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): October 4, 2010
CYCLACEL PHARMACEUTICALS,
INC.
(Exact name of registrant as
specified in its charter)
| Delaware | 0-50626 | 91-1707622 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 200 Connell Drive, Suite
1500 Berkeley Heights, NJ |
07922 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (908) 517-7330
| (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:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On October 4, 2010, Cyclacel Pharmaceuticals, Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”) pursuant to which it agreed to sell to the Investors an aggregate of 8,323,190 units (the “Units”) at a per Unit price of $1.82625 for total gross proceeds of $15.2 million. Each Unit consists of (i) one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and (ii) 0.5 of a warrant (the “Warrants”), each whole Warrant representing the right to acquire one share of Common Stock at an exercise price of $1.92 per share, subject to adjustment, for a period of five years from the date of issuance.
Pursuant to the terms of the Purchase Agreement, the Company granted to each Investor the non-transferable option (as to each Investor, an “Option”) to purchase up to a total of 4,161,595 additional Units at a per Unit price of $1.67 at any time up to nine months from the closing date.
The Warrants and Option Warrants contain limitations that prevent the holder thereof from acquiring shares upon exercise of a Warrant or Option Warrant that would result in the number of shares beneficially owned by it and its affiliates exceeding 4.99%, 9.99% or 19.99%, depending upon the investor, of the total number of shares of the Company’s Common Stock then issued and outstanding (which limit may be adjusted upon the request of the holder). In addition, the Warrants contain, and the Option Warrants are expected to contain, a provision permitting the warrant holders, upon certain changes in control of the Company, to elect to receive, subject to certain limitations and assumptions, cash equal to the Black-Scholes value of such holder’s outstanding warrants.
The closing is expected to take place on or about October 7, 2010, subject to the satisfaction of customary closing conditions. Lazard Capital Markets LLC served as the lead placement agent and Roth Capital Partners, LLC served as the co-placement agent for the Offering.
The securities described above were offered and will be sold pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder on the basis that, among other things, the transaction did not involve a public offering, the investors are accredited investors, the investors took the securities for investment and not resale and the Company took appropriate measures to restrict the transfer of the securities.
In connection with the transactions described above, the Company also entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed to register the shares of Common Stock acquired from the Company (including upon any exercise of Warrants and/or the Options). The Company is required to file a registration statement for the resale of such securities within 30 days following the closing date and to use its commercially reasonable efforts to cause each such registration statement to be declared effective no later than 90 days following the closing date (or 120 days following closing date, if the Securities and Exchange Commission determines to review the registration statement). The Company may incur liquidated damages if it does not meet certain deadlines with respect to its registration obligations under the Registration Rights Agreement or if certain other events occur. The Company also agreed to other customary obligations regarding registration, including indemnification and maintenance of the effectiveness of the registration statement.
The Purchase Agreement, the Registration Rights Agreement and the form of Warrant are filed as Exhibits 10.1, 10.2 and 4.1, respectively, to this Current Report on Form 8-K, and such documents are incorporated herein by reference. The foregoing is only a brief description of the material terms of the Purchase Agreement, the Registration Rights Agreement and the form Warrant, does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
Item 3.02 Unregistered Sales of Equity Securities.
The response to this item is included in Item 1.01, Entry into a Material Definitive Agreement, and is incorporated herein by this reference in its entirety.
Item 8.01 Other Events.
On October 5, 2010, the Company issued a press release announcing the offering described in Item 1.01 above which states that the Company will use a portion of the net proceeds of the offering to advance its pivotal Phase 3 trial for oral sapacitabine as a front-line treatment in elderly patients with newly diagnosed acute myeloid leukemia. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K, and the information contained therein is incorporated herein by reference.
Neither the filing of the press release as an exhibit to this Report nor the inclusion in the press release of a reference to our internet address shall, under any circumstances, be deemed to incorporate the information available at our internet address into this Report. The information available at our internet address is not part of this Report or any other report filed by us with the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
|
|
||
|
Exhibit Number
|
Description | |
|
|
||
|
|
||
|
4.1
|
Form of Warrant | |
|
|
||
|
10.1
|
Purchase Agreement, dated as of October 4, 2010, by and between the Company and each investor named therein | |
|
|
||
|
10.2
|
Registration Rights Agreement, dated as of October 4, 2010, by and among the Company and the investors named therein | |
|
|
||
|
99.1
|
Press release, dated October 5, 2010 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CYCLACEL PHARMACEUTICALS, INC. | ||
| By: | /s/ Paul McBarron | |
|
|
Name: Paul McBarron Title: Executive Vice President—Finance, Chief Financial Officer and Chief Operating Officer |
|
Date: October 5, 2010
Exhibit 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY, MAY NOT BE TRANSFERRED
UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
CYCLACEL PHARMACEUTICALS, INC.
Warrant To Purchase Common Stock
Warrant No.:
Number of Shares of Common Stock:
Date of Issuance: October [_____], 2010 (“Issuance Date”)
Number of Shares of Common Stock:
Date of Issuance: October [_____], 2010 (“Issuance Date”)
Cyclacel Pharmaceuticals, Inc., a Delaware corporation (the “Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
[INVESTOR NAME], the registered holder hereof or its permitted assigns (the “Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock (including
any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the
“Warrant”), at any time or times on or after [_____
(_____) days] after the date hereof
(the “Exercisability Date”), but not after 11:59 p.m., New York time, on the Expiration Date (as
defined below), [_____ (_____)] fully paid non-assessable shares of Common Stock
(as defined below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms
in this Warrant shall have the meanings set forth in Section 16. This Warrant is one of a
series of similar warrants to purchase Common Stock issued pursuant to that certain Securities
Purchase Agreement, dated as of October 4, 2010 (the “SPA Date”), by and between the Company and
the Holder (the “Securities Purchase Agreement”). All such warrants are referred to herein,
collectively, as the “Warrants.”
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant
may be exercised by the Holder on any day on or after the Exercisability Date, in whole or in part,
by delivery of a written notice, in the form attached hereto as Exhibit A (the
“Exercise Notice”), of the Holder’s election to
exercise this Warrant. Within two (2) Trading Days of the date
of the Exercise Notice, the Holder shall make payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate Exercise Price”) in cash or by wire transfer of immediately available funds or (B)
provided the conditions for cashless exercise set forth in Section 1(d) are satisfied, by
notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)). The Holder shall not be required to deliver the original Warrant
in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares 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 Warrant Shares. On or before the first (1st) Business Day following the date
on which the Company has received the Exercise Notice, the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the
Holder and American Stock Transfer & Trust Company (the Company’s “Transfer Agent”). On or before
the third
(3rd)
Business Day following the date on which the Company has received the
Exercise Notice (the “Share Delivery Date”), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such aggregate number of
Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system, or (Y) if
the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program,
issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company’s share register in the name of the Holder or its designee,
for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.
Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as
the case may be. If this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for
exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3) Business Days after any
exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of
this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to
the nearest whole number. In the event the Registration Statement is not effective at the time
this Warrant is exercised, there is no circumstance that would require the Company to net cash
settle this Warrant. The Company shall pay any and all transfer taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.
(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $1.92,
subject to adjustment as provided herein.
2
(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail for any
reason or for no reason to issue to the Holder within three (3) Business Days of receipt of the
Exercise Notice in compliance with the terms of this Section 1, a certificate
for the number of shares of Common Stock to which the Holder is entitled and register such shares
of Common Stock on the Company’s share register or to credit the Holder’s balance
account with DTC for such number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise of this Warrant, and if on or after such Trading Day the Holder
purchases, or any third party on behalf of such Investor or for the Investor’s account purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3)
Business Days after the Holder’s written request and in the Holder’s discretion, either (i) pay
cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Warrant 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 shares of Common Stock,
times (B) the Closing Bid Price on the date of exercise.
(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary, if
a registration statement covering the Warrant Shares that are the subject of the Exercise Notice
(the “Unavailable Warrant Shares”), or an exemption from registration, is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be
made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of Common Stock determined according to the
following formula (a “Cashless Exercise”):
Net Number =
|
(A x B) - (A x C) | ||
| B |
For purposes of the foregoing formula:
A=
|
the total number of shares with respect to which this Warrant is then being exercised. | |
B=
|
the arithmetic average of the Closing Sale Prices of the shares of Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice. | |
C=
|
the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise. |
(e) Rule 144. For purposes of Rule 144(d) promulgated under the Securities Act, as in
effect on the date hereof, assuming the Holder is not an affiliate of the Company, it is intended
that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the
date this Warrant was originally issued pursuant to the Securities Purchase Agreement.
3
(f) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder
the number of Warrant Shares that are not disputed.
(g) Registration of Warrant. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record
Holder hereof from time to time. The Company may deem and treat the registered Holder of record of
this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
(h) Registration of Transfers. The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of
Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at
its address specified herein. Upon any such registration of transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
(i) Percentage Limitation. Notwithstanding anything herein to the contrary, the
exercise of this Warrant shall be limited to the extent that, upon exercise hereof, the number of
shares of Common Stock issuable upon such exercise, when added to the number of shares of Common
Stock then beneficially owned by such Holder and any Person whose beneficial ownership of Common
Stock would be aggregated with such Holder for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), would cause the total number of shares of Common
Stock beneficially owned by such Holder and any such Person to exceed
[4.99%] OR [9.99%] OR [19.99%] of the total number of outstanding shares of Common Stock of the Company at the time of such issuance (the
“Maximum Aggregate Share Amount”), provided, however, that this Section 1(i) shall not
apply to the exercise of this Warrant in connection with any Fundamental Transaction involving the
acquisition of the Company by a third party. Upon the reasonable written or oral request of the
Holder, the Company shall within two (2) business days confirm in writing to such Holder the number
of shares of Common Stock then outstanding. For purposes of this Section 1(i), beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. If on any attempted exercise of this Warrant, the issuance
of shares of Common Stock for which this Warrant is exercised would cause the Maximum Aggregate
Share Amount to be exceeded, then the Company shall issue to the Holder such number of shares of
Common Stock as may be issued without exceeding the Maximum Aggregate Share Amount and, with
respect to the remainder of the aggregate number of shares of Common Stock, this Warrant shall
remain exercisable.
4
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Adjustment upon Subdivision or Combination of Common Stock. If the Company at any
time on or after the SPA Date subdivides (by any stock split, stock dividend, recapitalization,
reorganization, scheme, arrangement or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the SPA Date combines (by any
stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will be proportionately increased
and the number of Warrant Shares will be proportionately decreased. Any adjustment under this
Section 2(a) shall become effective at the close of business on the date the subdivision or
combination becomes effective.
(b) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights or phantom stock rights), then the Company’s
Board of Directors will make an appropriate adjustment in the Exercise Price and the number of
Warrant Shares so as to protect the rights of the Holder; provided that no such adjustment pursuant
to this Section 2(b) will increase the Exercise Price or decrease the number of Warrant
Shares as otherwise determined pursuant to this Section 2.
3. RIGHTS UPON DISTRIBUTION OF ASSETS.
(a) If at any time or from time to time the holders of Common Stock of the Company (or any
shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment therefor:
(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
2(a) above);
(ii) any cash paid or payable otherwise than as a cash dividend; or
(iii) Common Stock or additional stock or other securities or property (including cash)
by way of spinoff, split-up, reclassification, combination of shares or similar corporate
rearrangement (other than shares of Common Stock pursuant to Section 2(a) above),
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.
