EXHIBIT 4.1
AMENDMENT, REDEMPTION AND EXCHANGE AGREEMENT
This AMENDMENT, REDEMPTION AND EXCHANGE AGREEMENT ("Agreement") is made
as of this 4th day of June, 2003 by and between GENOME THERAPEUTICS CORP., a
Massachusetts corporation (the "Company"), and Smithfield Fiduciary LLC (the
"Investor").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Purchase Agreement, dated as
of March 5, 2002 (the "Purchase Agreement"), by and among the Company, the
Investor and The Tail Wind Fund, Ltd. (the "Other Investor," and collectively
with the Investor, the "Investors"), the Company sold and issued to the
Investor, and the Investor purchased from the Company, (i) $12 million in
principal amount of the Company's 6% Convertible Notes (the "Note"), which Note
is convertible into shares of common stock of the Company, $0.10 par value per
share (the "Common Stock"), in accordance with the terms of the Note and (ii)
warrants ("Initial Warrants") to purchase up to 390,000 shares of Common Stock;
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Purchase Agreement;
WHEREAS, a registration statement (file no. 333-85500) (the
"Current Registration Statement") was originally filed by the Company with the
SEC under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "1933 Act"), on April 4, 2002, and was declared
effective April 18, 2002;
WHEREAS, the Investor has not converted or sold any of the Note;
WHEREAS, the Investor wishes to sell to the Company, and the
Company wishes to redeem and purchase from the Investor, two-thirds (2/3) of the
outstanding principal amount of Notes held by the Investor at a redemption price
equal to the portion of the outstanding principal amount of such Note so
redeemed plus accrued and unpaid interest thereon through the Closing Date (as
defined below); and
WHEREAS, in order to induce the Investor to convert the
remaining Note not redeemed hereunder, the Company has agreed to reduce the
Conversion Price under the Note and to exchange the Initial Warrants for
warrants in the form of Exhibit A attached hereto (the "Exchange Warrants") as
more fully described herein;
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Redemption. The Investor hereby sells, assigns, transfers and conveys
to the Company, and the Company hereby redeems and purchases from the Investor,
$8,000,000 of the outstanding principal amount of the Note held by the Investor
at a redemption price (the "Redemption Price") equal to $8,203,836, which
represents the
outstanding principal amount of the Note plus accrued and unpaid interest
thereon through and including the date hereof. Simultaneous with the execution
hereof, the Company shall pay the Redemption Price by wire transfer to the
account designated in writing by the Investor.
2. Amendment. Notwithstanding anything contained in the Note, effective
upon execution hereof and receipt of the Redemption Price, the Conversion Price
(as defined in the Note) of the Note is hereby amended to equal $2.5686 (the
"New Conversion Price").
3. Conversion. Simultaneously with the Investor's receipt of the
Redemption Price, the remaining $4,000,000 outstanding principal amount of the
Note plus accrued and unpaid interest thereon held by the Investor after the
redemption pursuant to Section 1 above at the Redemption Price shall be
converted at the New Conversion Price as if the Investor delivered the
Conversion Notice (as defined in the Notes) attached to the Note. As a result,
the Investor is converting a total of $4,101,918 principal amount of Notes plus
accrued and unpaid interest thereon into 1,596,947 shares of Common Stock (the
"Conversion Shares"). The Company and the Investor acknowledge that, upon the
Investor's receipt of the Redemption Price, the foregoing constitutes valid
delivery of the applicable Conversion Notice to the Company as of the date
hereof. By execution hereof, the Company hereby waives the requirements under
Section 3(a) of the Note and Section 9.4 of the Purchase Agreement that the
Investor email three designees of the Company confirming delivery of such
Conversion Notice. Simultaneously with the delivery by the Company of the
Redemption Price, the Company shall cause its transfer agent to electronically
transmit the Conversion Shares to the Investor, by crediting the account of the
Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission
system designated in writing by the Investor to the Company concurrently
herewith. Upon the receipt by the Investor of the Redemption Price and the
Conversion Shares, the Purchase Agreement and the Note shall be deemed
terminated and of no further force or effect.
4. Warrant Exchange. As of the date hereof, the Company will issue to
the Investor the Exchange Warrants to subscribe for 389,317 shares of Common
Stock ("Warrant Shares") at an initial exercise price of $3.71 per share, in
exchange for the surrender of the Initial Warrants currently held by such
Investor.
