CUBIST PHARMACEUTICALS, INC.
CONVERSION AGREEMENT
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This Conversion Agreement, dated as of September 18, 1996 (this
"Agreement"), is between Cubist Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and Xxxxxxx-Xxxxx Squibb Company, a Delaware corporation
("BMS").
W I T N E S S E T H:
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WHEREAS, the Company proposes to effect an underwritten initial public
offering (the "Initial Public Offering") of shares of its Common Stock, $.001
par value per share ("Common Stock"), and has engaged UBS Securities LLC,
Xxxxxxxxx & Xxxxx LLC and Pacific Growth Equities, Inc. as the representatives
of the syndicate of underwriters that will underwrite, on a firm commitment
basis, the Initial Public Offering;
WHEREAS, in connection with the Initial Public Offering, the Company has
filed with the Securities and Exchange Commission a registration statement on
Form S-1 (Registration No. 333-6795) (as amended, the "Registration Statement")
for purposes of registering under the Securities Act of 1933, as amended (the
"Securities Act"), 2,000,000 shares (2,300,000 if the underwriters exercise
their over-allotment option) of Common Stock;
WHEREAS, as a condition to the consummation of the Initial Public Offering,
the Company is requesting that BMS agree to convert all of its 2,816,902 shares
(the "BMS Series D Shares") of Series D Convertible Preferred Stock, $0.001 par
value per share ("Series D Preferred Stock"), into shares of Common Stock,
$0.001 par value per shares ("Common Stock"), upon and simultaneously with the
closing of the Initial Public Offering, all subject to and upon the terms and
conditions set forth in this Agreement; and
WHEREAS, BMS is willing to convert all of the BMS Series D Shares into
shares of Common Stock upon and simultaneously with the closing of the Initial
Public Offering, subject to and upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the parties
hereto hereby agree as follows:
1. Conversion. Subject to the conditions set forth below in this
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Section 1, BMS hereby agrees that, upon and simultaneously with the closing of
the Initial Public Offering, all of the BMS Series D Shares shall automatically
(without any further action being required by the Company or BMS) convert into
that number of shares of Common Stock into which the BMS Series D Shares are
then convertible pursuant to, and in accordance with, the applicable provisions
of the Company's Restated Certificate of Incorporation, as amended and in effect
immediately prior to the closing of the Initial Public Offering (the "Restated
Certificate of Incorporation"). The agreement and obligation of BMS to convert
the BMS Series D Shares into shares of Common Stock pursuant to this Section 1
is subject to the conditions that (i) the aggregate gross proceeds to the
Company from the sale of Common Stock pursuant to the Initial Public Offering
shall be at least $15,000,000, (ii) the closing of the Initial Public Offering
shall occur on or prior to the first anniversary of the date on which the
Company sold and issued to BMS the BMS Series D Shares, (iii) the Company shall
have effected a one-for-seven reverse stock split of its Common Stock prior to
the effective date of the Initial Public Offering and (iv) all of the issued and
outstanding shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock of the Company shall,
at or prior to the closing of the Initial Public Offering, convert into shares
of Common Stock, and, immediately following the closing of the Initial Public
Offering, no share of any series of Preferred Stock of the Company shall be
outstanding. If any of the conditions set forth in the foregoing clauses (i)
through (iv) is not satisfied, this Agreement shall become null and void.
2. Antidilution Provisions. For and in consideration of BMS' agreement
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to convert the BMS Series D Shares pursuant to Section 1 hereof, the Company
hereby agrees that, in the event that the price per share of the Common Stock
offered by the Company in connection with the Initial Public Offering, as set
forth in the cover page of the final prospectus relating to the Initial Public
Offering (the "Initial Public Offering Price Per Share"), shall be less than
$10.00 (before deduction of any underwriting discounts, commissions or expenses
of sale payable in connection with the Initial Public Offering), the Company
shall issue to BMS, promptly after the closing of the Initial Public Offering,
such number of additional shares of Common Stock, at no cost to BMS, as shall be
equal to (A) the quotient obtained by dividing (i) $4,000,000.85 by (ii) the
Initial Public Offering Price Per Share, minus (B) the number of shares of
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Common Stock issued to BMS upon conversion of the BMS
Series D Shares pursuant to Section 1 above. If the remainder obtained by
subtracting the number in clause (B) above from the number in clause (A) above
is less than zero, the Company shall not be required to issue any shares of
Common Stock to BMS pursuant to this Section 2. The obligation of the Company to
issue additional shares of Common Stock to BMS pursuant to this Section 2 shall
be subject to the conversion of the BMS Series D Shares into shares of Common
Stock pursuant to the provisions of Section 1 hereof.
3. Representation and Warranty. This Agreement constitutes the valid and
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binding agreement of each party hereto, enforceable against such party in
accordance with its terms, except to the extent enforcement thereof may be
limited by insolvency, bankruptcy and similar laws affecting generally the
enforcement of creditor's rights and by the discretionary nature of equitable
remedies.
4. Miscellaneous Provisions. In the event of any conflict between this
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Agreement and any provision of the Restated Certificate of Incorporation
relating to conversion of shares of Series D Preferred Stock, the provisions of
this Agreement shall govern. This Agreement may be executed in any number of
counterparts which together shall constitute one instrument, and shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, and intending to become legally bound, the Company and
BMS have caused this Agreement to be duly executed as of the date first above
written.
CUBIST PHARMACEUTICALS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx, President
XXXXXXX-XXXXX SQUIBB COMPANY
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: VP Business Development