5
(b) Upon the occurrence of each adjustment pursuant to this Section 3, 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 number or type of Warrant 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
Company’s transfer agent.
4. FUNDAMENTAL TRANSACTIONS. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes this Warrant in accordance with the
provisions of this Section 4, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of
such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock
equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Holder. Upon the occurrence of any Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of
such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein. In addition to and not in substitution for
any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to
which holders of shares of Common Stock are entitled to receive securities or other assets with
respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon an
exercise of this Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash,
assets or other property) purchasable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder would have been
entitled to receive upon the happening of such Fundamental Transaction had the Warrant been
exercised immediately prior to such Fundamental Transaction. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction. The provisions of this Section 4
shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and
shall be applied without regard to any limitations on the exercise of this Warrant.
Notwithstanding the foregoing, in the event of a Fundamental Transaction (i) in which holders of
Common Stock receive all cash or substantially all cash or (ii) with a Person whose common
stock or equivalent equity security is not quoted or listed on an Eligible Market, and, in either
case, at the request of the Holder delivered within 30 days after consummation of the Fundamental
Transaction, the Company (or the Successor Entity) shall purchase this Warrant from the Holder by
paying to the Holder, within seven Business Days after such request (or, if later, on the effective
date of the Fundamental Transaction), cash in an amount equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such Fundamental Transaction.
6
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, 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 of this Warrant, and will at all times in good faith comply with all the
provisions of this Warrant and take all actions consistent with effectuating the purposes of this
Warrant. Without limiting the generality of the foregoing, the Company (i) shall not increase the
par value of any shares of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (iii) shall, so long as this Warrant is
outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Warrant,
100% of the number of shares of Common Stock issuable upon exercise of this Warrant then
outstanding (without regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s 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 Person’s 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 Warrant Shares which such Person 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.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. Subject to Section 14 of this Warrant, if this
Warrant is to be transferred, the Holder shall surrender this Warrant to the Company and deliver
the completed and executed Assignment Form, in the form attached hereto as Exhibit B,
whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant
(in accordance with Section 7(d)), registered as the Holder may request, representing the
right to purchase the number of Warrant Shares being transferred by the Holder and, if less
then the total number of Warrant Shares then underlying this Warrant is being transferred, a new
Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase
the number of Warrant Shares not being transferred.
7
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to
purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will
represent the right to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for fractional shares of Common
Stock shall be given. Notwithstanding anything to the contrary herein, in no event shall the
original Warrant be subdivided into more than three (3) separate Warrants and such new Warrants
shall not be further subdivided.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the
Holder which, when added to the number of shares of Common Stock underlying the other new Warrants
issued in connection with such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new
Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions
as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section 7.4 of the
Securities Purchase Agreement.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the Holder.
10. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York.
8
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two (2)
Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by the Holder, which
approval shall not be unreasonably withheld, or (b) the disputed arithmetic calculation of the
Warrant Shares to the Company’s independent, outside accountant. The Company shall cause the
investment bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than ten Business Days
from the time it receives the disputed determinations or calculations. The prevailing party in any
dispute resolved pursuant to this Section 12 shall be entitled to the full amount of all reasonable
expenses, including all costs and fees paid or incurred in good faith, in relation to the
resolution of such dispute. Such investment bank’s or accountant’s determination or calculation,
as the case may be, shall be binding upon all parties absent demonstrable error.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages
for any failure by the Company to comply with the terms of this Warrant.
9
14. TRANSFER. Subject to compliance with applicable laws, this Warrant may not be
offered for sale, sold, transferred or assigned without the consent of the Company, such consent
not to be unreasonably withheld or delayed.
15. WARRANT AGENT. The Company shall serve as warrant agent under this Warrant. Upon
30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its corporate trust or
stockholder services business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.
16. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:
(a) “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 using (i) a price per share of
Common Stock equal to the Weighted Average Price of the Common Stock for the Trading Day
immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) a
risk-free interest rate corresponding to the U.S. Dollar — LIBOR swap rate for a period equal to
the remaining term of this Warrant as of the date of consummation of the applicable Fundamental
Transaction, (iii) an expected volatility equal to the greater of 100% or the 30-day volatility on the HVT function on Bloomberg determined for the Trading Day immediately following the date
of the public announcement of the applicable Fundamental Transaction, and (iv) a remaining option time equal
to the number of calendar days between the date of the public announcement of the applicable Fundamental Transaction
and the expiration of the Exercise Period.
(b) “Bloomberg” means Bloomberg Financial Markets.
(c) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.
(d) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or the last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such security, the last closing bid price
or last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is
reported for such security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date
shall be the fair market value as mutually determined by the Company and the Holder. All such
determinations to be appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during the applicable calculation period.
10
(e) “Common Stock” means (i) the Company’s shares of Common Stock, par value $0.001 per share,
and (ii) any share capital into which such Common Stock shall have been changed or any share
capital resulting from a reclassification of such Common Stock.
(f) “Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for shares of Common Stock.
(g) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., The
American Stock Exchange, The NASDAQ Global Market or The NASDAQ Capital Market.
(h) “Expiration Date” means the date that is five (5) years following the Issuance Date or, if
such date falls on a day other than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”), the next date that is not a Holiday.
(i) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person (but excluding a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Company), or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the properties or assets of
the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange
offer that is accepted by 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), or (iv) consummate 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 (v) reorganize, recapitalize or
reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock; or (vii) the dissolution,
liquidation or winding up of the Company, whether voluntary or involuntary.
11
(j) “Options” means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.
(k) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(l) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(m) “Principal Market” means The NASDAQ Global Market.
(n) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered
into.
(o) “Trading Day” means any day on which the Common Stock are traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock are then traded;
provided that “Trading Day” shall not include any day on which the Common Stock are scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time).
(p) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period beginning
at 9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as reported by
Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for such security by Bloomberg for such hours, the
average of the highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for such security on
such date on any of the foregoing bases, the Weighted Average Price of such security on such date
shall be the fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 12 with the term “Weighted Average Price”
being substituted for the term “Exercise Price.” All such determinations shall be
appropriately adjusted for any share dividend, share split or other similar transaction during
such period.
[Signature Page Follows]
12
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.
| CYCLACEL PHARMACEUTICALS, INC. | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
WARRANT TO PURCHASE COMMON STOCK
CYCLACEL PHARMACEUTICALS, INC.
The undersigned holder hereby exercises the right to purchase
_____
of the shares
of Common Stock (“Warrant Shares”) of Cyclacel Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price
shall be made as:
a “Cash Exercise” with respect to
_____
Warrant Shares; and/or
a “Cashless Exercise” with respect to
_____
Warrant
Shares.
2. Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder
shall pay the Aggregate Exercise Price in the sum of $_____ to the Company in
accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
_____
Warrant Shares in accordance with the terms of the Warrant and, after delivery of such Warrant
Shares,
_____
Warrant Shares remain subject to the Warrant.
Date: _______________ __, ______
By: |
||||||
| Name: | ||||||
| Title: | ||||||
A-1
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs American Stock
Transfer & Trust Company to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated [__________ ____], 20[_____] from the Company and
acknowledged and agreed to by American Stock Transfer & Trust Company.
| CYCLACEL PHARMACEUTICALS, INC. | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
A-2
EXHIBIT B
ASSIGNMENT FORM
CYCLACEL PHARMACEUTICALS, INC.
(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
Name: |
||||
Address: |
||||
Dated: ______ ___,
_____
Holder’s Signature:
|
Holder’s Address:
|
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.
B-1
Exhibit 10.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 4th day of October, 2010 by and among
Cyclacel Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the Investors set forth
on the signature pages affixed hereto (each an “Investor” and collectively the “Investors”).
Recitals
A. The Company and the Investors are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by the provisions of Regulation D (“Regulation
D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities
Act of 1933, as amended; and
B. The Investors wish to purchase from the Company, and the Company wishes to sell and issue
to the Investors, upon the terms and subject to the conditions stated in this Agreement, units (the
“Firm Units”) at a purchase price of $1.82625 per Unit (the “Per Unit Purchase Price”), each Firm
Unit consisting of (i) one (1) share (collectively, the “Firm Shares”) of the Company’s Common
Stock, par value $0.001 per share (together with any securities into which such shares may be
reclassified, whether by merger, charter amendment or otherwise, the “Common Stock”), and (ii) 0.5
of a warrant in the form attached hereto as Exhibit A (the “Firm Warrants”), each whole
Firm Warrant representing the right to purchase one (1) share (collectively, the “Firm Warrant
Shares”) of Common Stock (subject to adjustment) at an exercise price of $1.92 per share (subject
to adjustment) (the “Warrant Exercise Price”);
C. Upon the terms and subject to the conditions set forth herein, the Investors will have the
nontransferable option to acquire additional units (the “Option Units”) at a price of $1.67 (the
“Per Option Unit Purchase Price”), each Option Unit consisting of (i) one (1) share (collectively,
the “Option Shares”) of Common Stock, and (ii) 0.5 of a warrant in the form attached hereto as
Exhibit A (the “Option Warrants”), each whole Option Warrant representing the right to
purchase one (1) share (collectively, the “Option Warrant Shares”) of Common Stock (subject to
adjustment) at an exercise price equal to the Warrant Exercise Price.
D. Contemporaneous with the sale of the Firm Units, the parties hereto will execute and
deliver a Registration Rights Agreement, in the form attached hereto as Exhibit B (the
“Registration Rights Agreement”), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common
Control with, such Person.
“Business Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.
“Closing” means, collectively, the Firm Closing and any Option Closing.
“Closing Date” means, collectively, the Firm Closing Date and any Option Closing Date.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock, including without
limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.
“Company’s Knowledge” means the actual knowledge of the executive officers (as defined
in Rule 405 under the 1933 Act) of the Company, after due inquiry.
“Confidential Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans, and customer and
supplier lists and related information).
“Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
“Effective Date” means the date on which the Registration Statement covering the
Registrable Securities (as defined in the Registration Rights Agreement) is declared effective by
the SEC.
“Intellectual Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos,
slogans and Internet domain names, together with all goodwill associated with each of the
foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals
for any of the foregoing; and (v) proprietary computer software (including but not limited to data,
data bases and documentation).
-2-
“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), business, or prospects of
the Company and its Subsidiaries taken as a whole, (ii) the legality or enforceability of any of
the Transaction Documents or (iii) the ability of the Company to perform its obligations under the
Transaction Documents.
“Material Contract” means any contract, instrument or other agreement to which the
Company or any Subsidiary is a party or by which it is bound which is material to the business of
the Company and its Subsidiaries, taken as a whole, including those that have been filed or were
required to have been filed as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item
601(b)(10) of Regulation S-K.
“Nasdaq” means The Nasdaq Global Market.
“Person” means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.
“Preferred Stock” the Company’s 6% Convertible Exchangeable Preferred Stock.
“Registration Statement” has the meaning set forth in the Registration Rights
Agreement.
“Required Investors” has the meaning set forth in the Registration Rights Agreement.