5. Simultaneous Signing and Closing. The transactions contemplated by
this Agreement shall be consummated on the date hereof (such event referred to
as the "Closing" and the date of such Closing, the "Closing Date"). At the
Closing, the Investor shall surrender to the New York office of Ropes & Gray
LLP, counsel to the Company, at 885 Third Avenue, Suite 3200, New York, New York
10022, the Note and Initial Warrants held by the Investor or in lieu of the
foregoing an indemnification undertaking reasonably satisfactory to the Company.
On the Closing Date and as a condition to the Closing, the Company shall have
entered into a separate but substantially identical redemption, amendment and
exchange agreement with the Other Investor (the "Other Investor Agreement") and
shall consummate the transactions contemplated by
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the Other Investor Agreement concurrently with the consummation of the
transactions contemplated by this Agreement.
6. Registration Rights.
(a) Prospectus Supplement. On or before the date which is one
(1) day following the Closing Date, the Company shall, to the extent
required or advisable by law, at its sole cost and expense and in
accordance with the 1933 Act, file a prospectus supplement to the
Current Registration Statement with the SEC describing the change of the
conversion price to the Notes to the New Conversion Price and the
exchange of the Initial Warrants with the Exchange Warrants as described
herein.
(b) New Warrant Shares. Promptly following the Closing Date,
(but by no later than 30 calendar days following the Closing Date), the
Company shall, at its sole cost and expense and in accordance with the
1933 Act, use its best efforts to prepare and file a registration
statement (the "Exchange Warrants Registration Statement") on Form S-3
(or other appropriate form acceptable to the Investor) under the 1933
Act with the SEC covering all the shares of Common Stock issued or
issuable upon exercise of the Exchange Warrants. The Company shall use
its best efforts to have such Exchange Warrants Registration Statement
declared effective as soon thereafter as possible (but by no later than
120 calendar days following the Closing Date). All the terms and
conditions of the Registration Rights Agreement, dated as of March 5,
2002 (the "Registration Rights Agreement"), by and among the Company and
the Investors shall apply mutatis mutandis to the registration of such
shares issued or issuable upon exercise of the Exchange Warrants,
including without limitation the indemnification and contribution
provisions contained therein, and all such terms are incorporated by
reference herein. Therefore, the Warrant Shares underlying the Exchange
Warrants shall be deemed to be Warrant Shares constituting Registrable
Securities for all purposes of the Registration Rights Agreement and the
Exchange Warrants Registration Statement shall be deemed to be a
Registration Statement for all purposes of the Registration Rights
Agreement. Notwithstanding the foregoing and in lieu of the amount set
forth as liquidated damages under Section 3(c) of the Registration
Rights Agreement, the amount which shall be paid to the Investor, if the
Company breaches the provisions of this Section 6(b), subject to the
provisions of Section 2(c)(ii) of the Registration Rights Agreement, and
the applicable provisions of Section 3(c) of the Registration Rights
Agreement, for each month (or portion thereof) following any such
breach, shall equal 2% of the product of (x) the number of Warrant
Shares issued and issuable upon exercise of the Exchange Warrants and
not available for resale under the Exchange Warrants Registration
Statement multiplied by (y) the greater of (I) the Warrant Price (as
defined in the Exchange Warrant) and (II) the closing price of the
Common Stock as reported by the NASDAQ National Market (or other
exchange or market on which the Common Stock is principally traded) on
the date of determination.
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7. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that:
(a) Organization, Good Standing and Qualification. The Company
is a corporation duly incorporated, 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 own its properties. The Company 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 licensing necessary
unless the failure to so qualify would not be reasonably likely to
result in a Material Adverse Effect. All of the Company's subsidiaries
are listed by name and jurisdiction on Schedule 4.1 attached to the
Purchase Agreement.
(b) Authorization. The Company has full corporate 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 this Agreement and the Exchange
Warrants, (ii) authorization of the performance of all obligations of
the Company hereunder and thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Conversion
Shares and Warrant Shares. Each of this Agreement and the Exchange
Warrant constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company 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.
(c) Capitalization. Set forth on Schedule 7(c) hereto is (a) the
authorized capital stock of the Company on the date hereof; (b) the
number of shares of capital stock issued and outstanding on the date
hereof; (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 Exchange Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock. 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 preemptive rights. Except as set forth on Schedule 7(c), no Person is
entitled to preemptive or similar statutory or contractual rights with
respect to any securities of the Company. Except as set forth on
Schedule 7(c), there are no outstanding warrants, options, convertible
securities or other rights, agreements or arrangements of any character
under which the Company is or may be obligated to issue any equity
securities of any kind and except as contemplated by this Agreement, the
Other Investor Agreement or set forth on Schedule 7(c), the Company is
not currently in negotiations for the issuance of any equity securities
of any kind. Except as set forth on Schedule 7(c), the Company has no
knowledge of any voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among any
of the securityholders of the Company relating
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to the securities of the Company held by them. Except pursuant to the
Registration Rights Agreement, this Agreement, the Other Investor
Agreement and as set forth on Schedule 7(c), the Company has not granted
any Person 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.
