Exhibit 10.2
THIS PROMISSORY NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”). NO SALE OR DISPOSITION OF THIS PROMISSORY NOTE
OR THE SECURITIES INTO WHICH THIS PROMISSORY NOTE IS CONVERTIBLE
MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER THE ACT,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
FOLLOWING RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR FOLLOWING RECEIPT BY
THE COMPANY OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
ACT.
MONOGRAM BIOSCIENCES,
INC.
3.0% SENIOR SECURED CONVERTIBLE
NOTE DUE MAY 19, 2010
Monogram Biosciences, Inc., a
Delaware corporation (the “ Company ”, which
term shall include any successor thereto), promises to pay to
Pfizer Inc. (the “ Holder ”, which term shall
include any successor thereto or permitted transferee thereof) in
cash, the principal sum of Twenty-Five Million Dollars
($25,000,000) on May 19, 2010 or such earlier date as may be
provided herein, with simple interest on the outstanding principal
amount at the rate of 3% per annum.
This Note and the Common Stock
issuable upon conversion of this Note (collectively, the “
Securities ”) are being offered and sold by the
Company pursuant to a Purchase Agreement, dated May 5, 2006
(the “ Purchase Agreement ”), among the Company
and the Holder, in a transaction exempt from, or not subject to,
the registration requirements of the Securities Act of 1933, as
amended (the “ Securities Act ”).
1. INTEREST
The Company promises to pay interest
on the principal amount of this Note at the rate of 3.0% per
annum. The Company shall pay interest quarterly on
March 31, June 30, September 30 and
December 31 of each year (each an “ Interest
Payment ”), commencing June 30, 2006. Interest on
this Note shall accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from May 19,
2006. Interest will be computed on the basis of a 365-day year for
the actual number of days elapsed. The Company shall pay interest
on this Note (except defaulted interest) to the Holder at the close
of business on the Business Day (as hereinafter defined)
immediately following the related interest payment date.
The Company may make the Interest
Payment at its option, either in cash or Common Stock (or a
combination of cash and Common Stock); provided, however,
that payment of any Interest
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Payment may not be made in shares of Common
Stock, in whole or in part, unless (i) the shares of Common
Stock to be issued in payment of each Interest Payment are
(A) listed or quoted as of the date of the payment of each
Interest Payment on a national securities exchange or on the Nasdaq
National Market and (B) upon issuance, shall be capable of
immediate resale to the public pursuant to an effective
registration statement at the time of issuance (without any
Suspension Period (as defined in the Purchase Agreement) then in
effect) or pursuant to Rule 144(k) if such registration statement
is no longer required to be in effect under the Purchase Agreement;
(ii) all shares of Common Stock that may be issued in payment
of each Interest Payment shall be newly issued, shall, upon issue,
be duly authorized, validly issued, fully paid and non-assessable
and shall be free from preemptive or similar rights and free of any
lien or adverse claim; and (iii) any required corporate
approvals or authorizations, including without limitation any
approval by the Company’s stockholders as may be required
under the Marketplace Rules of The Nasdaq Stock Market, Inc., shall
have been obtained prior to the issuance of such shares of Common
Stock. Payments made in Common Stock will be valued at 90% of the
average of the Closing Prices (as hereinafter defined) of the
Common Stock for the five consecutive Trading Days (as hereinafter
defined) ending on the Trading Day immediately preceding the date
of the applicable Interest Payment; and provided further
that any accrued and unpaid interest shall be paid concurrently
with the repayment of the outstanding principal balance of the Note
and shall be paid in cash.
“ Adjustment Event
” has the meaning specified in Section 7(k).
“ Affiliate ”
means with respect to any specified Person any other Person that
controls, is controlled by or is under common control with such
specified Person. For the purposes of this definition,
“control”, when used with respect to any specified
Person, means the actual power, either directly or indirectly
through one or more intermediaries, to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise, and the terms “controlled by” and
“under common control with” have meanings correlative
to the foregoing.
“ Board of Directors
” means the Board of Directors of the Company or a committee
of such Board duly authorized to act for it hereunder.
“Business
Day” means each day
that is not a Legal Holiday.
“ Collaboration
Agreement ” means the Collaboration Agreement, dated
May 5, 2006, between the Company and Holder, as amended from
time to time.
“ Collaboration Security
Agreement ” means the Collaboration Security Agreement,
dated as of May 5, 2006, between the Company and Holder, as
amended from time to time.
“ Collateral ”
has the meaning assigned to it in the Security
Agreement.
“ Current Market Price
” has the meaning specified in Section 7(g).
“ Determination Date
” has the meaning specified in Section 7(k).
“ Distributed Property
” has the meaning specified in Section 7(d).
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“ Ex-Dividend Date
” has the meaning specified in Section 7(d).
“ Expiration Time
” has the meaning specified in Section 7(f).
“ Fair Market Value
” has the meaning specified in Section 7(g).
