ISIS PHARMACEUTICALS, INC.
REGISTRATION RIGHTS AND STANDSTILL AGREEMENT
THIS REGISTRATION RIGHTS AND STANDSTILL AGREEMENT (the
"Agreement") is made as of August 17, 2001 by and between ISIS PHARMACEUTICALS,
INC., a Delaware corporation (the "Company"), and XXX XXXXX AND COMPANY, an
Indiana corporation ("Lilly").
R E C I T A L S:
A. Pursuant to a Securities Purchase Agreement (the "PURCHASE
AGREEMENT") and a Loan Agreement (the "LOAN AGREEMENT") each dated as of the
date hereof, and each by and between the Company and Xxxxx, Xxxxx has acquired,
or may acquire in the future, (i) certain shares of common stock, par value
$.001 per share, of the Company (the "COMMON STOCK"), and (ii) a promissory note
(the "Note"), which in certain circumstances may be converted into Common Stock.
B. The execution of the Purchase Agreement and the Loan
Agreement has occurred on the date hereof, and it is a condition to the closing
of the transactions contemplated thereby that the parties execute and deliver
this Agreement.
C. The parties desire to set forth herein their agreement as
to the terms and conditions set forth herein related to the granting of certain
registration rights to the Holders (as defined below) relating to the Common
Stock held by such Holders and the Common Stock underlying the Note.
A G R E E M E N T:
The parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following respective meanings:
"COMMISSION" shall mean the U.S. Securities and Exchange
Commission.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect from time to time.
"HOLDERS" or "HOLDERS OF REGISTRABLE SECURITIES" shall mean
Lilly and any other Person owning Registrable Securities to whom registration
rights shall have been assigned in accordance with Section 10 below.
"PERSON" shall mean an individual, a corporation, a
partnership, a company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental or quasi-governmental
entity, or any department, agency or political subdivision thereof.
"REGISTRABLE SECURITIES" means (i) any shares of Common Stock
purchased pursuant to the Purchase Agreement, (ii) any shares of Common Stock
issued or issuable upon conversion of the Note and (iii) any Common Stock issued
or issuable in respect of the securities referred to in clauses (i) and (ii)
above upon any stock split, stock dividend, recapitalization or similar event;
excluding in all cases, however, any such securities which are not held by a
Holder.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or order of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, other than
Selling Expenses, incurred by the Company in complying with Sections 2 or 3
hereof, including without limitation, all registration, qualification and filing
fees, exchange listing fees, printing expenses, escrow fees, underwriters' fees
and expenses (excluding discounts and commissions), fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration and the fees and
disbursements (not to exceed $20,000) of counsel for the Holders.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and the costs of any accountants, attorneys or other
experts retained by the Holders, except as expressly included in Registration
Expenses.
2. DEMAND REGISTRATION.
(a) REQUESTS FOR REGISTRATION. Effective upon the second
anniversary of the Closing (as defined in the Purchase Agreement), until
expiration of such rights as set forth in Section 13 hereof, any Holder or
Holders who collectively hold Registrable Securities representing at least 50%
of the Registrable Securities then outstanding shall have the right at any time
and from time to time, to request registration under the Securities Act of a
minimum of 500,000 shares of Common Stock (as adjusted for any combinations,
consolidations, splits, stock distributions, stock dividends or other
recapitalizations with respect to such shares) on Form X-0, X-0 or S-3 (if
available) or any similar registration statement (a "Demand Registration"), such
form to be selected by the Company as appropriate. The request for the Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered. Within 20 days after receipt of any such request,
the Company will give written notice of such requested registration to all other
Holders of Registrable Securities. The Company shall include such other Holders'
Registrable Securities in such offering if they have responded affirmatively
within 20 days after the receipt of the Company's notice. The Holders in
aggregate will be entitled to request only one Demand Registration hereunder,
unless any Registrable Securities are issued upon conversion of the Note, in
which case the Holders in aggregate will be entitled to request two Demand
Registrations hereunder. A registration will not count as a Demand Registration
until it has become effective and has been effective for 180 days (or until such
lesser time as all Registrable Securities included therein shall have been sold
thereunder), unless such Demand
Registration has not become effective due solely to the fault of the Holders
requesting such registration, including a request by such Holders that such
registration be withdrawn, unless the Holders have paid the Registration
Expenses pursuant to the provisions of Section 4(b) hereof. The Company shall
pay all Registration Expenses in connection therewith. The Holders whose
Registrable Securities are included therein shall pay all Selling Expenses in
connection therewith.