(d) Valid Issuance. As of the Closing, the Company has reserved
a sufficient number of shares of Common Stock for the issuance upon
exercise of the Exchange Warrants. The Exchange Warrants are duly
authorized, and the Conversion Shares, the Exchange Warrants and the
Warrant Shares (collectively, the "Securities"), respectively, when
issued in accordance herewith and with the terms of the Note, the
Exchange Warrants and this Agreement, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all
encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws. The number of shares to be
reserved hereunder shall be determined without regard to any
restrictions on beneficial ownership contained in this Agreement or in
the Exchange Warrants.
(e) Consents. The execution, delivery and performance by the
Company of this Agreement and the Exchange Warrants 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 will have been made pursuant to
applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws and the additional listing
application requirements of the NASDAQ National Market, which the
Company undertakes to file within the applicable time periods.
(f) Delivery of SEC Filings; Business. The SEC Filings represent
all filings required of the Company pursuant to the 1934 Act since
August 31, 2000. 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
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The
Company is engaged only in the business described in the SEC Filings and
the SEC Filings contain a complete and accurate description of the
business of the Company in all material respects. The Company has not
provided to the Investor (i) any information required to be filed under
the 1934 Act that has not been so filed or (ii) any non-public
information.
(g) No Material Adverse Change. Since the filing of the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2002, no event, transaction or condition has occurred that,
individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect.
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(h) Registration Statements; Material Contracts.
(1) During the preceding two years, each
registration statement and any amendment thereto filed by the
Company pursuant to the 1933 Act, 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, in the light of the
circumstances under which they were made, 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.
(2) Except as set forth on Schedule 4.3 to the
Purchase Agreement, there are no agreements or instruments
currently in force and effect that constitute a warrant, option,
convertible security or other right, agreement or arrangement of
any character under which the Company is or may be obligated to
issue any material amounts of any equity security of any kind,
or to transfer any material amounts of any equity security of
any kind.
(i) Form S-3 Eligibility. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on
Form S-3 under the 1933 Act. The Current Registration Statement is
effective and available for the sale of at least all of the Registrable
Securities required to be included in such Current Registration
Statement.
(j) No Conflict, Breach, Violation or Default.
(1) The execution, delivery and performance of
this Agreement and the Exchange Warrants by the Company and the
issuance and sale of the Securities will not conflict with or
result in a breach or violation of any of the terms and
provisions of, or constitute a default under (i) the Company's
Restated Articles of Organization (including any certificates of
designation) or the Company's Bylaws, both as in effect on the
date hereof (copies of which have been provided to the Investor
before the date hereof to the extent there have been any changes
since execution of the Purchase Agreement) and the date of
issuance of such securities, or (ii) except where it would not
have a Material Adverse Effect, (A) any statute, rule,
regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company
or any of its properties, or (B) any agreement or instrument to
which the
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Company is a party or by which the Company is bound or to which
any of the properties of the Company is subject.
(2) Except where it would not have a Material
Adverse Effect, the Company (i) is not in violation of any
statute, rule or regulation applicable to the Company or its
assets, (ii) is not in violation of any judgment, order or
decree applicable to the Company or its assets, and (iii) is not
in breach or violation of any agreement, note or instrument to
which it or its assets are a party or are bound or subject. The
Company has not received notice from any Person of any claim or
investigation that, if adversely determined, would render the
preceding sentence untrue or incomplete.
(k) Tax Matters. The Company has timely prepared and filed all
tax returns required to have been filed by the Company with all
appropriate governmental agencies and timely paid all taxes 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 nor, to the knowledge of the Company, 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
such as which are not material and except as set forth on Schedule 4.12
to the Purchase Agreement. All material taxes and other assessments and
levies that the Company 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 material tax
liens or claims pending or, to the Company's knowledge, threatened
against the Company or any of its respective assets or property. There
are no outstanding tax sharing agreements or other such arrangements
between the Company and any other corporation or entity.
(l) Title to Properties. Except as disclosed in the SEC Filings,
the Company 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, except for such liens, encumbrances and
defects which could not reasonably be expected to have a Material
Adverse Effect; and except as disclosed in the SEC Filings, the Company
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.
