer to sell or the solicitation of an
offer to buy, nor will there be any sale of these securities in any state or jurisdiction in which
such offer, solicitation or sale would be unlawful prior to registration or qualification under the
securities laws of any such state or jurisdiction.
About StemCells, Inc.
StemCells, Inc. is a clinical-stage biotechnology company focused on the discovery, development and
commercialization of cell-based therapeutics to treat diseases of the central nervous system and
liver. The Companys product development programs seek to repair or repopulate CNS and liver tissue
that has been damaged or lost as a result of disease or injury. StemCells has pioneered the
discovery and development of HuCNS-SC® cells, its highly purified, expandable population
of human neural stem cells. StemCells has completed enrollment and dosing of a six patient Phase I
clinical trial of its proprietary HuCNS-SC product candidate as a treatment for neuronal ceroid
lipofuscinosis (NCL) and expects the trial to be completed in January 2009. NCL, which is often
referred to as Batten disease, is a rare and fatal neurodegenerative disease that affects infants
and young children. StemCells owns or has exclusive rights to more than 50 issued or allowed U.S.
patents and more than 150 granted or allowed non-U.S.
patents. Further information about the Company is available on its web site at:
www.stemcellsinc.com.
Apart from statements of historical fact, the text of this press release constitutes
forward-looking statements regarding, among other things, the future business operations of
StemCells, Inc. (the Company) and its ability to conduct clinical trials as well as its research
and product development efforts. These forward-looking statements speak only as of the date of this
news release. The Company does not undertake to update any of these forward-looking statements to
reflect events or circumstances that occur after the date hereof. Such statements reflect
managements current views and are based on certain assumptions that may or may not ultimately
prove valid. The Companys actual results may vary materially from those contemplated in such
forward-looking statements due to risks and uncertainties to which the Company is subject,
including uncertainty as to whether the FDA or other applicable regulatory agencies will permit the
Company to continue clinical testing in NCL or in future clinical trials of proposed therapies for
other diseases or conditions despite the novel and unproven nature of the Companys technologies;
uncertainties regarding the Companys ability to obtain the increased capital resources needed to
continue its current research and development operations and to conduct the research, preclinical
development and clinical trials necessary for regulatory approvals; uncertainty regarding the
validity and enforceability of the Companys patents; uncertainty as to whether HuCNS-SC and any
products that may be generated in the future in the Companys cell-based programs will prove safe
and clinically effective and not cause tumors or other adverse side effects; uncertainties
regarding the Companys manufacturing capabilities given its increasing preclinical and clinical
commitments; uncertainties as to whether the Company will achieve revenues from product sales or
become profitable; and other factors that are described under the heading Risk Factors in Item 1A
of Part II of the Companys Quarterly Report on Form 10-Q.
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CONTACT:
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StemCells, Inc. |
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Rodney Young |
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Chief Financial Officer |
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650-475-3100, Ext. 105 |
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irpr@stemcellsinc.com |
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SOURCE:
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StemCells, Inc. |