“SEC Filings” has the meaning set forth in Section 4.6.
“Securities” means the Units, the Shares, the Warrants and the Warrant Shares.
“Shares” means, collectively, the Firm Shares and the Option Shares.
“SSF Investors” means the Investors affiliated with AWM Investment Company, Inc.
“Subsidiary” of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or indirectly by such
first Person.
-3-
“Transaction Documents” means this Agreement, the Warrants and the Registration Rights
Agreement.
“Units” means, collectively, the Firm Units and the Option Units.
“Warrants” means, collectively, the Firm Warrants and the Option Warrants.
“Warrant Shares” means, collectively, the Firm Warrant Shares and the Option Warrant
Shares.
“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations promulgated thereunder.
“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, on the Firm Closing Date (as
defined below), each of the Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Investors, the Firm Units in the respective amounts set forth opposite
the Investors’ names on the signature pages attached hereto in exchange for payment as specified in
Section 3 below of an aggregate purchase price equal to the Per Unit Purchase Price multiplied by
the number of Firm Units to be purchased by each Investor as set forth opposite the Investors’
names on the signature pages attached hereto. The Firm Units will not be certificated and the Firm
Shares and the Firm Warrants included therein shall be immediately separable and shall trade
separately.
(b) The Company hereby grants to each Investor the nontransferable option (the “Option”) to
acquire Option Units in an amount equal to 50% of the Firm Units acquired by such Investor on the
Firm Closing Date at the Per Option Unit Purchase Price. The Option may be exercised by an
Investor in whole or in part and from time to time at any time on or prior to 5:00 p.m., New York
time, on the date which is nine (9) months from the Firm Closing Date (as defined below) (the
“Expiration Time”). Any Investor exercising its Option is hereinafter referred to as an
“Exercising Investor.” Any Investor wishing to exercise its Option shall give written notice to
the Company of such exercise (an “Exercise Notice”) on or prior to the Expiration Time, which
Exercise Notice shall be irrevocable and shall specify the number of Option Units to be acquired by
such Investor and the date on which the Option exercise is to be consummated (an “Option Closing
Date”), which Option Closing Date shall not be less than three (3) Business Days or more than five
(5) Business Days after the date on which the Exercise Notice is given to the Company. Subject to
the terms and conditions of this Agreement, on any Option Closing Date, the Exercising Investor
shall purchase, and the Company shall sell and issue to such Exercising Investor, the Option Units
set forth in the Exercising Investor’s Exercise Notice in exchange for payment as specified in
Section 3 below of an aggregate purchase price equal to the Per Option Unit Purchase Price
multiplied by the number of Option Units to be purchased by the Exercising Investor on the Option
Closing Date. The Option Units will not be
certificated and the Option Shares and the Option Warrants included therein shall be immediately
separable and shall trade separately.
-4-
(c) In the event that the Options granted to the Investors pursuant to Section 2(b) have not
been exercised in full on or prior to the Expiration Date, the Company shall provide written notice
thereof to the Investors that have exercised their Options in full on or prior to the Expiration
Date (the “Exercising Investors”) not later than 5:00 p.m., New York time, on the second Business
Day after the Expiration Time, which notice shall specify the number of Option Units that have not
been purchased by the other Investors (the “Remaining Option Units”). The Exercising Investors
shall have the nontransferable right, exercisable in whole or in part and from time to time on or
prior to 5:00 p.m., New York time, on the tenth Business Day following the Expiration Date (the
“Additional Expiration Time”), to purchase some or all of the Remaining Option Units not purchased
by the other Investors at the Per Option Unit Purchase Price. Any Participating Investor wishing
to exercise its right to acquire some or all of the Remaining Option Units shall provide an
Exercise Notice to the Company on or prior to the Additional Expiration Time, which Exercise Notice
shall be irrevocable and shall specify the number of Remaining Option Units the Participating
Investor wishes to acquire. An Exercising Investor delivering such an Exercise Notice with respect
to the Remaining Option Units is hereinafter referred to as a “Participating Investor.” In the
event that the number of Remaining Option Units available for sale exceeds the number of Remaining
Option Units set forth in the Exercise Notices of the Participating Investors, the Remaining Option
Units shall be allocated among the Participating Investors on a pro rata basis based on a fraction,
the numerator of which is the number of Remaining Option Units sought to be purchased by a
Participating Investor and the denominator of which is the number of Remaining Option Units sought
to be purchased by all of the Participating Investors. No later than two (2) Business Days after
the Additional Expiration Time, the Company shall notify each Participating Investor in writing of
the number of Remaining Option Units allocated to such Investor pursuant hereto. On the fifth
Business Day after the Additional Expiration Time (or such other time and date as the Company and
the Participating Investors may agree), each Participating Investor shall purchase, and the Company
shall sell and issue to such Participating Investor, the Remaining Option Units allocated to such
Participating Investor in exchange for payment as specified in Section 3 below of an aggregate
purchase price equal to the Per Option Unit Purchase Price multiplied by the number of Remaining
Option Units to be purchased by such Participating Investor on the date specified above (which
shall be deemed to be an Option Closing Date). The Remaining Option Units will not be certificated
and the Option Shares and the Option Warrants included therein shall be immediately separable and
shall trade separately.
3. Closing.
(a) Unless other arrangements have been made with a particular Investor, upon confirmation
that the other conditions to closing specified herein have been satisfied or duly waived by the
Investors, the Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate, representing the
Firm Shares and Firm Warrants included in the Firm Units, with instructions that such certificates
are to be held for release to each Investor only upon payment in full by such Investor of the
purchase price to be paid by the Investor for the Firm Units acquired by it.
Unless other arrangements have been made with a particular Investor, upon such receipt by
Lowenstein Sandler PC of the certificates, each Investor shall promptly, but no more than one (1)
Business Day thereafter, cause a wire transfer in same day funds to be sent to the account of the
Company as instructed in writing by the Company, in an amount equal to the purchase price to be
paid by the Investor for the Firm Units acquired by it. On the date (the “Firm Closing Date”) the
Company receives payment for the purchase price from all of the Investors, the certificates
evidencing the Firm Shares and the Firm Warrants shall be released to the Investors (the “Firm
Closing”). The Firm Closing shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue
of the Americas, 18th Floor, New York, New York 10020, or at such other location and on such other
date as the Company and the Investors shall mutually agree.
-5-
(b) Unless other arrangements have been made with a particular Exercising Investor, upon
confirmation that the other conditions to closing specified herein have been satisfied or duly
waived by such Exercising Investor, prior to an Option Closing Date the Company shall deliver to
Lowenstein Sandler PC, in trust, a certificate or certificates, registered in such name or names as
the Exercising Investor may designate, representing the Option Shares and Option Warrants included
in the Option Units being acquired, with instructions that such certificates are to be held for
release to the Exercising Investor only upon payment in full by such Exercising Investor of the
purchase price to be paid by the Exercising Investor for the Option Units acquired by it. Unless
other arrangements have been made with a particular Exercising Investor, upon such receipt by
Lowenstein Sandler PC of the certificates, on the Option Closing Date the Exercising Investor shall
cause a wire transfer in same day funds to be sent to the account of the Company as instructed in
writing by the Company, in an amount equal to the purchase price to be paid by the Exercising
Investor for the Option Units acquired by it. Upon receipt by the Company of payment for the
purchase price from the Exercising Investor, the certificates evidencing the Option Shares and the
Option Warrants shall be released to the Exercising Investor (an “Option Closing”). Each Option
Closing shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th
Floor, New York, New York 10020, or at such other location and on such other date as the Company
and the Exercising Investor shall mutually agree.
4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”):
4. 1 Organization, Good Standing and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power and authority to
carry on its business as now conducted and to own or lease its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or leasing of property
makes such qualification or leasing necessary unless the failure to so qualify has not had and
could not reasonably be expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule 4.1 hereto.
-6-
4.2 Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and stockholders necessary for
(i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization
of the performance of all obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the Securities. The
Transaction Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally and to general equitable principles.
4.3 Capitalization. Schedule 4.3 sets forth as of the date hereof (a) the
authorized capital stock of the Company; (b) the number of shares of capital stock issued and
outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock
plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company. All of the issued and outstanding
shares of the Company’s capital stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of pre-emptive rights and were issued in compliance in all material
respects with applicable state and federal securities law and any rights of third parties. Except
as described on Schedule 4.3, all of the issued and outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights, were issued in full compliance with applicable state and federal
securities law and any rights of third parties and are owned by the Company, beneficially and of
record, subject to no lien, encumbrance or other adverse claim. Except as described on
Schedule 4.3, no Person is entitled to pre-emptive or similar statutory or contractual
rights with respect to any securities of the Company. Except as described on Schedule 4.3,
there are no outstanding warrants, options, convertible securities or other rights, agreements or
arrangements of any character under which the Company or any of its Subsidiaries is or may be
obligated to issue any equity securities of any kind and except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of
any equity securities of any kind. Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held by them. Except as
described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the Company under the
1933 Act, whether on a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.
Except as described on Schedule 4.3, the issuance and sale of the Securities hereunder
will not obligate the Company to issue shares of Common Stock or other securities to any other
Person (other than the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.
-7-
Except as described on Schedule 4.3, the Company does not have outstanding stockholder
purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right
to purchase any equity interest in the Company upon the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and
shall be free and clear of all encumbrances and restrictions (other than those created by the
Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws. The Warrants have been duly and validly authorized. Upon the due
exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable
free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws and except for those created
by the Investors. The Company has reserved a sufficient number of shares of Common Stock for
issuance upon the exercise of the Warrants.
4.5 Consents. The execution, delivery and performance by the Company of the
Transaction Documents and the offer, issuance and sale of the Securities require no consent of,
action by or in respect of, or filing with, any Person, governmental body, agency, or official
other than filings that have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws and the rules and regulations of
Nasdaq which the Company undertakes to file within the applicable time periods. Subject to the
accuracy of the representations and warranties of each Investor set forth in Section 5 hereof, the
Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii)
the issuance of the Warrant Shares upon due exercise of the Warrants, and (iii) the other
transactions contemplated by the Transaction Documents from the provisions of any stockholder
rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control
share law or statute binding on the Company or to which the Company or any of its assets and
properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws
that is or could reasonably be expected to become applicable to the Investors as a result of the
transactions contemplated hereby, including without limitation, the issuance of the Securities and
the ownership, disposition or voting of the Securities by the Investors or the exercise of any
right granted to the Investors pursuant to this Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made available to the
Investors through the EDGAR system, true and complete copies of the Company’s most recent Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 (as amended prior to the date
hereof, the “10-K”), and all other reports filed by the Company pursuant to the 1934 Act since the
filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings
are the only filings required of the Company pursuant to the 1934 Act for such period. The Company
and its Subsidiaries are engaged in all material respects only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate description in all material respects of
the business of the Company and its Subsidiaries, taken as a whole.
-8-
4.7 Use of Proceeds. The net proceeds of the sale of the Shares and the Warrants
hereunder shall be used by the Company for working capital and general corporate purposes,
including, at the Company’s sole option, the payment of dividends on the Company’s outstanding
Preferred Stock in accordance with the terms thereof as in effect on the date hereof.
