EXHIBIT 10.48
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
ANY DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN
SPECIFIC LIMITED CIRCUMSTANCES, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
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$15,000,000 Foster City, California
March 26, 1997
Cell Genesys, Inc., a Delaware corporation ("Company"), for value received,
hereby promises to pay to the order of GenPharm International, Inc. ("Holder")
in lawful money of the United States at the address of Holder set forth below,
the principal sum of Fifteen Million Dollars ($15,000,000), together with
interest on the unpaid principal at the rate of seven percent (7%) per annum,
payable semi-annually, beginning on September 30, 1997 until the Maturity Date,
as defined below. All outstanding principal and interest shall be payable in
full on the Maturity Date.
The Maturity Date shall be September 30, 1998; provided that if the Company
does not elect to adjust the Conversion Price (as defined below) as provided in
Section 1.4(a) by providing notice of such election to the Holder no later than
February 28, 1998, the Maturity Date shall be March 31, 1998. If the Company
does so elect, the Conversion Price (as defined below) shall be adjusted as set
forth in Section 1.4(a). The Maturity Date may, at the election of the Holder,
be extended as provided in Section 5.
If any payment of principal or interest on this Note shall become due on a
Saturday, Sunday, or a public holiday under the laws of the State of California,
such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment.
Upon payment in full of all principal and interest payable hereunder, this
Note shall be surrendered to Company for cancellation.
The Company waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Holder in exercising any right hereunder shall operate as a waiver
of such right under this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, the Company agrees to pay, in addition to the principal and
interest payable hereon, reasonable attorneys fees and costs incurred by Holder.
In addition, the Holder of this Note by acceptance hereof agrees to the
following terms and conditions:
1. CONVERTIBILITY
1.1 Conversion. Subject to the provisions of this Note, at any time prior
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to 12:00 p.m., Pacific Time, on the earlier of the Maturity Date or the
Redemption Date, at the option of the Holder
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all or any portion of not less than $90,000 of the outstanding principal amount
of this Note and all or any portion of accrued and unpaid interest on this Note
shall be converted from time to time into shares of Common Stock of the Company
(or such other security into which this Note becomes convertible pursuant to
Section 1.4 below, in either case, the "Shares") at a conversion price (the
"Conversion Price") equal to $9.00 per share (adjusted as provided in Section
1.4 below).
1.2 Mechanics of Conversion. This Note or a specified portion thereof
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shall be converted by the Holder, pursuant to Section 1.1, by surrender of this
Note to the Company at the address set forth below together with a notice of
election to convert all or a specified portion of the principal and a specified
portion of the accrued and unpaid interest into Shares. If only a specified
portion of the Note is so converted, a notation of such amount shall be placed
on the Note and the Note shall be returned to the Holder. From and after the
date of the surrender, (i) the rights of the Holder of the surrendered Note or
the specified portion thereof as such shall (to the extent of such principal
amount and any accrued and unpaid interest converted) cease, and (ii) Holder
shall be treated for all purposes as the record holder of the Shares into which
such principal and/or interest has been converted. The Company shall, as soon
as practicable after the conversion issue and deliver to the Holder of the
surrendered Note or specified portion thereof, at the address designated by such
Holder, a certificate or certificates (issued as of the date of conversion) for
the Shares
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into which the principal amount and any accrued and unpaid interest has been
converted.
1.3 Fractional Shares. No fractional shares shall be issued upon
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conversion of the outstanding principal amount of this Note and any accrued and
unpaid interest on this Note. In lieu of any fractional shares to which the
Holder of this Note would otherwise be entitled, this Company shall pay cash
equal to such fraction multiplied by the Conversion Price.
1.4 Adjustments.
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(a) Adjustment for Extension of Maturity Date. If the Company elects to
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adjust the Conversion Price and gives notice of such election to Holder no later
than February 28, 1998, it shall be adjusted to equal the lower of (x) $9.00 or
(y) 115% of the average of the closing prices of the Shares on the Nasdaq
National Market (or such other securities market which is the principal trading
market for the Shares) over the 30 trading days immediately preceding February
28, 1998.
(b) Equitable Adjustments. The number of Shares to be issued upon
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conversion of this Note and the Conversion Price shall be equitably adjusted for
stock splits, stock dividends, subdivisions, and the like. In the case of any
merger, consolidation, sale of all or substantially all of the assets, or
similar transaction in which the holders of the Company's Common Stock would
receive securities other than Company Common Stock, this Note shall become
convertible into the number and kind of securities as the Holder would have
received in such transaction in exchange for the shares of Company Common Stock
into which this Note was convertible immediately prior to the closing such
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transaction, and the Conversion Price shall be equitably adjusted.
2. REDEMPTION
2.1 Redemption. This Note may be redeemed at any time on or after August
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31, 1997 if the closing price of the Shares on the Nasdaq National Market (or
such other securities market which is the principal trading market for the
Shares) is at least 130 percent of the Conversion Price on at least 20 of the 30
trading days immediately preceding the date of notice of redemption.
2.2 Notice of Redemption. The Company shall, at least 30 days prior to
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the date fixed by the Company for redemption (the "Redemption Date"), notify the
Holder of such Redemption Date. The notice of redemption shall state:
(a) the Redemption Date,
(b) the accrued interest to the Redemption Date, and
(c) that on the Redemption Date the Note will become due and payable,
and that interest thereon shall cease to accrue on and after said date. To the
extent permitted by applicable law, the Company's notice of redemption shall be
irrevocable. The Holder may convert this Note pursuant to Section 1 above at
any time prior to 12:00 p.m., Pacific Time, on the Redemption Date. The Holder
may extend the Redemption Date as provided in Section 5.