(b) PRIORITY ON DEMAND REGISTRATION. If, in connection with a
Demand Registration, any managing underwriter (or, if such Demand Registration
is not an underwritten offering, a nationally recognized independent underwriter
selected by the Company and reasonably acceptable to the Holders of a majority
of the Registrable Securities sought to be registered in such Demand
Registration (and whose fees and expenses shall be borne solely by the Company))
advises the Company and the Holders of the Registrable Securities sought to be
included in such Demand Registration ("Demanding Sellers") that, in its opinion,
the inclusion of all the Registrable Securities and any other securities of the
Company, in each case, sought to be registered in connection with such Demand
Registration would adversely affect the marketability of the Registrable
Securities sought to be sold pursuant thereto, then the Company shall include in
the registration statement applicable to such Demand Registration only such
securities as the Company and the Demanding Sellers are advised by such
underwriter can be sold without such an effect (the "Maximum Demand Number"), as
follows and in the following order of priority:
(i) first, the number of Registrable Securities
sought to be registered by each Demanding Seller, PRO RATA in
proportion to the number of Registrable Securities sought to be
registered by all Demanding Sellers; and
(ii) second, if the number of Registrable Securities
to be included under clause (i) next above is less than the Maximum
Demand Number, the number of securities sought to be included by each
other seller, PRO RATA in proportion to the number of securities sought
to be sold by all such other sellers, which in the aggregate, when
added to the number of securities to be included pursuant to clause (i)
next above, equals the Maximum Demand Number.
Other than the securities issued by the Company to Reliance Insurance Company
and to Elan International Services, Ltd. and their permitted transferees, no
securities other than Registrable Securities hereunder shall be included in such
Demand Registration without the prior written consent of Holders who
collectively hold Registrable Securities representing at least 50% of the
Registrable Securities then outstanding.
(c) RESTRICTIONS ON DEMAND REGISTRATION. The Company may
postpone the filing or the effectiveness of a registration statement for a
Demand Registration one time in any 12 month period for up to 90 days if the
Company determines in good faith that such Demand Registration would reasonably
be expected to have a material adverse effect on any proposal or plan by the
Company or would require disclosure of any information that the board of
directors of the Company determines in good faith the disclosure of which would
be detrimental to the Company; provided, however, that in such event, the
Holders initially requesting such Demand
Registration will be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration will not count as a Demand Registration
hereunder.
(d) SELECTION OF UNDERWRITERS. The Holders will have the right
to select the investment banker(s) and manager(s) to administer an offering
pursuant to the Demand Registration, subject to the Company's prior written
approval, which will not be unreasonably withheld or delayed.
(e) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, so long as any Holder owns any Registrable Securities, the Company
will not grant to any Persons the right to request the Company to register any
equity securities of the Company, or any securities convertible or exchangeable
into or exercisable for such securities, which conflicts with the rights granted
to the Holders hereunder, without the prior written consent of the Holders of at
least 50% of the Registrable Securities.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Effective upon the second anniversary
of the Closing (as defined in the Purchase Agreement), any time that the Company
shall propose (whether in a primary offering or pursuant to the exercise of
demand rights by others) to register Common Stock under the Securities Act
(other than in a registration (i) on Form S-3 relating to sales of securities to
participants in a Company dividend reinvestment plan, (ii) on Form S-4 or S-8 or
any successor form or in connection with an acquisition or exchange offer or an
offering of securities solely to the existing shareholders or employees of the
Company, (iii) pursuant to a shelf registration statement filed pursuant to
Section 3 of either of two Registration Rights Agreements by and between Elan
International Services, Ltd., dated as of April 20, 1999 and as of January 14,
2001, (iv) pursuant to a shelf registration statement filed pursuant to Section
7.2 of the Master Agreement by and between Hybridon, Inc. and the Company, dated
as of May 24, 2001 or (v) pursuant to a shelf registration statement filed to
facilitate any equity line of credit financing), the Company shall give prompt
written notice to all Holders of Registrable Securities of its intention to
effect such a registration and, subject to Section 3(b) and the other terms of
this Agreement, shall include in such registration all Registrable Securities
that are permitted under applicable securities laws to be included in such
registration and with respect to which the Company has received written requests
for inclusion therein by the Holders within 20 days after the receipt of the
Company's notice (each, a "PIGGYBACK REGISTRATION"; together with a Demand
Registration, a "REGISTRATION").