4.8 No Material Adverse Change. Since June 30, 2010, except as identified and
described in the SEC Filings or as described on Schedule 4.8, there has not been:
(i) any change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included in the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, except for changes in the
ordinary course of business which have not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or repurchase of any
securities of the Company;
(iii) any material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company or its Subsidiaries;
(iv) any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a
material right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of business and which is
not material to the assets, properties, financial condition, operating results or business of the
Company and its Subsidiaries taken as a whole (as such business is presently conducted and as it is
proposed to be conducted);
(vi) any change or amendment to the Company’s Certificate of Incorporation or Bylaws, or
material change to any material contract or arrangement by which the Company or any Subsidiary is
bound or to which any of their respective assets or properties is subject;
(vii) any material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;
(viii) any material transaction entered into by the Company or a Subsidiary other than in the
ordinary course of business;
(ix) the loss of the services of any key employee, or material change in the composition or
duties of the senior management of the Company or any Subsidiary;
(x) the loss or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect.
-9-
4.9 SEC Filings.
(a) At the time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each registration statement and any amendment thereto filed by the Company since January
1, 2007 pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such
statement or amendment became effective, complied as to form in all material respects with the 1933
Act and did not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue
date and as of the closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.
4.10 No Conflict, Breach, Violation or Default. The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and sale of the Securities
will not (i) conflict with or result in a breach or violation of (a) any of the terms and
provisions of, or constitute a default under the Company’s Certificate of Incorporation or the
Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been
made available to the Investors through the EDGAR system), or (b) any applicable statute, rule,
regulation or order of any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or
(ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any lien, encumbrance or other adverse
claim upon any of the properties or assets of the Company or any Subsidiary or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any Material Contract. This Section does not relate to matters with respect to
tax status, which are the subject of Section 4.11, employee relations and labor matters, which are
the subject of Section 4.14, and environmental laws, which are the subject of Section 4.16
4.11 Tax Matters. The Company and each Subsidiary has timely prepared and filed all
tax returns required to have been filed by the Company or such Subsidiary with all appropriate
governmental agencies and timely paid all taxes shown thereon or otherwise owed by it. The
charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material unpaid assessments against
the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party when due. There
are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company
or any Subsidiary or any of their respective assets or property. Except as described on
Schedule 4.11, there are no outstanding tax sharing agreements or other such arrangements
between the Company and any Subsidiary or other corporation or entity.
-10-
4.12 Title to Properties. Except as disclosed in the SEC Filings, the Company and
each Subsidiary has good and marketable title to all real properties and all other properties and
assets owned by it, in each case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or currently planned to be made
thereof by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds
any leased real or personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or currently planned to be made thereof by them.
4.13 Certificates, Authorities and Permits. The Company and each Subsidiary possess
adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary
has received any written notice of proceedings relating to the revocation or modification of any
such certificate, authority or permit that, if determined adversely to the Company or such
Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate, on the Company and its Subsidiaries, taken as a whole.
4.14 Labor Matters.
(a) Except as set forth on Schedule 4.14, the Company is not a party to or bound by
any collective bargaining agreements or other agreements with labor organizations. The Company has
not violated in any material respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws, regulations or orders
affecting employment discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours.
(b) (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other
disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions
for election pending or, to the Company’s Knowledge, threatened before the National Labor Relations
Board or any other federal, state or local labor commission relating to the Company’s employees,
(iii) no demand for recognition or certification heretofore made by any labor organization or group
of employees is pending with respect to the Company and (iv) to the Company’s Knowledge, the
Company enjoys good labor and employee relations with its employees and labor organizations.
-11-
(c) The Company is, and at all times has been, in compliance in all material respects with all
applicable laws respecting employment (including laws relating to classification of employees and
independent contractors) and employment practices, terms and conditions of employment, wages and
hours, and immigration and naturalization. There are no claims pending against the Company before
the Equal Employment Opportunity Commission or any other administrative body or in any court
asserting any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of
1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or local Law, statute or ordinance
barring discrimination in employment.
(d) Except as disclosed in the SEC Filings or as described on Schedule 4.14, the
Company is not a party to, or bound by, any employment or other contract or agreement that contains
any severance, termination pay or change of control liability or obligation, including, without
limitation, any “excess parachute payment,” as defined in Section 280G(b) of the Internal Revenue
Code.
(e) Except as specified in Schedule 4.14, each of the Company’s employees is a Person
who is either a United States citizen or a permanent resident entitled to work in the United
States. To the Company’s Knowledge, the Company has no liability for the improper classification
by the Company of such employees as independent contractors or leased employees prior to the
Closing.
4.15 Intellectual Property.
(a) All Intellectual Property of the Company and its Subsidiaries is currently in compliance
with all legal requirements (including timely filings, proofs and payments of fees) and, to the
Company’s Knowledge, is valid and enforceable. No Intellectual Property of the Company or its
Subsidiaries which is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be conducted has been or
is now involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no
such action is threatened. Except as disclosed in the SEC Filings, no patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All of the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted
to which the Company or any Subsidiary is a party or by which any of their assets are bound (other
than generally commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license) (collectively, “License
Agreements”) are valid and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and there exists no event or condition which will
result in a material violation or breach of or
constitute (with or without due notice or lapse of time or both) a default by the Company or any of
its Subsidiaries under any such License Agreement.
-12-
(c) The Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted
and for the ownership, maintenance and operation of the Company’s and its Subsidiaries’ properties
and assets, free and clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Intellectual Property and Confidential Information, other than licenses entered into in
the ordinary course of the Company’s and its Subsidiaries’ businesses. The Company and its
Subsidiaries have a valid and enforceable right to use all third party Intellectual Property and
Confidential Information used or held for use in the respective businesses of the Company and its
Subsidiaries.
(d) The conduct of the Company’s and its Subsidiaries’ businesses as currently conducted does
not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual
Property rights of any third party or any confidentiality obligation owed to a third party, and, to
the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company and
its Subsidiaries which are necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be conducted are not being
Infringed by any third party. There is no litigation or order pending or outstanding or, to the
Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or Confidential Information
of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual
Property or Confidential Information owned by a third party, and, to the Company’s Knowledge, there
is no valid basis for the same.
(e) The consummation of the transactions contemplated hereby and by the other Transaction
Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or
any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be conducted.
(f) The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and
its Subsidiaries’ rights in their Intellectual Property and Confidential Information. Each
employee, consultant and contractor who has had access to Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has executed an agreement to maintain
the confidentiality of such Confidential Information and has executed appropriate agreements that
are substantially consistent with the Company’s standard forms thereof. Except under
confidentiality obligations, there has been no material disclosure of any of the Company’s or its
Subsidiaries’ Confidential Information to any third party.
-13-
4.16 Environmental Matters. Neither the Company nor any Subsidiary is in violation of
any statute, rule, regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), has released any hazardous substances
regulated by Environmental Law on to any real property that it owns or operates, has received any
written notice or claim it is liable for any off-site disposal or contamination pursuant to any
Environmental Laws which violation, release, notice, claim, or liability could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate; and to the Company’s
Knowledge, there is no pending or threatened investigation that might lead to such a claim.
4.17 Litigation. Except as disclosed in the SEC Filings, there are no pending
actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or
their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are
threatened or contemplated. Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or since January 1, 2005 has been the subject of any action involving a claim of
violation of or liability under federal or state securities laws or a claim of breach of fiduciary
duty. There has not been, and to the Company’s Knowledge, there is not pending or contemplated,
any investigation by the SEC involving the Company or any current or former director or officer of
the Company. The SEC has not issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company or any Subsidiary under the 1933 Act or the 1934
Act.
4.18 Financial Statements. The financial statements included in each SEC Filing
comply in all material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing (or to the extent
corrected by a subsequent restatement) and present fairly, in all material respects, the
consolidated financial position of the Company as of the dates shown and its consolidated results
of operations and cash flows for the periods shown, and such financial statements have been
prepared in conformity with United States generally accepted accounting principles applied on a
consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the
case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings filed prior to the
date hereof or as described on Schedule 4.18, neither the Company nor any of its
Subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the
ordinary course of business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect.
4.19 Insurance Coverage. The Company and each Subsidiary maintains in full force and
effect insurance coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to insure.
-14-
4.20 Compliance with Nasdaq Continued Listing Requirements. The Company is in
compliance with applicable Nasdaq continued listing requirements. There are no proceedings pending
or, to the Company’s Knowledge, threatened against the Company relating to the continued listing of
the Common Stock on Nasdaq and the Company has not received any notice of, nor to the Company’s
Knowledge is there any basis for, the delisting of the Common Stock from Nasdaq.
4.21 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of the Company, other than
as described in Schedule 4.21.
4.22 No Directed Selling Efforts or General Solicitation. Neither the Company nor any
Person acting on its behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any of the Securities.
4.23 No Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any
Company security or solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the Securities under the 1933
Act.
4.24 Private Placement. Assuming the accuracy of the representations and warranties
of the Investors set forth in Section 5, the offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933 Act.
4.25 Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to
the Company’s Knowledge, any of their respective current or former directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the
Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (d) made any false or fictitious entries on the books and records
of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.
4.26 Transactions with Affiliates. Except as disclosed in the SEC Filings or as
disclosed on Schedule 4.26, none of the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director, trustee or
partner.
-15-
4.27 Internal Controls. The Company is in material compliance with the provisions of
the Sarbanes-Oxley Act of 2002 currently applicable to the Company. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material information relating to
the Company, including the Subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company’s most recently filed periodic
report under the 1934 Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of
the period covered by the most recently filed periodic report under the 1934 Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic report under the
1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no significant changes in the Company’s internal controls (as such term is
defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other factors that could
significantly affect the Company’s internal controls. The Company maintains and will continue to
maintain a standard system of accounting established and administered in accordance with GAAP and
the applicable requirements of the 1934 Act.
4.28 Disclosures. Neither the Company nor any Person acting on its behalf has
provided the Investors or their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the terms of the transactions contemplated
hereby. The written materials delivered to the Investors in connection with the transactions
contemplated by the Transaction Documents do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
4.29 Investment Company. The Company is not required to be registered as, and is not
an Affiliate of, and immediately following the Closing will not be required to register as, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended.
-16-
5. Representations and Warranties of the Investors. Each of the Investors hereby
severally, and not jointly, represents and warrants to the Company that:
5.1 Organization and Existence. Such Investor is a validly existing corporation,
limited partnership or limited liability company and has all requisite corporate, partnership or
limited liability company power and authority to invest in the Securities pursuant to this
Agreement.
5.2 Authorization. The execution, delivery and performance by such Investor of the
Transaction Documents to which such Investor is a party have been duly authorized and each will
constitute the valid and legally binding obligation of such Investor, enforceable against such
Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability, relating to or
affecting creditors’ rights generally.
5.3 Purchase Entirely for Own Account. The Securities to be received by such Investor
hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the 1933 Act, and such
Investor has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s
right at all times to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so registered.
5.4 Investment Experience. Such Investor acknowledges that it can bear the economic
risk and complete loss of its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.
5.5 Disclosure of Information. Such Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor shall modify, limit
or otherwise affect such Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.