(m) Certificates, Authorities and Permits. The Company possesses
adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by it and has not received any notice of proceedings relating
to the revocation or modification of any such certificate, authority or
permit that, if determined adversely to the Company, would individually
or in the aggregate have a Material Adverse Effect.
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(n) No Labor Disputes. No material labor dispute with the
employees of the Company exists or, to the knowledge of the Company, is
imminent.
(o) Intellectual Property. The Company owns or possesses
adequate rights or licenses to the inventions, know-how, patents, patent
rights, copyrights, trademarks, trade names, licenses, approvals,
governmental authorizations, trade secrets confidential information and
other intellectual property rights (collectively, "Intellectual Property
Rights"), free and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims, necessary to conduct
the business now operated by it, or presently employed by it and
presently contemplated to be operated by it as described in the SEC
Filings, and the Company has not received any notice of infringement of
or conflict with asserted rights of others with respect to any
Intellectual Property Rights except as disclosed in the SEC Filings.
None of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within three years
from the date of this Agreement, except where such expirations or
termination would not result, either individually or in the aggregate,
in a Material Adverse Effect. To the knowledge of the Company, the
Company's patents and other Intellectual Property Rights and the present
activities of the Company do not infringe any patent, copyright,
trademark, trade name or other proprietary rights of any third party
where such infringement may cause a Material Adverse Effect on the
Company, and there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened
against, the Company or its subsidiaries regarding its Intellectual
Property Rights (other than as set forth in the SEC Filings filed at
least ten (10) day prior to the date hereof), and the Company and its
subsidiaries are unaware of any facts or circumstances which could
reasonably be expected to give rise to any of the foregoing. The Company
has no knowledge of the material infringement of its Intellectual
Property Rights by third parties and has no reason to believe that any
of its Intellectual Property Rights is unenforceable, and the Company
and its subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company and its
subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties.
(p) Environmental Matters. The Company is not 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"), does
not own or operate any real property contaminated with any substance
that is subject to any Environmental Laws, is not liable for any
off-site disposal or contamination pursuant to any Environmental Laws,
and is not subject to any claim relating to any Environmental Laws,
which violation, contamination, liability or claim would individually or
in the aggregate have a Material Adverse Effect; and the Company is not
aware of any pending investigation that might lead to such a claim.
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(q) Litigation. Except as disclosed in the SEC Filings, there
are no pending actions, suits or proceedings against or affecting the
Company or any of its properties that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse
Effect; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
(r) Financial Statements. The financial statements included in
each SEC Filing present fairly and accurately 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 generally accepted accounting principles applied on a
consistent basis. Since December 31, 2002, no event has occurred that
would cause a Material Adverse Effect on the financial condition of the
Company except as otherwise reflected in the SEC Filings since such
date, and there has not been any material adverse 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 most recent Quarterly Report on Form 10-Q,
except changes in the ordinary course of business which have not had, in
the aggregate, a Material Adverse Effect.
(s) Insurance Coverage. The Company maintains in full force and
effect insurance coverage that the Company reasonably believes to be
adequate against all liabilities, claims and risks against which it is
customary for comparably situated companies to insure.
(t) Compliance with NASDAQ Continued Listing Requirements. The
Company is in material compliance with all applicable NASDAQ National
Market continued listing requirements and is in good standing on such
exchange. 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 the NASDAQ National Market and the
Company has not received any notice of, nor to the knowledge of the
Company is there any basis for, the delisting of the Common Stock from
the NASDAQ National Market.
(u) Brokers and Finders. The Investor shall have no liability or
responsibility for the payment of any commission or finder's fee to any
third party in connection with or resulting from this Agreement or the
transactions contemplated by this Agreement by reason of any agreement
of or action taken by the Company.
(v) No General Solicitation; 1933 Act Exemption. 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
Exchange Warrants or any of the Securities. The issuance of the
Conversion Shares and the exchange of the Initial Warrants for the
Exchange Warrants are exempt from registration under the 1933 Act
pursuant to Section 3(a)(9) of the 1933 Act.
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(w) 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 security or solicited any
offers to buy any security, under circumstances that would require
registration of the Exchange Warrants or the Securities under the 1933
Act; or would require the integration of this offering with any other
offering of securities for purposes of determining the need to obtain
stockholder approval of the transactions contemplated hereby under the
rules of the NASDAQ National Market.
(x) Disclosures. For purposes of this Agreement and the
transactions contemplated hereby, none of the representations or
warranties made by the Company in this Agreement or in the Exchange
Warrants and no information furnished by the Company pursuant hereto or
thereto, or in any other document, certificate or statement furnished by
the Company to the Investor or any authorized representative of the
Investor, pursuant hereto or thereto or in connection therewith, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein and therein,
in the light of the circumstances under which they were made, not
misleading.