3. NOTE AGREEMENT; SUBORDINATION This Note is issued pursuant to that certain
Convertible Note Purchase Agreement of even date between the Company and the
Holder (the "Note Agreement") and is subject to the terms thereof. This Note
and the indebtedness evidenced hereby is subordinate to any and all Senior Debt,
as
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defined in the Note Agreement, on the terms set forth in the Note Agreement and
in any subordination agreement entered into pursuant thereto by the Holder,
which Senior Debt subordination agreement shall not restrict the Holder from
enforcing its rights under this Note even though the Company may be in default
under its Senior Debt subordination agreement.
4. EVENTS OF DEFAULT; ACCELERATION The occurrence of any of the following
shall constitute an "Event of Default" under this Note:
(a) The Company shall fail to pay any interest or other payment required
under the terms of this Note on the date due and such default is not cured by
the Company within five days after the Holder has give the Company notice of
such default; or
(b) The Company shall breach the covenant set forth in Section 7.1 under
the Note Agreement; or
(c) There shall occur any Change of Control of the Company. For purposes
of this Section 4, "Change of Control" means any of the following results in the
shareholders of the Company, immediately preceding such event (or combination of
events), ceasing to hold, by reason of their holding of Company shares before
the event, a majority of the voting interest of the Company or the Successor
Company: (i) a merger or consolidation of the Company with another corporation
or entity, whether or not the Company is the survivor, (ii) a transfer by the
Company of substantially all its operating assets, whether in a single
transaction or series of transactions, or (iii) the transfer of a majority of
the outstanding voting shares of the Company pursuant to a tender offer or
exchange offer, or multiple offers. The
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term "Successor Company" in the preceding sentence means any of (A) a company
into which the Company is merged or consolidated resulting in the Change of
Control, (B) a company to which the majority of the operating assets of the
Company are transferred resulting in the Change of Control, (C) a company which
makes an exchange offer resulting in the Change of Control or (D) a company
which owns all of the outstanding shares of a company described in clause (A),
(B) or (C); or
(d) The Company shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property; (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature; (iii) make a general assignment for the
benefit of its or any of its creditors; (iv) be dissolved or liquidated in full
or in part, (v) become insolvent (as such term may be defined or interpreted
under any applicable statute); (vi) commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary case or
other proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing; or
(e) Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief
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with respect to the Company or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be commenced
and an order for relief entered or such proceeding shall not be dismissed or
discharged within 30 days of commencement.
Upon the occurrence or existence of an Event of Default (other than an
Event of Default referred to in clauses (d) or (e) above) and at any time
thereafter during the continuance of such Event of Default, Holder may, by
written notice to the Company, declare all outstanding obligations payable by
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived. Upon the occurrence of any Event of Default referred to in clauses (d)
or (e), all outstanding obligations payable by the Company hereunder shall be
immediately due and payable with presentation of demand, protest or any other
notice of any kind, all of which are hereby expressly waived. Upon the
occurrence or existence of any Event of Default, Holder may exercise any other
right, power or remedy permitted to it by law, either by suit in equity or by
action at law, or both.
5. HOLDERS' RIGHT TO EXTEND MATURITY DATE OR REDEMPTION DATE
Notwithstanding anything to the contrary in this Note, the Holder, by
notice to the Company given at least ten days before the Maturity Date or the
Redemption Date, as the case may be, may elect to extend the Maturity Date or
Redemption Date for such number of days, if any, that during the 30 days
immediately prior to such Maturity Date or Redemption Date the Holder was
disabled from selling Registrable Securities pursuant to the Registration
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in accordance with Section 5.3 of the Note Agreement by reason of either (i) a
notification described in clause (d) of subsection 5.3.3 of the Note Agreement
(relating to a deficiency in the prospectus), or (ii) the market stand-off
obligations in Section 6.2 of the Note Agreement.
6. NOTICES Any notice or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been given upon written
confirmation of telex or telecopy or upon delivery if personally delivered or
upon deposit if deposited in the United States mail for mailing by certified
mail, postage prepaid, and addressed as follows:
If to Holder GenPharm International, Inc.
855 California Ave., Suite C
Palo Alto, CA 94304
Attn: CEO
Address for payment: GenPharm International, Inc.
855 California Ave., Suite C
Palo Alto, CA 94304
Attn: CEO
If to the Company: Cell Genesys, Inc.
342 Lakeside Drive
Foster City, California 94404
Attn: President and CEO
Each of the above addresses may change its address for purposes of this
paragraph by giving to the other addressee notice in conformance with this
paragraph of such new address.
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7. DEFAULT RATE: USURY. During any period in which an Event of Default has
occurred and is continuing, Company shall pay interest on the unpaid principal
balance hereof at a rate per annum equal to the rate otherwise applicable
hereunder plus two percent (2%). In the event any interest is paid on this Note
which is deemed to be in excess of the then legal maximum rate, then that
portion of the interest payment representing an amount in excess of the then
legal maximum rate shall be deemed a payment of principal and applied against
the principal of this Note.
8. EXPENSES. If action is instituted to collect this Note, Company promises
to pay all costs and expenses, including, without limitation, reasonable
attorneys' fees and costs, incurred in connection with such action whether or
not a lawsuit is actually filed.
9. GOVERNING LAW This Note shall be governed by the laws of the State of
California (without giving effect to its conflict of law provisions).
CELL GENESYS, INC.
By: /s/ Stephen A. Sherwin
______________________________________
Title: President and
Chief Executive Officer
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