5.6 Restricted Securities. Such Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
1933 Act only in certain limited circumstances.
-17-
5.7 Legends. It is understood that, except as provided below, certificates evidencing
the Securities may bear the following or any similar legend:
(a) “The securities represented hereby have not been registered with the Securities and
Exchange Commission or the securities commission of any state in reliance upon an exemption from
registration under the Securities Act of 1933, as amended, and, accordingly, may not be transferred
unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the Company has received
an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933, as amended.”
(b) If required by the authorities of any state in connection with the issuance of sale of the
Securities, the legend required by such state authority.
5.8 Accredited Investor. Such Investor is an accredited investor as defined in Rule
501(a) of Regulation D, as amended, under the 1933 Act.
5.9 No General Solicitation. Such Investor did not learn of the investment in the
Securities as a result of any general solicitation or general advertising.
5.10 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of such Investor.
6. Conditions to Closing.
6.1 Conditions to the Investors’ Obligations. The obligation of each Investor to
purchase Shares and Warrants at any Closing is subject to the fulfillment to such Investor’s
satisfaction, on or prior to the applicable Closing Date, of the following conditions, any of which
may be waived by such Investor (as to itself only):
(a) The representations and warranties made by the Company in Section 4 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the
Closing Date.
-18-
(b) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers necessary or appropriate for consummation of the purchase and sale of the Securities
and the consummation of the other transactions contemplated by the Transaction Documents, all of
which shall be in full force and effect.
(c) The Company shall have executed and delivered the Registration Rights Agreement.
(d) With respect to the Firm Closing only, the Company shall have filed with Nasdaq a
Notification Form: Listing of Additional Shares for the listing of the Shares and the Warrant
Shares, a copy of which shall have been provided to the Investors.
(e) With respect to the Firm Closing only, the Company shall have received gross proceeds from
the sale of the Firm Shares and Firm Warrants as contemplated hereby of at least Fifteen Million
Dollars ($15,000,000).
(f) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.
(g) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to
the fulfillment of the conditions specified in subsections (a), (b), (d) (to the extent
applicable), (e) (to the extent applicable), (f) and (j) of this Section 6.1.
(h) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of
Directors of the Company approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, certifying the current versions of the
Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and
authority of persons signing the Transaction Documents and related documents on behalf of the
Company.
(i) The Investors shall have received an opinion from Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., the Company’s counsel, dated as of the Closing Date, in form and substance reasonably
acceptable to the Investors and addressing such legal matters as the Investors may reasonably
request.
(j) No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or any
other governmental or regulatory body with respect to public trading in the Common Stock.
-19-
6.2 Conditions to Obligations of the Company. The Company’s obligation to sell and
issue Shares and Warrants at any Closing is subject to the fulfillment to the satisfaction
of the Company on or prior to the applicable Closing Date of the following conditions, any of which
may be waived by the Company:
(a) The representations and warranties made by the Investors in Section 5 hereof shall be true
and correct in all material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been made on and as of
said date. The Investors shall have performed in all material respects all obligations and
covenants herein required to be performed by them on or prior to the Closing Date.
(b) With respect to the Firm Closing only, the Investors shall have executed and delivered the
Registration Rights Agreement.
(c) Any Investor purchasing Shares or Warrants at such Closing shall have paid in full its
purchase price to the Company.
6.3 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to
effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the Investors;
(ii) By the Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the Company;
(iii) By an Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the
Investor; or
(iv) By either the Company or any Investor (with respect to itself only) if the Firm Closing
has not occurred on or prior to October 15, 2010;
provided, however, that, except in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other Transaction Documents
if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate
its obligation to effect the Closing.
(b) In the event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 6.3, written notice thereof shall forthwith be given to the
other Investors by the Company and the other Investors shall have the right to terminate their
obligations to effect the Closing upon written notice to the Company and the other Investors.
Nothing in this Section 6.3 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific performance by any
other party of its obligations under this Agreement or the other Transaction Documents.
-20-
7. Covenants and Agreements of the Company.
7.1 Reservation of Common Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for the purpose of
providing for the exercise of the Warrants, such number of shares of Common Stock as shall from
time to time equal the number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.
7.2 Reports. The Company will furnish to the Investors and/or their assignees such
information relating to the Company and its Subsidiaries as from time to time may reasonably be
requested by the Investors and/or their assignees; provided, however, that the Company shall not
disclose material nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company identifies such
information as being material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material nonpublic
information for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.
7.3 No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction Documents.
7.4 Insurance. The Company shall not materially reduce the insurance coverages
described in Section 4.19.
7.5 Compliance with Laws. The Company will comply in all material respects with all
applicable laws, rules, regulations, orders and decrees of all governmental authorities.
7.6 Listing of Underlying Shares and Related Matters. Promptly following the date
hereof, the Company shall take all necessary action to cause the Shares and the Warrant Shares to
be listed on Nasdaq no later than the Firm Closing Date. Further, if the Company applies to have
its Common Stock or other securities traded on any other principal stock exchange or market, it
shall include in such application the Shares and the Warrant Shares and will take such other action
as is necessary to cause such Common Stock to be so listed. The Company will use commercially
reasonable efforts to continue the listing and trading of its Common Stock on Nasdaq and, in
accordance, therewith, will use commercially reasonable efforts to comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of such market or
exchange, as applicable.
-21-
7.7 Termination of Covenants. The provisions of Sections 7.2 through 7.5 shall
terminate and be of no further force and effect on the date on which the Company’s
obligations under the Registration Rights Agreement to register or maintain the effectiveness of
any registration covering the Registrable Securities (as such term is defined in the Registration
Rights Agreement) shall terminate.
7.8 Removal of Legends. In connection with any sale or disposition of the Securities
by an Investor pursuant to Rule 144 or pursuant to any other exemption under the 1933 Act such that
the purchaser acquires freely tradable shares and upon compliance by the Investor with the
requirements of this Agreement, the Company shall or, in the case of Common Stock, shall cause the
transfer agent for the Common Stock (the “Transfer Agent”) to issue replacement certificates
representing the Securities sold or disposed of without restrictive legends. Upon the earlier of
(i) registration for resale of the Shares and the Warrant Shares
pursuant to the Registration Rights Agreement or (ii) the Shares
and Warrant Shares becoming freely tradable by a non-affiliate pursuant to Rule 144 the Company shall (A) deliver to
the Transfer Agent irrevocable instructions that the Transfer Agent shall reissue a certificate
representing shares of Common Stock without legends upon receipt by such Transfer Agent of the
legended certificates for such shares, and (B) cause its
counsel to deliver to the Transfer Agent one or more blanket opinions to the effect that the
removal of such legends in such circumstances may be effected under the 1933 Act. From and after
the earlier of such dates, upon an Investor’s written request, the Company shall promptly cause
certificates evidencing the Investor’s Securities to be replaced with certificates which do not
bear such restrictive legends, and Warrant Shares subsequently issued upon due exercise of the
Warrants shall not bear such restrictive legends provided the provisions of either clause (i) or
clause (ii) above, as applicable, are satisfied with respect to
such Warrant Shares. For purposes hereof, the Company agrees that the holding period pursuant to Rule 144 for any Warrant
Shares purchased pursuant to a “cashless exercise” shall commence on the Firm Closing Date. The Company shall be
responsible for the fees of its transfer agent and all DTC fees associated with such issuance. When the
Company is required to cause an unlegended certificate to replace a previously issued legended
certificate, if: (1) the unlegended certificate is not delivered to an Investor within three (3)
Business Days of submission by that Investor of a legended certificate and supporting documentation
to the Transfer Agent as provided above and (2) prior to the time such unlegended certificate is
received by the Investor, the Investor, or any third party on behalf of such Investor or for the
Investor’s account, purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Investor of shares represented by such certificate (a
“Buy-In”), then the Company shall pay in cash to the Investor (for costs incurred either directly
by such Investor or on behalf of a third party) the amount by which the total purchase price paid
for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the
proceeds received by such Investor as a result of the sale to which such Buy-In relates. The
Investor shall provide the Company written notice indicating the amounts payable to the Investor in
respect of the Buy-In.
-22-
7.9 Subsequent Equity Sales.
(a) From the date hereof until ninety (90) days after the later of (i) the Firm Closing Date
or (ii) the last Option Closing Date, if any, without the consent of the Required Investors,
neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock
Equivalents. Notwithstanding the foregoing, the provisions of this Section 7.9(a) shall not apply
to (i) the issuance of Common Stock or Common Stock Equivalents upon
the conversion or exercise of any securities of the Company or a Subsidiary outstanding on the date
hereof, provided that the terms of such security are not amended after the date hereof to decrease
the exercise price or increase the Common Stock or Common Stock Equivalents receivable upon the
exercise, conversion or exchange thereof, (ii) the issuance of any Common Stock or Common Stock
Equivalents pursuant to any Company equity incentive plan approved by the Company’s stockholders
and in place as of the date hereof, (iii), the issuance of Common Stock to holders of the Company’s
issued and outstanding Preferred Stock in exchange for outstanding shares of the Preferred Stock
from time to time, (iv) the issuance of any Common Stock pursuant to the terms of the Common Stock
Purchase Agreement entered into with Kingsbridge Capital Limited, dated as of December 10, 2007, as
amended on November 24, 2009 (the “Kingsbridge Line”) or any other Equity Line Arrangement (as
defined below) which occurs more than thirty (30) days after the Effective Date, or (v) the
issuance of any Common Stock or Common Stock Equivalents pursuant to the terms of any joint
venture, strategic alliance, collaboration or corporate partnering agreement with the Company or a
Subsidiary of the Company; provided, however, that with respect to clauses (iii), (iv) and (v), the
effective price per share of the Common Stock issued or issuable upon the exercise or conversion of
any Common Stock Equivalents shall be at least equal to the greater of (A) the Warrant Exercise
Price (appropriately adjusted for any stock split, reverse stock split, stock dividend or other
reclassification or combination of the Common Stock occurring after the date hereof) as in effect
at the time of such issuance or (B) the average of the closing bid prices of the Common Stock for
the five Business Days ending immediately prior to such issuance.
(b) From the date hereof until the earlier of (i) three years after the later of (A) the Firm
Closing Date or (B) the last Option Closing Date, if any, or (ii) such time as the Investors do not
beneficially own at least 10% of the Firm Shares in the aggregate (appropriately adjusted for any
stock split, reverse stock split, stock dividend or other reclassification or combination of the
Common Stock occurring after the date hereof), the Company shall not, without the consent of the
Required Investors, effect or enter into an agreement to effect any “Variable Rate Transaction”.
The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells
(i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock or (ii) enters into any agreement, including, but not
limited to, an equity line of credit or a distribution agreement relating to “at-the-market”
offerings, whereby the Company may sell securities at a future determined price (an “Equity Line
Arrangement”). For the avoidance of doubt, the issuance of a security which is subject to
customary anti-dilution protections, including where the conversion, exercise or exchange price is
subject to adjustment as a result of stock splits, reverse stock splits and other similar
recapitalization or reclassification events, shall not be deemed to be a “Variable Rate
Transaction.” Notwithstanding the foregoing, the Company shall have the right to enter into and to
issue and sell shares of Common Stock pursuant to the Kingsbridge Line or another Equity Line
Arrangement so long as such issuances and sales
comply with the terms of the proviso in Section 7.9(a) (regardless of whether the restrictions of
Section 7.9(a) remain in effect).