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering without adversely affecting the
marketability of the offering, the Company shall include in such registration,
only as may be permitted in the reasonable business judgment of the managing
underwriters for such registration:
(i) first, up to that number of securities the
Company proposes to sell;
(ii) second, up to that number of Registrable
Securities requested to be included in such registration by the Holders
and that number of securities requested to be included in such
registration by any other Person entitled to registration rights with
respect to such registration, PRO RATA among the Holders of such
Registrable Securities and such other Persons, on the basis of the
number of Registrable Securities and other securities of the Company
requested to be included by each such Holder and such other Persons;
and
(iii) third, up to that number of other securities
requested to be included in such registration.
The Holders of any Registrable Securities included in such a registration shall
execute an underwriting agreement and customary accompanying documents in form
and substance satisfactory to the managing underwriters.
(c) RIGHT TO TERMINATE REGISTRATION. If, at any time
after giving written notice of its intention to register any of its securities
as set forth in Section 3(a) and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may, at
its election, give written notice of such determination to each Holder of
Registrable Securities and thereupon be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not of its
obligation to pay the Registration Expenses in connection therewith).
(d) SELECTION OF UNDERWRITERS. The Company shall have the
right to select the investment banker(s) and manager(s) to administer an
offering pursuant to a Piggyback Registration.
4. EXPENSES OF REGISTRATION; WITHDRAWAL RIGHTS.
(a) EXPENSES. Except as otherwise provided herein, all
Registration Expenses incurred in connection with all registrations pursuant to
Sections 2 and 3 shall be borne by the Company, and all Selling Expenses
relating to securities registered on behalf of the Holders of Registrable
Securities shall be borne by such Holders.
(b) WITHDRAWAL RIGHTS. Any Holder of Registrable
Securities having notified or directed the Company to include any or all of its
Registrable Securities in a registration statement under the Securities Act
(whether pursuant to Section 2 or 3 hereof) shall have the right to withdraw any
such notice or direction with respect to any or all of the Registrable
Securities designated for registration thereby by giving written notice to such
effect to the Company prior to the effective date of such registration
statement. In the event of any such withdrawal, the Company shall not include
such Registrable Securities in the applicable registration and such Registrable
Securities shall continue to be Registrable Securities hereunder. No such
withdrawal shall affect the obligations of the Company with respect to any
Registrable Securities not so withdrawn; provided that in the case of a
registration pursuant to Section 2 hereof, if such withdrawal shall reduce the
number of Registrable Securities still sought to be included in such
registration ("Included Securities") below the minimum number required
pursuant to Section 2(a) to be included therein, then the Company shall as
promptly as practicable give each Holder of Included Securities notice to such
effect, referring to this Agreement and summarizing this Section, and within ten
business days following the effectiveness of such notice, either the Company or
the Holders of a majority of the Included Securities may, by written notice to
each Holder of Included Securities or the Company, respectively, elect that such
registration statement not be filed or, if theretofore filed, be withdrawn.
During such ten business day period, the Company shall not file such
registration statement if not theretofore filed or, if such registration
statement has been theretofore filed, the Company shall not seek, and shall use
its best efforts to prevent, the effectiveness thereof. Any registration
statement effected pursuant to Section 2 hereof and not filed or withdrawn in
accordance with this Section 4(b) shall be counted as a Demand Registration for
purposes of Section 2 hereof, unless the Holders of the Included Securities and
the securities withdrawn from the registration statement pay the Registration
Expenses.