(y) Rights Plan. None of the acquisition of the Exchange
Warrants or any of the Securities nor the deemed beneficial ownership of
shares of Common Stock issuable upon, or the acquisition of such shares
pursuant to the exercise of the Exchange Warrants will in any event
under any circumstances in and of itself trigger the poison pill
provisions of any stockholder rights or similar agreements, or plan
having a similar effect, to which the Company is a party.
8. Representations and Warranties of the Investor. The Investor hereby
represents and warrants on the date hereof to that Company that:
(a) Organization and Existence. The Investor is a validly
existing entity and has all requisite power and authority to enter into
this Agreement.
(b) Authorization. The execution, delivery and performance by
the Investor of this Agreement has been duly authorized and this
Agreement will constitute the valid and legally binding obligation of
the Investor, enforceable against the Investor in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
(c) Legends. It is understood that, until registration for
resale pursuant to the Registration Rights Agreement or until sales
under Rule 144 are permitted, certificates evidencing the Exchange
Warrants and the Warrant Shares may bear one or all of the following
legends or legends substantially similar thereto:
(1) "THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION OF
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COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION (IF REQUESTED) THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933; OR (II) SUCH REGISTRATION OR QUALIFICATION."
(2) 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.
Upon registration for resale pursuant hereto and the
Registration Rights Agreement or upon Rule 144(k) under the 1933 Act becoming
available, the Company shall promptly cause certificates evidencing the Warrant
Shares previously issued to be replaced with certificates which do not bear such
restrictive legends, and all Warrant Shares subsequently issued shall not bear
such restrictive legends. Certificates evidencing the Warrant Shares issued
following the registration for resale of such shares pursuant hereto and the
Registration Rights Agreement or Rule 144(k) under the 1933 Act becoming
available for the sale of such shares shall be issued without any restrictive
legends.
(d) Title to Note and Initial Warrants. The Investor has good
and valid title to the Note and the Initial Warrants, free of any
encumbrances, has not transferred the Note or the Initial Warrants, and
has not converted the Note into shares of Common Stock or exercised the
Initial Warrants for shares of Common Stock.
9. Covenants and Agreements of the Company.
(a) Additional Financings. From the date hereof until the second
anniversary of the Closing Date, the Investor will have a right of
participation with respect to any sales of any of the Company's
securities in a non-registered or "shelf" offering (subject to the
exclusions set forth in the definition of "Excluded Transaction" in the
Purchase Agreement) capital raising transaction on and subject to the
terms and conditions set forth in this Section 9(a). During such period,
the Company shall give written notice (a "Financing Notice") to the
Investor within five (5) business days following any non-registered or
"shelf" sale (subject to the exclusions set forth in the definition of
"Excluded Transaction") of any of the Company's equity securities or any
securities convertible into or exchangeable or exercisable for such
securities in a capital raising transaction (including, without
limitation, any Variable Rate Transaction or MFN Transaction) (a
"Participation Transaction"); provided, however, that if the approval of
the Company's shareholders is required by the rules and regulations of
NASDAQ or any other applicable market, exchange, regulatory authority,
agency or commission in order to enter into such Participation
Transaction, then the Company shall provide the Financing Notice to the
Investor at least 10 business days prior to the filing of any proxy or
information statement with the SEC seeking shareholder approval of such
Participation Transaction in order to provide the Investor a reasonable
period of time to exercise its rights hereunder and to have the
securities the Investor elects to purchase included in such proxy or
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information statement. Such Financing Notice shall describe the
significant business terms of such transaction and be accompanied by a
copy of all transaction documents pertaining to such transaction. The
Investor shall have the right (pro rata with the Other Investor (based
on a 4:1 ratio for the Investor and the Other Investor) respectively, or
together with other investors selected by the Investor and reasonably
acceptable to the Company) to purchase, in accordance with the
procedures set forth below, an amount of identical securities issued in
such transaction equal to the Investor's pro rata portion of 33 1/3% of
the amount purchased by such other investors (i.e., 25% of the aggregate
amount of such securities issuable to the Investors and such other
investors together) for the same consideration and on the same terms and
conditions as such third party sale, provided that if the aggregate
amount of net proceeds raised by the Company in any such transaction
exceeds $15 million, then for such portion of such transaction which
exceeds $15 million the Investor shall have the right to purchase only
its pro rata portion of 20% of such excess amount purchased by such
other investors (i.e., 16 2/3% of the aggregate amount of such excess