-23-
(c) The Company shall not, and shall use its commercially reasonable efforts to ensure that no
Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the 1933 Act) that will be
integrated with the offer or sale of the Securities in a manner that would require the registration
under the 1933 Act of the sale of the Securities to the Investors, or that will be integrated with
the offer or sale of the Securities for purposes of the rules and regulations of any trading market
such that it would require stockholder approval prior to the closing of such other transaction
unless stockholder approval is obtained before the closing of such subsequent transaction.
7.13 Equal Treatment of Investors. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to the Transaction
Documents. For clarification purposes, this provision constitutes a separate right granted to each
Investor by the Company and negotiated separately by each Investor, and is intended for the Company
to treat the Investors as a class and shall not in any way be construed as the Investors acting in
concert or as a group with respect to the purchase, disposition or voting of Securities or
otherwise.
8. Survival and Indemnification.
8.1 Survival. The representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing of the transactions contemplated by this Agreement.
8.2 Indemnification. The Company agrees to indemnify and hold harmless each Investor
and its Affiliates and their respective directors, officers, trustees, members, managers, employees
and agents, and their respective successors and assigns, from and against any and all losses,
claims, damages, liabilities and expenses (including without limitation reasonable attorney fees
and disbursements and other expenses incurred in connection with investigating, preparing or
defending any action, claim or proceeding, pending or threatened and the costs of enforcement
thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach
of representation, warranty, covenant or agreement made by or to be performed on the part of the
Company under the Transaction Documents, and will reimburse any such Person for all such amounts as
they are incurred by such Person.
-24-
8.3 Conduct of Indemnification Proceedings. Any person entitled to indemnification
hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (a) the indemnifying party has agreed to pay such
fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a conflict of interest
exists between such person and the indemnifying party with respect to such claims (in which case,
if the person notifies the indemnifying party in writing that such person elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall not have the right
to assume the defense of such claim on behalf of such person); and provided,
further, that the failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party in the defense of
any such claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more
than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying
party will, except with the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability in respect of such
claim or litigation.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investors, as applicable, provided,
however, that an Investor may assign its rights and delegate its duties hereunder in whole or in
part to an Affiliate or to a third party acquiring some or all of its Securities in a transaction
complying with applicable securities laws without the prior written consent of the Company or the
other Investors. The provisions of this Agreement shall inure to the benefit of and be binding
upon the respective permitted successors and assigns of the parties. Without limiting the
generality of the foregoing, in the event that the Company is a party to a merger, consolidation,
share exchange or similar business combination transaction in which the Common Stock is converted
into the equity securities of another Person, from and after the effective time of such
transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the
obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person
and the term “Shares” shall be deemed to refer to the securities received by the Investors in
connection with such transaction. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
9.2 Counterparts; Faxes; E-mail. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement may also be executed via facsimile or e-mail, which
shall be deemed an original.
-25-
9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by facsimile, then such notice shall be deemed given upon receipt of confirmation of
complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the
earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is
deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one Business Day after delivery to
such carrier. All notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’ advance written notice
to the other party:
If to the Company:
Cyclacel Pharmaceuticals, Inc.
200 Connell Drive, Suite 1500
Berkeley Heights, New Jersey 07922
Attention: Chief Executive Officer
Fax: (866) 271-3466
200 Connell Drive, Suite 1500
Berkeley Heights, New Jersey 07922
Attention: Chief Executive Officer
Fax: (866) 271-3466
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
666 Third Avenue, New York, New York 10017
Attention: Joel I. Papernik, Esq.
Fax: (212) 983-3115
666 Third Avenue, New York, New York 10017
Attention: Joel I. Papernik, Esq.
Fax: (212) 983-3115
If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection
herewith, except that the Company shall pay the reasonable fees and expenses of Lowenstein Sandler
PC not to exceed $40,000, regardless of whether the transactions contemplated hereby are
consummated; it being understood that Lowenstein Sandler PC has only rendered legal advice to the
SSF Investors and not to the Company or any other Investor in connection with the transactions
contemplated hereby, and that each of the Company and each Investor has relied for such matters on
the advice of its own respective counsel. Such expenses shall be paid upon demand. The Company
shall reimburse the Investors upon demand for all reasonable out-of-pocket expenses incurred by the
Investors, including without limitation reimbursement of attorneys’ fees and disbursements, in
connection with any amendment, modification or waiver of this Agreement or the other Transaction
Documents requested by the Company. In the event that legal proceedings are commenced by any party
to this Agreement against another party to this Agreement in connection with this Agreement or the
other Transaction Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other
reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.
-26-
9.6 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Required Investors. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Securities purchased under this Agreement at the time
outstanding, each future holder of all such Securities, and the Company.
9.7 Publicity. Except as set forth below, no public release or announcement
concerning the transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or announcement by the
Investors) or the Investors (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities exchange or securities
market, in which case the Company or the Investors, as the case may be, shall allow the Investors
or the Company, as applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such issuance. By 8:30
a.m. (New York City time) on the trading day immediately following the Firm Closing Date, the
Company shall issue a press release disclosing all material terms of transactions contemplated by
this Agreement (the “Press Release”). No later than 5:30 p.m. (New York City time) on the first trading day following
the Firm Closing Date, the Company will file a Current Report on Form 8-K attaching the press
release described in the foregoing sentence as well as copies of the Transaction Documents. In
addition, the Company will make such other filings and notices in the manner and time required by
the SEC or Nasdaq. From and after the issuance of the Press Release, no Investor shall be in possession
of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in the Press Release.
The Company shall not, and shall cause each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide any Investor with any material, nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the Press Release without the express written consent of
such Investor.
9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
9.9 Entire Agreement. This Agreement, including the Exhibits and the Disclosure
Schedules, and the other Transaction Documents constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the subject matter
hereof and thereof.
9.10 Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements
herein contained.
-27-
9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.
9.12 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor independently of
any other Investor. Nothing contained herein or in any Transaction Document, and no action taken
by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and
it shall not be necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors has been provided
with the same Transaction Documents for the purpose of closing a transaction with multiple
Investors and not because it was required or requested to do so by any Investor.
[signature page follows]
-28-
IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.
| The Company: | CYCLACEL PHARMACEUTICALS, INC. |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
-29-
| The Company: | [INVESTOR NAME] |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
-30-
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the “Agreement”) is made and entered into as of this • day
of October, 2010 by and among Cyclacel Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and the “Investors” named in that certain Purchase Agreement by and among the Company
and the Investors (the “Purchase Agreement”). Capitalized terms used herein have the respective
meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein.
The parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following meanings:
“Investors” means the Investors identified in the Purchase Agreement and any Affiliate
or permitted transferee of any Investor who is a subsequent holder of any Warrants or Registrable
Securities.
“Prospectus” means (i) the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in
Rule 405 under the 1933 Act.
“Register,” “registered” and “registration” refer to a registration
made by preparing and filing a Registration Statement or similar document in compliance with the
1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration
Statement or document.
“Registrable Securities” means (i) the Firm Shares, (ii) the Firm Warrant Shares,
(iii) the Option Shares, (iv) the Option Warrant Shares and (v) any other securities issued or
issuable with respect to or in exchange for Registrable Securities, whether by merger, charter
amendment or otherwise; provided, that, a security shall cease to be a Registrable Security upon
(A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security
becoming eligible for sale without restriction by the Investors pursuant to Rule 144.
“Registration Statement” means any registration statement of the Company filed under
the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions
of this Agreement, amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
“Required Investors” means the Investors holding a majority of the Registrable
Securities outstanding from time to time.
“SEC” means the U.S. Securities and Exchange Commission.
“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
2. Registration.
(a) Registration Statements.
(i) Promptly following the Firm Closing Date but no later than thirty (30) days after the Firm
Closing Date (the “Filing Deadline”), the Company shall prepare and file with the SEC one
Registration Statement on Form S-1, covering the resale of the Registrable Securities. Subject to
any SEC comments, such Registration Statement shall include the plan of distribution attached
hereto as Exhibit A; provided, however, that no Investor shall be named as an “underwriter”
in the Registration Statement without the Investor’s prior written consent. Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock splits, stock dividends or similar transactions with respect to the
Registrable Securities. Such Registration Statement shall not include any shares of Common Stock
or other securities for the account of any other holder without the prior written consent of the
Required Investors. The Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in accordance with Section
3(c) to the Investors and their counsel prior to its filing or other submission. If a Registration
Statement covering the Registrable Securities is not filed with the SEC on or prior to the Filing
Deadline, the Company will make pro rata payments to each Investor, as liquidated damages and not
as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof following the Filing Deadline for which no
Registration Statement is filed with respect to the Registrable Securities. Such payments shall
constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right
of the Investors to seek injunctive relief. Such payments shall be made to each Investor in cash
no later than three (3) Business Days after the end of each 30-day period.
(ii) Promptly following the date (the “Qualification Date”) upon which the Company becomes
eligible to use a registration statement on Form S-3 to register the Registrable Securities for
resale, but in no event more than thirty (30) days after the Qualification Date (the “Qualification
Deadline”), the Company shall file a registration statement on Form S-3 covering the Registrable
Securities (or a post-effective amendment on Form S-3 to a registration statement on Form S-1) (a
“Shelf Registration Statement”) and shall use commercially reasonable efforts to cause such Shelf
Registration Statement to be declared effective as promptly as practicable thereafter. If a Shelf
Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to
the Qualification Deadline, the Company will make pro rata payments to each Investor, as liquidated
damages and not as a penalty, in an amount equal to 1.5% of the aggregate purchase price paid by
such Investor pursuant to the Purchase Agreement attributable to those Registrable Securities that
remain unsold at that time for each 30-day period or pro rata for any portion thereof following the
date by which such Shelf Registration Statement should have been filed for which no such Shelf
Registration Statement is filed with respect to the Registrable Securities. Such payments shall
constitute the Investors’ exclusive monetary remedy for such events, but shall not affect the right
of the Investors to seek
injunctive relief. Such payments shall be made to each Investor in cash no later than three
(3) Business Days after the end of each 30-day period.
-2-
(b) Expenses. The Company will pay all expenses associated with each registration,
including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs
associated with clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, fees and expenses of one counsel to the Investors and the Investors’ reasonable
expenses in connection with the registration, but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry professionals with
respect to the Registrable Securities being sold.
(c) Effectiveness.