5. HOLDBACK AGREEMENTS.
(a) The Company agrees, unless the underwriters managing
the registered public offering otherwise agree, (i) not to effect any public
sale or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, for its own account
during the seven days prior to and during the 90-day period beginning on the
effective date of any underwritten Demand Registration (except (A) as part of
such underwritten registration, (B) pursuant to registration statements on Form
S-4 or Form S-8 or any successor form, (C) pursuant to a registration statement
then in effect or (D) as required under any existing contractual obligation of
the Company), and (ii) to cause its officers and directors and to use reasonable
efforts to cause each holder of at least 5% (on a fully-diluted basis) of its
outstanding Common Stock, or any securities convertible into or exchangeable or
exercisable for Common Stock, purchased from the Company at any time after the
date of this Agreement (other than in a registered public offering) to agree not
to effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during such periods (except as part of such underwritten
registration, if otherwise permitted).
(b) Each Holder agrees, so long as such Holder holds at
least 1% (on a fully diluted basis) of the outstanding Common Stock, if
requested by the managing underwriter or underwriters in an underwritten
offering of securities of the Company, not to effect any offer, sale,
distribution or transfer, including a sale pursuant to Rule 144 (or any similar
provision then effect) under the Securities Act (except as part of such
underwritten registration), during the seven-day period prior to, and during the
180-day period (or such shorter period as may be agreed to in writing by the
Company and the Holders of at least 50% of the Registrable Securities) following
the effective date of such Registration Statement to the extent timely notified
in writing by the managing underwriter or underwriters.
6. REGISTRATION PROCEDURES. Whenever the Company is
under the obligation to register Registrable Securities hereunder, the Company
will use all reasonable efforts to effect the Registration and the sale of such
Registrable Securities, and pursuant thereto the Company will as expeditiously
as possible:
(a) subject to Section 2(c) hereof, prepare and file with
the Commission a registration statement on any form for which the Company
qualifies with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to the counsel selected by the
Holders copies of all such documents proposed to be filed, which documents will
be subject to the prompt review of such counsel, and (ii) notify each Holder of
Registrable Securities covered by such registration of any stop order issued or
threatened in writing by the Commission);
(b) subject to Sections 2(c) and 6(e) hereof, prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for, in the case of a Demand
Registration, a period equal to the shorter of (i) six months and (ii) the time
by which all securities covered by such registration statement have been sold,
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use all reasonable efforts to register or qualify
such Registrable Securities under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 6(d), or (ii) subject
itself to taxation in any jurisdiction;
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
and, at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in light of the circumstances under which they were
made not misleading; provided, however, that the Company shall not be required
to amend the registration statement or supplement the Prospectus for a period of
up to six months if the board of directors of the Company determines in good
faith that to do so would reasonably be expected to have a material adverse
effect on any proposal or plan by the Company to engage in any financing,
acquisition or disposition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction or
would require the disclosure
of any information that the board of directors of the Company determines in
good faith the disclosure of which would be detrimental to the Company, it being
understood that the period for which the Company is obligated to keep the
Registration Statement effective shall be extended for a number of days equal to
the number of days the Company delays amendments or supplements pursuant to this
provision. Upon receipt of any notice pursuant to this Section 6(e), the Holders
shall suspend all offers and sales of securities of the Company and all use of
any prospectus until advised by the Company that offers and sales may resume,
and shall keep confidential the fact and content of any notice given by the
Company pursuant to this Section 6(e);
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the Holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(i) at reasonable times and as reasonably requested make
available for inspection by a representative of the Holders of Registrable
Securities included in the registration statement, any underwriter participating
in any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company, and use commercially reasonable efforts to cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 12(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Common Stock included in such registration statement for
sale in any jurisdiction, use all reasonable efforts promptly to obtain the
withdrawal of such order; and
(l) if the registration is an underwritten offering, use
all reasonable efforts to obtain a so-called "cold comfort" letter from the
Company's independent public accountants in
customary form and covering such matters of the type customarily covered by cold
comfort letters.