securities issuable to the Investors and such other investors together),
and provided further that, notwithstanding the foregoing, the Investor
shall be accorded the right to purchase not less than $1 million of
securities of the Company on the same terms as the securities issued in
such Participation Transaction. The Company shall not consummate any
such third party transaction unless following such consummation the
Investor is permitted to purchase such percentage under the terms of all
transaction documents for such other transaction and under all
applicable laws and regulations. Without limiting the foregoing (a) the
Company shall authorize and reserve a sufficient number and amount of
such securities, or class or series thereof, in order to enable full
participation by the Investor in such securities, class or series that
is purchased by such third party, and (b) the Company shall not issue in
excess of such number of shares of Common Stock (or securities which are
convertible, exchangeable or exercisable into such number of shares of
Common Stock) which, together with the maximum amount of securities
otherwise permitted to be purchased by the Investor and the other
Investor hereunder, would cause the Company to violate any shareholder
approval or other requirements of NASDAQ or any other applicable market,
exchange, regulatory authority, agency or commission. The Investor may
elect to participate in such transaction by delivering written notice of
such election to the Company within ten (10) business days following
receipt of the Financing Notice. If, subsequent to the Company giving
any Financing Notice to the Investor hereunder, any material term or
condition of such third-party sale is changed from that disclosed in the
Financing Notice and the accompanying transaction documents, the Company
shall be required to provide a new Financing Notice to the Investor
hereunder and the Investor shall again have the right to exercise its
rights to purchase a percentage of the securities in such transaction on
such changed terms and conditions as provided hereunder. The rights and
obligations of this Section 9(a) shall in no way diminish the other
rights of the Investor pursuant to this Section 9. Notwithstanding
anything to the contrary contained herein, the number of shares of
Common Stock that may be acquired by the
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Investor pursuant to any Participation Transaction shall not exceed a
number that, when added to the total number of shares of Common Stock
deemed beneficially owned by the Investor (other than by virtue of the
ownership of securities or rights to acquire securities that have
limitations on the Investor's right to convert, exercise or purchase
similar to the limitation set forth herein), together with all shares of
Common Stock deemed beneficially owned by the Investor's "affiliates"
(as defined in Rule 144 of the 1933 Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the 1934
Act, exists, would exceed 4.99% of the total issued and outstanding
shares of the Common Stock; provided, that the limitation set forth in
this sentence shall not limit the ability of the Company to engage in a
Participation Transaction. The rights of participation of the Investor
set forth in this Section 9(a) will not apply to any Excluded
Transaction. All rights of the Investor under this Section 9(a) shall
cease and be of no further effect upon the consummation of a Change in
Control Transaction (as defined in the Notes).
(b) Reservation of Common Stock issuable upon Exercise of the
Exchange Warrants. The Company hereby agrees at all times to reserve and
keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the full exercise of the
Exchange Warrants, such number of shares of Common Stock as shall from
time to time equal 100% of the number of shares sufficient to permit the
full exercise of the Exchange Warrants in accordance with the terms of
the Exchange Warrants. All calculations pursuant to this paragraph shall
be made without regard to restrictions on beneficial ownership.
(c) Press Releases; Form 8-K.
(1) Other than the press release
described in the next sentence, any press release or other
publicity concerning this Agreement, the Other Investor
Agreement or the transactions contemplated by this Agreement
shall be submitted to the Investor for comment at least two (2)
business days prior to issuance, unless the release is required
to be issued within a shorter period of time by law or pursuant
to the rules of the NASDAQ National Market or a national
securities exchange. The Company shall issue a press release
concerning the fact and material terms of this Agreement
promptly upon execution hereof but in any event within one
business day hereof in the form attached hereto as Exhibit B.
(2) On or before 8:30 a.m. (New York
City time), on the first business day following the date hereof,
the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by (i) this Agreement
and the Exchange Warrants and (ii) the Other Investor Agreement
and the warrants issuable pursuant thereto on the Closing Date
(collectively, the "Other Investor Documents"), in each case, in
the form required by the 1934 Act, and
13
attaching the material transaction documents (including, without
limitation, this Agreement and the Other Investor Documents) as
exhibits to such filing (including all attachments, the "8-K
Filing", and the description and attachments, the "8-K
Materials"). The 8-K Materials shall be subject to the
Investor's prior approval, not to be unreasonably withheld or
delayed. From and after the filing of the 8-K Filing with the
SEC, the Investor shall not 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 8-K Filing.