(i) The Company shall use commercially reasonable efforts to have the Registration Statements
declared effective as soon as practicable. The Company shall notify the Investors by facsimile or
e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any
Registration Statement is declared effective and shall simultaneously provide the Investors with
copies of any related Prospectus to be used in connection with the sale or other disposition of the
securities covered thereby. If (A)(x) a Registration Statement covering the Registrable Securities
is not declared effective by the SEC prior to the earlier of (i) five (5) Business Days after the
SEC shall have informed the Company that no review of the Registration Statement will be made or
that the SEC has no further comments on the Registration Statement or (ii) the 90th day
after the Firm Closing Date (the 120th day if the SEC reviews the Registration
Statement), or (y) a Shelf Registration Statement is not declared effective by the SEC prior to the
earlier of (i) five (5) Business Days after the SEC shall have informed the Company that no review
of the Registration Statement will be made or that the SEC has no further comments on the
Registration Statement or (ii) the 90th day after the Qualification Deadline (the
120th day if the SEC reviews the Registration Statement), or (B) after a Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by reason of a stop order, or
the Company’s failure to update the Registration Statement), but excluding any Allowed Delay (as
defined below) or the inability of any Investor to sell the Registrable Securities covered thereby
due to market conditions, then the Company will make pro rata payments to each Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount
invested by such Investor for each 30-day period or pro rata for any portion thereof following the
date by which such Registration Statement should have been effective (the “Blackout Period”). Such
payments shall constitute the Investors’ exclusive monetary remedy for such events, but shall not
affect the right of the Investors to seek injunctive relief. The amounts payable as liquidated
damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last
day of each month following the commencement of the Blackout Period until the termination of the
Blackout Period. Such payments shall be made to each Investor in cash.
-3-
(ii) For not more than twenty (20) consecutive days or for a total of not more than forty-five
(45) days in any twelve (12) month period, the Company may suspend the use of any Prospectus
included in any Registration Statement contemplated by this Section in the event that the Company
determines in good faith that such suspension is necessary to (A) delay
the disclosure of material non-public information concerning the Company, the disclosure of
which at the time is not, in the good faith opinion of the Company, in the best interests of the
Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so
that such Registration Statement or Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in the case of the Prospectus in light of the circumstances under which they
were made, not misleading (an “Allowed Delay”); provided, that the Company shall promptly (a)
notify each Investor in writing of the commencement of an Allowed Delay, but shall not (without the
prior written consent of an Investor) disclose to such Investor any material non-public information
giving rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales under the
Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable
efforts to terminate an Allowed Delay as promptly as practicable.
(d) Rule 415; Cutback If at any time the SEC takes the position that the offering of
some or all of the Registrable Securities in a Registration Statement is not eligible to be made on
a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any
Investor to be named as an “underwriter”, the Company shall use its best efforts to persuade the
SEC that the offering contemplated by the Registration Statement is a valid secondary offering and
not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the
Investors is an “underwriter”. The Investors shall have the right to participate or have their
counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to
comment or have their counsel comment on any written submission made to the SEC with respect
thereto. No such written submission shall be made to the SEC to which the Investors’ counsel
reasonably objects. In the event that, despite the Company’s best efforts and compliance with the
terms of this Section 2(d), the SEC refuses to alter its position, the Company shall (i) remove
from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”)
and/or (ii) agree to such restrictions and limitations on the registration and resale of the
Registrable Securities as the SEC may require to assure the Company’s compliance with the
requirements of Rule 415 (collectively, the “SEC Restrictions”); provided, however, that the
Company shall not agree to name any Investor as an “underwriter” in such Registration Statement
without the prior written consent of such Investor. Any cut-back imposed on the Investors pursuant
to this Section 2(d) shall be allocated among the Investors on a pro rata basis and shall be
applied first to any of the Registrable Securities of such Investor as such Investor shall
designate, unless the SEC Restrictions otherwise require or provide or the Investors otherwise
agree. No liquidated damages shall accrue as to any Cut Back Shares until such date as the Company
is able to effect the registration of such Cut Back Shares in accordance with any SEC Restrictions
(such date, the “Restriction Termination Date” of such Cut Back Shares). From and after the
Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this
Section 2 (including the liquidated damages provisions) shall again be applicable to such Cut Back
Shares; provided, however, that (i) the Filing Deadline and/or the Qualification Deadline, as
applicable, for the Registration Statement including such Cut Back Shares shall be ten (10)
Business Days after such Restriction Termination Date, and (ii) the date by which the Company is
required to obtain effectiveness with respect to such Cut Back Shares under Section 2(c) shall be
the 90th day immediately after the Restriction Termination Date (the 120th day if the
SEC reviews the Registration Statement).
-4-
3. Company Obligations. The Company will use commercially reasonable efforts to
effect the registration of the Registrable Securities in accordance with the terms hereof, and
pursuant thereto the Company will, as expeditiously as possible:
(a) use commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will terminate upon the earlier of
(i) the date on which all Registrable Securities covered by such Registration Statement as amended
from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by
such Registration Statement may be sold without restriction pursuant to Rule 144 (the
“Effectiveness Period”) and advise the Investors in writing when the Effectiveness Period has
expired;
(b) prepare and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the Registration Statement
effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the
1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;
(c) provide copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer than seven (7) days
prior to their filing with the SEC and not file any document to which such counsel reasonably
objects;
(d) furnish to the Investors and their legal counsel (i) promptly after the same is prepared
and publicly distributed, filed with the SEC, or received by the Company (but not later than two
(2) Business Days after the filing date, receipt date or sending date, as the case may be) one (1)
copy of any Registration Statement and any amendment thereto, each preliminary prospectus and
Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other than any portion of
any thereof which contains information for which the Company has sought confidential treatment),
and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as each Investor may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by such Investor that
are covered by the related Registration Statement;
(e) use commercially reasonable efforts to (i) prevent the issuance of any stop order or other
suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such
order at the earliest possible moment;
-5-
(f) prior to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their counsel in connection with
the registration or qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions requested by the Investors and do any and all
other commercially reasonable acts or things necessary or advisable to enable the distribution in
such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself
to general taxation in any jurisdiction where it would not otherwise be so subject but for this
Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;
(g) use commercially reasonable efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer quotation system or
other market on which similar securities issued by the Company are then listed;
(h) immediately notify the Investors, at any time prior to the end of the Effectiveness
Period, upon discovery that, or upon the happening of any event as a result of which, the
Prospectus includes an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such
holder a supplement to or an amendment of such Prospectus as may be necessary so that such
Prospectus shall not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(i) otherwise use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, including, without limitation, Rule 172
under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with
the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in writing if, at
any time during the Effectiveness Period, the Company does not satisfy the conditions specified in
Rule 172 and, as a result thereof, the Investors are required to deliver a Prospectus in connection
with any disposition of Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities hereunder; and make
available to its security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of at least twelve
(12) months, beginning after the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158
promulgated thereunder (for the purpose of this subsection 3(i), “Availability Date” means the 45th
day following the end of the fourth fiscal quarter that includes the effective date of such
Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the
Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal
quarter); and
-6-
(j) With a view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any time permit the
Investors to sell shares of Common Stock to the public without registration, the Company covenants
and agrees to: (i) make and keep public information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable
Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other
rule of similar effect or (B) such date as all of the Registrable Securities shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon
request, as long as such Investor owns any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the
Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such
other information as may be reasonably requested in order to avail such Investor of any rule or
regulation of the SEC that permits the selling of any such Registrable Securities without
registration.
4. Due Diligence Review; Information. The Company shall make available, during normal
business hours, for inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to
the Company), all financial and other records, all SEC Filings (as defined in the Purchase
Agreement) and other filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause the Company’s
officers, directors and employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investors and such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company
and the accuracy of such Registration Statement.
The Company shall not disclose material nonpublic information to the Investors, or to advisors
to or representatives of the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides the Investors,
such advisors and representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.
5. Obligations of the Investors.
(a) Each Investor shall furnish in writing to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the
Company may reasonably request. At least five (5) Business Days prior to the first anticipated
filing date of any Registration Statement, the Company shall notify each Investor of the
information the Company requires from such Investor if such Investor elects to have any of the
Registrable Securities included in the Registration Statement. An Investor shall provide such
information to the Company at least two (2) Business Days prior to the first anticipated filing
date of such Registration Statement if such Investor elects to have any of the Registrable
Securities included in the Registration Statement.
-7-
(b) Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with
the Company as reasonably requested by the Company in connection with the preparation and filing of
a Registration Statement hereunder, unless such Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities from such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the Company of either (i) the
commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event
pursuant to Section 3(h) hereof, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such Registrable Securities,
until the Investor is advised by the Company that such dispositions may again be made.
6. Indemnification.
(a) Indemnification by the Company. The Company will indemnify and hold harmless each
Investor and its officers, directors, members, employees and agents, successors and assigns, and
each other person, if any, who controls such Investor within the meaning of the 1933 Act, against
any losses, claims, damages or liabilities, joint or several, to which they may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue
statement or omission or alleged omission of any material fact contained in any Registration
Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof;
(ii) any blue sky application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information herein called a “Blue Sky Application”);
(iii) the omission or alleged omission to state in a Blue Sky Application a material fact required
to be stated therein or necessary to make the statements therein not misleading; (iv) any violation
by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to
the Company or its agents and relating to action or inaction required of the Company in connection
with such registration; or (v) any failure to register or qualify the Registrable Securities
included in any such Registration Statement in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake such registration or
qualification on an Investor’s behalf and will reimburse such Investor, and each such officer,
director or member and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in any
such case if and to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or alleged omission so made
in conformity with information furnished by such Investor or any such controlling person in writing
specifically for use in such Registration Statement or Prospectus.
-8-
(b) Indemnification by the Investors. Each Investor agrees, severally but not
jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, employees, stockholders and each person who controls the
Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities
and expense (including reasonable attorney fees) resulting from any untrue statement of a material
fact or any omission of a material fact required to be stated in the Registration Statement or
Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the
statements therein not misleading, to the extent, but only to the extent that such untrue statement
or omission is contained in any information furnished in writing by such Investor to the Company
specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement
thereto. In no event shall the liability of an Investor be greater in amount than the dollar
amount of the proceeds (net of all expense paid by such Investor in connection with any claim
relating to this Section 6 and the amount of any damages such Investor has otherwise been required
to pay by reason of such untrue statement or omission) received by such Investor upon the sale of
the Registrable Securities included in the Registration Statement giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled to indemnification
hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses,
or (b) the indemnifying party shall have failed to assume the defense of such claim and employ
counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists between such person
and the indemnifying party with respect to such claims (in which case, if the person notifies the
indemnifying party in writing that such person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the indemnifying party of
its obligations hereunder, except to the extent that such failure to give notice shall materially
adversely affect the indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any
time for all such indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or litigation.
-9-
(d) Contribution. If for any reason the indemnification provided for in the preceding
paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act
shall be entitled to contribution from any person not guilty of such
fraudulent misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all
expenses paid by such holder in connection with any claim relating to this Section 6 and the amount
of any damages such holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission) received by it upon the sale of the Registrable
Securities giving rise to such contribution obligation.
7. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended only by a writing signed by
the Company and the Required Investors. The Company may take any action herein prohibited, or omit
to perform any act herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the Required Investors.
(b) Notices. All notices and other communications provided for or permitted hereunder
shall be made as set forth in Section 9.4 of the Purchase Agreement.
(c) Assignments and Transfers by Investors. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Investors and their respective successors and assigns.
An Investor may transfer or assign, in whole or from time to time in part, to one or more persons
its rights hereunder in connection with the transfer of Registrable Securities by such Investor to
such person, provided that such Investor complies with all laws applicable thereto and provides
written notice of assignment to the Company promptly after such assignment is effected.
(d) Assignments and Transfers by the Company. This Agreement may not be assigned by
the Company (whether by operation of law or otherwise) without the prior written consent of the
Required Investors, provided, however, that in the event that the Company is a party to a merger,
consolidation, share exchange or similar business combination transaction in which the Common Stock
is converted into the equity securities of another Person, from and after the effective time of
such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the
obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person
and the term “Registrable Securities” shall be deemed to include the securities received by the
Investors in connection with such transaction unless such securities are otherwise freely tradable
by the Investors after giving effect to such transaction.