7. OBLIGATIONS OF HOLDERS. Whenever the Holders of
Registrable Securities sell any Registrable Securities pursuant to a
Registration, such Holders shall be obligated to comply with the applicable
provisions of the Securities Act, including the prospectus delivery requirements
thereunder, and any applicable state securities or blue sky laws.
8. INDEMNIFICATION. (a) In connection with any
registration statement for any Registration in which a Holder of Registrable
Securities is participating, the Company agrees to indemnify, to the fullest
extent permitted by applicable law, each such Holder of Registrable Securities,
its officers and directors and each Person who controls such Holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities,
reasonable and documented expenses or any amounts paid in settlement of any
litigation, investigation or proceeding commenced or threatened to which each
such indemnified party may become subject under the Securities Act including,
without limitation, reasonable attorneys fees and disbursements (collectively,
"Claims") insofar as such Claim arose out of (i) any untrue or alleged untrue
statement of material fact contained, on the effective date thereof, in any such
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such Holder
expressly for use therein or by such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company will
indemnify the underwriters, their officers and directors and each Person who
controls the underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the Holders of
Registrable Securities.
(b) In connection with any registration statements for
any Registration in which a Holder of Registrable Securities is participating,
each such Holder will furnish to the Company in writing such customary
information as the Company reasonably requests for use in connection with any
such registration statement or prospectus (the "Seller's Information") and, to
the fullest extent permitted by applicable law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any and all Claims to which each such
indemnified party may become subject under the Securities Act insofar as such
Claim arose out of (i) any untrue or alleged untrue statement of material fact
contained, on the effective date thereof, in any such registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided that with respect to a Claim arising pursuant to clause
(i) or (ii) above, the material misstatement or omission is contained in such
Seller's Information; provided, further, that the obligation to indemnify will
be individual to each Holder (not joint and several among Holders) and will be
limited to the amount of proceeds received by such Holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (but the failure to provide such
notice shall not release the indemnifying party of its obligation under
paragraphs (a) and (b), unless and then only to the extent that, the
indemnifying party has been prejudiced by such failure to provide such notice)
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnifying party shall not be liable to
indemnify an indemnified party for any settlement, or consent to judgment of any
such action effected without the indemnifying party's written consent (but such
consent will not be unreasonably withheld). Furthermore, the indemnifying party
shall not, except with the prior written approval of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to each indemnified party of a release from all liability in respect of such
claim or litigation without any payment or consideration provided by each such
indemnified party.
(e) If the indemnification provided for in this Section 8
is unavailable to an indemnified party under clauses (a) and (b) above in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company, the underwriters, the
sellers of Registrable Securities and any other sellers participating in the
registration statement in connection with the statement or omission which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company, the
underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the sellers of Registrable Securities
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
anything herein to the contrary, the obligation of any Holder to contribute as
provided herein shall be limited to the amount of net proceeds received by such
Holder from the sale of Registrable Securities pursuant to the registration
statement.
(f) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No
Holder may participate in any registration hereunder which is underwritten
unless such Holder (a) agrees to sell such
Holder's securities on the basis provided in any underwriting arrangements
approved by the Holder or Holders entitled hereunder to approve such
arrangements, (b) as expeditiously as possible notifies the Company of the
occurrence of any event as a result of which any prospectus contains an untrue
statement of material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(c) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. TRANSFER OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Agreement may be
assigned by a Holder to an affiliate of Lilly and to not more than two other
transferees or assignees of such Registrable Securities pursuant to a private
placement transaction as permitted by the Purchase Agreement; provided that (i)
such transferee or assignee was a Holder of Registrable Securities prior to such
transfer or such transferee or assignee acquires at least 200,000 Registrable
Securities (subject to appropriate adjustment for stock splits, stock
combinations and similar events) and the transferring Holder gives the Company
written notice of such transfer or assignment within a reasonable time after
consummation thereof, which notice states the name and address of the transferee
or assignee and identifies the Registrable Securities with respect to which such
registration rights are being transferred or assigned; (ii) such transferee or
assignee assumes the obligations of the Holder with respect to the transferred
Registrable Securities pursuant to this Agreement; (iii) immediately following
such transfer or assignment, the further disposition of such Registrable
Securities by the transferee or assignee is restricted under the Securities Act;
and (iv) no more than a maximum of three such transferees or assignees in the
aggregate shall be assigned or hold the rights to cause the Company to register
Registrable Securities pursuant to this Agreement.