The Company shall not, and shall cause each of its officers,
directors, employees and agents, not to, provide the Investor
with any material, nonpublic information regarding the Company
from and after the filing of the 8-K Filing with the SEC without
the express written consent of the Investor.
(d) 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 obligations to
the Investor under this Agreement or the Exchange Warrants.
(e) Listing of Conversion Shares, Warrant Shares and Related
Matters. The Company hereby agrees, promptly following the Closing of
the transactions contemplated by this Agreement, to take such action to
cause the Conversion Shares (if necessary) and the Warrant Shares to be
listed on the NASDAQ National Market as promptly as possible but no
later than the effective date of the registration contemplated by this
Agreement. The Company further agrees that if the Company applies to
have its Common Stock or other securities traded on any other principal
stock exchange or market, it will include in such application the
Conversion Shares and the Warrant Shares and will take such other action
as is necessary to cause such Common Stock to be so listed. Neither the
Company nor any of its Affiliates, nor any Person acting on its or their
behalf, shall directly or indirectly make any offers or sales of any
security or solicit any offers to buy any security which may cause the
integration of the offering hereunder with any other offering of
securities for purposes of determining the need to obtain stockholder
approval of the transactions contemplated hereby under the rules of the
NASDAQ National Market.
(f) Corporate Existence. So long as any Exchange Warrants remain
outstanding, the Company shall maintain its corporate existence, except
in the event of a merger, consolidation or sale of all or substantially
all of the Company's assets, as long as the surviving or successor
entity in such transaction (a) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in
connection herewith, regardless of whether or not the Company would have
had a sufficient number of shares of Common Stock authorized and
available for issuance in order to fulfill its obligations hereunder and
effect the exercise in full of all Exchange Warrants outstanding as of
the date of such transaction; (b) has no legal, contractual or other
restrictions on its ability
14
to perform the obligations of the Company hereunder and under the
agreements and instruments entered into in connection herewith; and (c)
is a publicly traded corporation whose common stock and the shares of
capital stock issuable upon exercise of the Exchange Warrants are (or
would be upon issuance thereof) listed for trading on an Approved
Market, provided that this clause (c) shall not apply in the event of a
merger, consolidation or sale of all or substantially all of the
Company's assets with or to an unaffiliated third party in an arm's
length transaction pursuant to which all holders, other than the
acquiring entity, of outstanding shares of Common Stock receive
consideration consisting solely of cash.
10. Miscellaneous.
(a) Full Force and Effect. Except as otherwise expressly
provided herein, the Registration Rights Agreement shall remain in full
force and effect.
(b) Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants and agreements as of the date
hereof and shall survive the execution and delivery of this Agreement.
(c) Successors and Assigns; Amendment. This Agreement may not be
assigned by a party hereto without the prior written consent of the
other party hereto which consent may not be unreasonably withheld or
delayed, except that without the prior written consent of the Company,
but after notice duly given, the Investor may assign its rights and
delegate its duties hereunder in whole or in part to an affiliate of the
Investor or to the Other Investor. 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. No
provision of this Agreement or the Exchange Warrant may be amended other
than by an instrument in writing signed by the Company and the Investor
and no amendment may be made to the Other Investor Documents without the
written consent of the Investor if such amendment would be adverse to
the rights of the Investor relative to the Other Investor or
preferential to the Other Investor relative to the Investor. No
consideration shall be offered or paid to any Person to amend or consent
to a waiver or modification of any provision of this Agreement, the
Purchase Agreement, the Registration Rights Agreement or the Exchange
Warrants unless the same consideration also is offered to all of the
parties to such agreements or holders of the Exchange Warrants, as the
case may be. The Company has not entered into and does not currently
contemplate entering into, directly or indirectly, any transaction with
the Other Investor except as set forth in the Other Investor Documents.
15
(d) Counterparts. 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 shall not become effective unless and until it is executed and
delivered by each of the Company and the Investor.
(e) 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.
(f) Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given only upon delivery to each party to be notified
by (i) personal delivery, (ii) telecopier, upon receipt of confirmation
of complete transmittal, or (iii) an internationally recognized
overnight air courier, 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:
Genome Therapeutics Corp.
100 Beaver Street
Waltham, Massachusetts 02453
Telephone: (781) 398-2300
Fax: (781) 893-9535
Attention: Stephen Cohen, CFO
with a copy to:
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110-2624
Telephone: (617) 951-7000
Fax: (617)951-7050
Attention: Patrick O'Brien, Esquire
If to the Investor, to the address set forth on the
signature page hereto.