(e) Benefits of the Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.
-10-
(f) Counterparts; Faxes. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may also be executed via facsimile,
which shall be deemed an original.
(g) Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
(h) Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which renders any
provisions hereof prohibited or unenforceable in any respect.
(i) Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry
out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.
(j) Entire Agreement. This Agreement is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the parties with respect to
such subject matter.
(k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.
-11-
IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.
| The Company: | CYCLACEL PHARAMACEUTICALS, INC. |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
-12-
| The Company: | [INVESTOR NAME] |
|||
| By: | ||||
| Name: | ||||
| Title: | ||||
-13-
Exhibit A
Plan of Distribution
The selling stockholders, which as used herein includes donees, pledgees, transferees or other
successors-in-interest selling shares of common stock or interests in shares of common stock
received after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market prices at the time
of sale, at prices related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when disposing of
shares or interests therein:
– ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
– block trades in which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the transaction;
– purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
– an exchange distribution in accordance with the rules of the applicable exchange;
– privately negotiated transactions;
– short sales effected after the date the registration statement of which this Prospectus is a
part is declared effective by the SEC;
– through the writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;
– broker-dealers may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;
– a combination of any such methods of sale; and
– any other method permitted by applicable law.
The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus. The selling stockholders also may transfer the shares
of common stock in other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered
by them will be the purchase price of the common stock less discounts or commissions, if any. Each
of the selling stockholders reserves the right to accept and, together with their agents from time
to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering. Upon any exercise
of the warrants by payment of cash, however, we will receive the exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet
the criteria and conform to the requirements of that rule.
The selling stockholders and any underwriters, broker-dealers or agents that participate in
the sale of the common stock or interests therein may be “underwriters” within the meaning of
Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn
on any resale of the shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities
Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices, the names of any agents,
dealer or underwriter, any applicable commissions or discounts with respect to a particular offer
will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
-15-
In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of shares in the market and to the activities of the
selling stockholders and their affiliates. In addition, to the extent applicable we will make
copies of this prospectus (as it may be supplemented or amended from time to time) available to the
selling stockholders for the purpose of satisfying the prospectus delivery requirements of the
Securities Act. The selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities, including liabilities
arising under the Securities Act.
We have agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the
shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration statement of which this
prospectus constitutes a part effective until the earlier of (1) such time as all of the shares
covered by this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which all of the shares may be sold without restriction
pursuant to Rule 144 of the Securities Act.
-16-
Exhibit 99.1
CYCLACEL ANNOUNCES PRIVATE PLACEMENT FINANCING FOR UP TO $22.1 MILLION
- Proceeds to advance “SEAMLESS” pivotal Phase 3 trial of oral sapacitabine -
BERKELEY HEIGHTS, NJ — October 5, 2010 — Cyclacel Pharmaceuticals, Inc. (NASDAQ: CYCC, NASDAQ:
CYCCP), a biopharmaceutical company developing oral therapies that target the various phases of
cell cycle control for the treatment of cancer and other serious diseases, announced today that it
has agreed to sell approximately $15.2 million of units to several institutional investors
including the Special Situations Funds. The investors will have the right to acquire up to an
additional $6.9 million of units at any time up to nine months after closing. The units consist of
one share of common stock and 0.5 of a warrant, with each whole warrant representing the right to
purchase one share of common stock at an exercise price of $1.92 per share for a period of five years.
Upon closing, the Company expects to receive net proceeds of approximately $14.1 million after the
deduction of expected offering expenses. Cyclacel anticipates using a portion of the net proceeds
from the financing to fund “SEAMLESS”, its planned pivotal Phase 3 trial, under a Special Protocol
Assessment agreement with the U.S. Food and Drug Administration, for the Company’s sapacitabine
oral capsules as a front-line treatment in elderly patients aged 70 years or older with newly
diagnosed acute myeloid leukemia (AML) who are not candidates for intensive induction chemotherapy.
The investors have agreed to purchase a total of 8,323,190 units at a price of $1.82625 per unit.
The investors will have the right to acquire up to 4,161,595 additional units at a price of $1.67
per unit at any time up to nine months after closing. The sale of the units is expected to close on
or about October 7, 2010, subject to the satisfaction of customary closing conditions. Lazard
Capital Markets LLC served as the lead placement agent and Roth Capital Partners, LLC served as the
co-placement agent for the offering.
The securities offered in the private placement have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”), or applicable state securities laws. Accordingly, the
securities may not be offered or sold in the United States except pursuant to an effective
registration statement or an applicable exemption from the registration requirements of the
Securities Act and such applicable state securities laws. The securities were offered only to
accredited investors. The Company has agreed to file a registration statement with the Securities
and Exchange Commission registering the resale of the shares of common stock issued in the private
placement and the shares of common stock issuable upon the exercise of the warrants issued in the
private placement. Any offering of the Company’s securities under the resale registration
statement referred to above will be made only by means of a prospectus.
This release does not constitute an offer to sell or the solicitation of an offer to buy the
securities, nor shall there be any sale of the securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or qualification under the
securities laws of such state. Any offering of the securities under the resale registration
statement will only be by means of a prospectus.
About sapacitabine oral capsules
Sapacitabine (CYC682), an orally-available nucleoside analogue, will be entering Phase 3
development for the treatment of Acute Myeloid Leukemia in the elderly under a Special Protocol
Assessment agreement with the U.S. Food and Drug Administration, and is in Phase 2 studies for
myelodysplastic syndromes and lung cancer. Sapacitabine acts through a dual mechanism, interfering
with DNA synthesis by causing single-strand DNA breaks and inducing arrest of cell cycle
progression mainly at G2-Phase. Both sapacitabine and CNDAC, its major metabolite, have
demonstrated potent anti-tumor activity in preclinical studies. Over 200 patients have received
sapacitabine in Phase 2 studies in AML, MDS, cutaneous T cell lymphoma (CTCL) and non-small cell
lung cancer (NSCLC). Sapacitabine has been administered to approximately 170 patients in five Phase
1 studies with both hematologic malignancies and solid tumors. In December 2009 at the 51st Annual
Meeting of the American Society of Hematology (ASH), Cyclacel reported data from a randomized Phase
2 study including promising 1-year survival in elderly patients with AML aged 70 years or older.
Sapacitabine is part of Cyclacel’s pipeline of small molecule drugs designed to target and stop
uncontrolled cell division.
About Acute Myeloid Leukemia (AML)
AML is a cancer of the blood cells that progresses rapidly and if not treated, could be fatal in a
few months. AML is generally a disease of older people and is uncommon before the age of 40. The
average age of a patient with AML is about 67 years. There are more than 12,300 new cases of AML,
of which about half are elderly, and nearly 9,000 deaths caused by this cancer each year in the
United States. A recently published review of The University of Texas M. D. Anderson Cancer
Center’s historical experience with front-line intensive induction chemotherapy for elderly AML
patients aged 70 years or older demonstrated that while 45% of patients achieved a complete
remission, median overall survival was only 4.6 months and 36% of patients died within the first 8
weeks of treatment, underscoring the unmet need in this patient setting.
†
About Special Protocol Assessment (SPA)
A SPA is a binding written agreement with the FDA that the sponsor’s proposed trial protocol
design, clinical endpoints and statistical analyses are acceptable to support regulatory approval.
Final marketing approval depends on efficacy results, adverse event profile and an evaluation of
the benefit/risk of a treatment as demonstrated in the trial. For further information regarding the
SPA process, please visit the FDA website, www.fda.gov.
About Cyclacel Pharmaceuticals, Inc.
Cyclacel is a biopharmaceutical company developing oral therapies that target the various phases of
cell cycle control for the treatment of cancer and other serious disorders. Three product
candidates are in clinical development. Sapacitabine (CYC682), a cell cycle modulating nucleoside
analog, will be entering Phase 3 development for the treatment of Acute Myeloid Leukemia in the
elderly under a Special Protocol Assessment agreement with the U.S. Food and Drug Administration,
and is in Phase 2 studies for myelodysplastic syndromes and lung cancer. Seliciclib (CYC202 or
R-roscovitine), a CDK (cyclin dependent kinase) inhibitor, is in Phase 2 studies for the treatment
of lung cancer and nasopharyngeal cancer and in a Phase 1 trial in combination with sapacitabine.
CYC116, an Aurora kinase and VEGFR2 inhibitor, is in a Phase 1 trial in patients with solid tumors.
Cyclacel’s ALIGN Pharmaceuticals subsidiary markets directly in the U.S. Xclair® Cream for
radiation dermatitis, Numoisyn® Liquid and Numoisyn® Lozenges for xerostomia. Cyclacel’s strategy
is to build a diversified biopharmaceutical business focused in hematology and oncology based on a
portfolio of commercial products and a development pipeline of novel drug candidates. Please visit
www.cyclacel.com for additional information.
2
Forward-looking Statements
This news release contains certain forward-looking statements that involve risks and uncertainties
that could cause actual results to be materially different from historical results or from any
future results expressed or implied by such forward-looking statements. Such forward-looking
statements include statements regarding, among other things, the efficacy, safety, and intended
utilization of Cyclacel’s product candidates, the conduct and results of future clinical trials,
plans regarding regulatory filings, future research and clinical trials and plans regarding
partnering activities. Factors that may cause actual results to differ materially include the risk
that product candidates that appeared promising in early research and clinical trials do not
demonstrate safety and/or efficacy in larger-scale or later clinical trials, the risk that Cyclacel
will not obtain approval to market its products, the risks associated with reliance on outside
financing to meet capital requirements, and the risks associated with reliance on collaborative
partners for further clinical trials, development and commercialization of product candidates. You
are urged to consider statements that include the words “may,” “will,” “would,” “could,” “should,”
“believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “anticipates,” “intends,”
“continues,” “forecast,” “designed,” “goal,” or the negative of those words or other comparable
words to be uncertain and forward-looking. For a further list and description of the risks and
uncertainties the Company faces, please refer to our most recent Annual Report on Form 10-K and
other periodic and current filings that have been filed with the Securities and Exchange Commission
and are available at www.sec.gov. Such forward-looking statements are current only as of the date
they are made, and we assume no obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
Contact for Cyclacel Pharmaceuticals, Inc.
Investors/Media:
Corey Sohmer, (908) 517-7330
csohmer@cyclacel.com
Corey Sohmer, (908) 517-7330
csohmer@cyclacel.com
†
Blood First Edition Paper, prepublished online July 28, 2010; DOI 10.1182/blood-2010-03-276485
(http://bloodjournal.hematologylibrary.org/cgi/content/abstract/blood-2010-03-276485v1).
(http://bloodjournal.hematologylibrary.org/cgi/content/abstract/blood-2010-03-276485v1).
© Copyright 2010 Cyclacel Pharmaceuticals, Inc. All Rights Reserved. The Cyclacel logo and
Cyclacel® are trademarks of Cyclacel Pharmaceuticals, Inc. Numoisyn® and Xclair® are trademarks
of Sinclair Pharma plc.
3