11. INFORMATION BY HOLDER. Each Holder shall furnish to
the Company such written information regarding such Holder and any distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement and shall promptly notify the
Company of any changes or updates in such information.
12. EXCHANGE ACT COMPLIANCE. The Company shall comply
with all of the reporting requirements of the Exchange Act then applicable to it
and shall comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Registrable Securities. The Company shall cooperate with each Holder in
supplying such information as may be necessary for such Holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
13. TERMINATION OF REGISTRATION RIGHTS. All registration
rights granted under this Agreement shall terminate and be of no further force
and effect, as to any particular Holder, at such time as all Registrable
Securities held by such Holder or contingently issuable to such Holder upon
conversion of the Note (i) represent, in the aggregate, less than 2% of the
Common Stock then outstanding and (ii) can be sold by such Holder within a
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including Rule 144(k)) promulgated
thereunder.
14. STANDSTILL.
(a) Provided that nothing contained herein will prevent
or prohibit Lilly from acquiring Voting Stock (as defined below) of the Company
pursuant to the Purchase Agreement or pursuant to conversion of the Note, Lilly
will not, directly or indirectly, without the prior consent of a majority of the
Board of Directors of the Company (the "Board"), (i) acquire (or offer or agree
to acquire) any Voting Stock if, as a result, Lilly would beneficially own more
than 20% of the then outstanding Voting Stock; (ii) directly or indirectly
solicit proxies or consents or become a participant in a solicitation (as such
terms are defined in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the majority of the Board for a Takeover Event (as defined
below); or (iii) transfer to any third party (other than to its "affiliates,"
"associates" (as such terms are defined in Rule 12b-2 under the Exchange Act),
officers, directors or employees and other than pursuant to a proxy solicitation
conducted by or on behalf of the Board), the right to vote any Voting Stock
except in connection with the transfer of ownership of such Voting Stock for
fair value. Lilly also agrees that it will not advise, assist or encourage any
third party to do any of the foregoing. Notwithstanding the foregoing, (x) Lilly
will not be obligated to dispose of any Voting Stock it owns if its percentage
ownership is increased as a result of a decrease in the number of shares of
Voting Stock outstanding, and (y) in the event of any bona fide third party
tender or exchange offer for at least 50% of the outstanding Voting Stock of the
Company, Lilly will be free to tender or exchange any or all of its Voting Stock
and/or take such other actions as it deems advisable, in its sole discretion.
The covenants in this Section 14(a) shall expire upon the later of (i) the fifth
anniversary of the date hereof and (ii) the first anniversary of the termination
of the Collaboration Agreement, dated as of the date hereof, between the Company
and Lilly (the "Collaboration Agreement").
(b) The Company will give Lilly prompt notice of the
receipt by the Company of any written notice couched in such terms as to put the
Company reasonably on notice of the likelihood that a person or group has
acquired or is proposing to acquire an aggregate position of at least 10% of the
Voting Stock, the Company's receiving any bona fide offer to purchase or acquire
20% or more of the Voting Stock or all or substantially all of the assets of the
Company, and any Board determination to seek an acquiror for in excess of 50% of
the Voting Stock.
(c) Lilly will cause its affiliates and associates to
comply with the provisions of this Section 14, whether directly or indirectly,
individually or as part of a "group" (as such term is defined in Rule 13d-5
under the Exchange Act). When used in this Section 14, the term Lilly includes
Lilly together with its affiliates and associates.