(g) Expenses. Promptly following the Closing Date, the Company
shall pay for reasonable legal fees and expenses incurred by the
Investor in connection with the transactions contemplated by this
Agreement and the preparation and negotiation of this Agreement and the
Exchange Warrants in an amount up to $12,500.
(h) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall
be excluded from this
16
Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance
with its terms.
(i) Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, the Registration Rights Agreement, the Purchase
Agreement, the Notes and the Exchange Warrants and other documents
contemplated hereby 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.
(j) 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.
(k) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(l) Remedies.
(1) The Investor shall be entitled to specific
performance of the Company's obligations under the Agreements.
(2) The Company on the one hand, and the
Investor on the other hand, shall indemnify the other and hold
it harmless from any loss, cost, expense or fees (including
attorneys' fees and expenses) arising out of any breach of any
representation, warranty, covenant or agreement in this
Agreement or the Exchange Warrants, or arising out of the
enforcement of this Section.
(m) JURISDICTION. THE PARTIES HEREBY AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING DIRECTLY OR INDIRECTLY FROM OR IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER AGREEMENTS SHALL BE LITIGATED ONLY IN THE
SUPREME COURT OF THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY,
NEW YORK. THE PARTIES CONSENT TO THE JURISDICTION AND VENUE OF THE
FOREGOING COURTS AND CONSENT THAT ANY PROCESS OR NOTICE OF MOTION OR
OTHER APPLICATION TO EITHER OF SAID COURTS OR A JUDGE THEREOF MAY BE
SERVED INSIDE OR OUTSIDE THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT
OF NEW YORK BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO
THE PARTY BEING SERVED AT ITS ADDRESS SET FORTH IN THIS AGREEMENT (AND
17
SERVICE SO MADE SHALL BE DEEMED COMPLETE THREE (3) DAYS AFTER THE SAME
HAS BEEN POSTED AS AFORESAID) OR BY PERSONAL SERVICE OR IN SUCH OTHER
MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE PARTIES
HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
PURSUANT TO THIS AGREEMENT OR THE OTHER AGREEMENTS.
(n) Payment Set Aside. To the extent that the Company makes a
payment or payments to any Investor hereunder or pursuant to the
Registration Rights Agreement or the Exchange Warrants or the Investor
enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or
any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required
to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person or entity under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall
be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
(o) Like Treatment of Investors and Holders. For so long as any
Exchange Warrants remain outstanding, neither the Company nor any of its
affiliates shall, directly or indirectly, pay or cause to be paid any
consideration (immediate or contingent), whether by way of interest,
fee, payment for the redemption, exchange or exercise of the Securities,
or otherwise, to any Investor, Other Investor or holder of Securities,
for or as an inducement to, or in connection with the solicitation of,
any consent, waiver or amendment of any terms or provisions of the
Agreement or the Exchange Warrants, unless such consideration is
required to be paid to all Investors or holders of Securities bound by
such consent, waiver or amendment. The Company shall not, directly or
indirectly, redeem or exchange any Securities unless such offer of
redemption or exchange is made pro rata to all Investors or holders of
Securities, as the case may be, on identical terms.
(p) Independent Nature of Investor's Obligations and Rights. The
obligations of the Investor hereunder and under the documents
contemplated hereby are several and not joint with the obligations of
the Other Investor, and the Investor shall not be responsible in any way
for the performance of the obligations of the Other Investor under any
such document. Nothing contained herein or in any other document
contemplated hereby, and no action taken by the Investor pursuant hereto
or thereto, shall be deemed to constitute any of 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 hereby or thereby. The Investor confirms that
it has independently participated in
18
the negotiation of the transaction contemplated hereby with the advice
of its own counsel and advisors. The Investor shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
document contemplated hereby, and it shall not be necessary for any
other Investor to be joined as an additional party in any proceeding for
such purpose.
*** Signature Pages Follow***
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
The Company: GENOME THERAPEUTICS CORP.
By: /s/ Steven M. Rauscher
-------------------------------
Name: Steven M. Rauscher
Title: Chairman, President and CEO
20
THE INVESTOR
SMITHFIELD FIDUCIARY LLC
By: /s/ Adam J. Chill
-----------------------------
Name: Adam J. Chill
Title: Authorized Signatory
Address for Notices: c/o Highbridge Capital Management, LLC,
9 West 57th Street, 27th Floor
New York, New York 10019
Tel: (212) 287-4720
Fax: (212) 751-0755
Attention: Ari J. Storch/Adam J. Chill
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attn: Eleazer N. Klein, Esq.
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Exhibits:
Exhibit A Form of Exchange Warrants
Exhibit B Press Release
Schedules:
Schedule 7(c) Capitalization