(d) For purposes of this Section 14, the term "TAKEOVER
EVENT" means any proposal for any merger or business combination involving the
Company or any of its subsidiaries, the purchase or sale of all or substantially
all of the assets of the Company or any of its subsidiaries, or the purchase of
at least 20% of the Voting Stock, by tender offer or otherwise (except pursuant
to the exercise of rights, warrants, options or similar securities distributed
by the Company to holders of Voting Stock generally), and the term "VOTING
STOCK" means the Common Stock and any preferred stock of the Company possessing
voting rights and eligible to participate in votes of all of the Company's
stockholders pursuant to the Company's Certificate of Incorporation and Delaware
law, and includes any options, convertible securities or other rights to acquire
such stock.
15. COOPERATION UPON SALE OF SECURITIES. In the event
that Lilly or any affiliate transferee of Lilly proposes to sell, transfer or
otherwise dispose of any securities of the Company prior to the termination of
the Collaboration Agreement, Lilly or any such affiliate transferee shall notify
the Company in writing at least fifteen (15) days prior to such proposed sale,
transfer or other disposition thereof and further agrees to cooperate and
coordinate with the Company in the development by Lilly or such affiliate
transferee, as applicable, and the Company of a standby statement to be used in
responding to any inquiries from third parties (or if deemed appropriate by the
Company or Lilly or such affiliate transferee, as applicable, a press release of
that party) that would, as appropriate, indicate the continuing strong support
by Lilly or such affiliate transferee, as applicable, of the collaboration
activities, and the Company, notwithstanding the decision of Lilly or such
affiliate transferee, as applicable, to dispose of some of its holdings of the
Company's securities. Subject to the required notice above, the Company and
Lilly or such affiliate transferee, as applicable, shall provide each other with
comments on any such proposed standby statement or press release in such manner
as is necessary to not cause a delay in Lilly's or such affiliate transferee's,
as applicable, proposed sale, transfer or other disposition of such securities.
16. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders of Registrable
Securities in this Agreement without the prior written consent of a majority in
interest of such Registrable Securities.
(b) REMEDIES. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights specifically
to recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement; provided, however, that in no event shall any
Holder have the right to enjoin, delay or interfere with any offering of
securities by the Company which is not in violation of the provisions of Section
5(a) above.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only with the
prior written consent of the Company and Holders of at least 50% of the
Registrable Securities; provided, however, that without the prior written
consent of all the Holders, no such amendment or waiver shall reduce the
foregoing percentage required to amend or waive any provision of this Agreement.
Notwithstanding the foregoing, Section 14 may be amended or waived only with the
prior written consent of the Company and Lilly.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, and shall inure to the benefit and be enforceable by each Holder of
Registrable Securities from time to time.
(e) SEVERABILITY. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(h) GOVERNING LAW. All questions concerning the
construction, validity and interpretation of this Agreement will be governed by
the laws of the State of Delaware without regard to principles of conflicts of
laws, except that all issues concerning the relative rights of the Company and
its stockholders shall be governed by the Delaware General Corporation Law,
without giving effect to the principles thereof relating to conflicts of laws.
(i) NOTICES. All notices, demands and requests of any
kind to be delivered to any party in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered or
if sent by nationally-recognized overnight courier or by registered or certified
airmail, return receipt requested and postage prepaid or by facsimile
transmission (with receipt confirmed by telephone), addressed as follows:
(i) if to the Company, to:
Isis Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
telephone confirmation required at (000) 000-0000
Attention: B. Xxxxx Xxxxxxxx
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
telephone confirmation required at (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
(ii) if to Lilly, to:
Xxx Xxxxx and Company
Lilly Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
telephone confirmation required at (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq., Senior Vice
President and General Counsel
with a copy to:
Facsimile: (000) 000-0000
telephone confirmation required at (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Ph.D., Group Vice
President, Lilly Research Center
(j) ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed this
Registration Rights and Standstill Agreement as of the date first written above.
ISIS PHARMACEUTICALS, INC.
By: /s/ B. Xxxxx Xxxxxxxx
--------------------------------------------
Name: B. Xxxxx Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
XXX XXXXX AND COMPANY
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman of the Board, Chief Executive
Officer and President