“Indebtedness”
means, with respect to any Person,
and without duplication,
(i) all indebtedness, obligations
and other liabilities (contingent or otherwise) of such Person for
borrowed money (including obligations of the Person in respect of
overdrafts, foreign exchange contracts, commodity contracts,
currency exchange agreements, interest rate protection agreements
and any loans or advances from banks, whether or not evidenced by
notes or similar instruments) or evidenced by bonds, debentures,
notes or similar instruments (whether or not the recourse of the
lender is to the whole of the assets of such Person or to only a
portion thereof), other than any current account payable or other
accrued current liability or obligation to trade creditors incurred
in the ordinary course of business in connection with the obtaining
of materials or services;
(ii) all reimbursement obligations
and other liabilities (contingent or otherwise) of such Person with
respect to letters of credit, bank guarantees or bankers’
acceptances;
(iii) all obligations and
liabilities (contingent or otherwise) in respect of leases of such
Person required, in conformity with generally accepted accounting
principles, to be accounted for as capital lease obligations on the
balance sheet of such Person and all obligations and other
liabilities (contingent or otherwise) under any lease or related
document (including a purchase agreement) in connection with the
lease of real property or personal property or assets which
provides that such Person is contractually obligated to purchase or
cause a third party to purchase the leased property or assets and
thereby guarantee a minimum residual value of the leased property
or assets to the lessor and the obligations of such Person under
such lease or related document to purchase or to cause a third
party to purchase such leased property or assets;
(iv) all obligations of such Person
(contingent or otherwise) with respect to an interest rate or other
swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar
instrument or agreement;
(v) all direct or indirect
guarantees or similar agreements by such Person in respect of, and
obligations or liabilities (contingent or otherwise) of such Person
to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kind described in clauses
(i) through (iv);
(vi) any indebtedness or other
obligations described in clauses (i) through (v) secured
by any mortgage, pledge, lien or other encumbrance existing on
property that is owned or held by such Person, regardless of
whether the indebtedness or other obligation secured thereby shall
have been assumed by such Person; and
(vii) any and all deferrals,
renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or
liability of the kind or type described in clauses (i) through
(vi).
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“Legal
Holiday” is a
Saturday, Sunday or a day on which state or federally chartered
banking institutions in New York, New York are not required to be
open.
“ Lien ” means
any security interest, pledge, mortgage, lien (statutory or other),
charge, option to purchase, lease or otherwise acquire any interest
or any claim, restriction, covenant, title defect, hypothecation,
assignment, deposit arrangement or any preference, priority or
other security agreement (including any conditional sale or other
title retention agreement and the filing of, or agreement to give,
any financing statement under the Uniform Commercial Code of any
applicable jurisdiction).
“ Master Services
Agreement ” means the Master Services Agreement, dated as
of November 14, 2002, between the Company and Holder, as
amended from time to time.
“ Person ” means
an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
“ Secured Property
” means the properties and assets of the Company subject to a
security interest pursuant to the Security Agreement.
“ Security Agreement
” has the meaning assigned to it in Article 3.
“ Subsidiary ”
means as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock
or such other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
“ Trading Day ”
has the meaning specified in Section 7(g).
“ Trigger Event ”
has the meaning specified in Section 7(d).
The “ Closing Price
” per share of Common Stock for each day shall be the last
reported sales price or, in case no such reported sale take place
on such date, the average of the reported closing bid and asked
prices in either case on the Nasdaq National Market or, if the
Common Stock is not listed or admitted to trading on the Nasdaq
National Market, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on the Nasdaq National Market or any
national securities exchange, the average of the closing bid and
asked prices as quoted on NASDAQ or any comparable system or, if
the Common Stock is not quoted on NASDAQ or any comparable system,
the closing sales price or, in case no reported sale takes place,
the average of the closing bid and asked prices, as furnished by
any two members of the National Association of Securities Dealers,
Inc. selected from time to time by the Company for that
purpose.
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2. METHOD OF PAYMENT
The Holder must surrender this Note
to the Company to collect payment of principal. The Company will
pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and
private debts.
3. SECURED
OBLIGATION
The indebtedness evidenced by this
Note is secured pursuant to a Note Security Agreement, dated as of
May 5, 2006 (as amended from time to time, the “
Security Agreement ”), by and among the Company and
the Holder, pursuant to which the Company has granted Holder a
security interest in all of the Collateral.
4. REDEMPTION
The Note cannot be redeemed by the
Company before May 19, 2010 (other than at the option of the
Holder as provided herein).
5. PURCHASE OF NOTE AT OPTION OF
HOLDER
(a) At the option of the Holder, the
Company shall become obligated to purchase all or any part (so long
as the principal amount of such part is $1,000 or an integral
multiple of $1,000 in excess thereof) of this Note specified by the
Holder on the Fundamental Change Purchase Date (as defined below),
at a purchase price equal to 100% of the principal amount thereof
together with accrued and unpaid interest to, but excluding, the
Fundamental Change Purchase Date (the “ Fundamental Change
Purchase Price ”), subject to satisfaction by or on
behalf of the Holder of the requirements set forth in
subsection (d) of this Section 5.
(b) A “ Change in
Control ” shall be deemed to have occurred if any of the
following occurs after the date hereof:
(1) the Company consolidates with or
merges with or into a “Designated Entity” (as such term
is defined below) or a wholly-owned subsidiary of a Designated
Entity; or
(2) any “Major Pharmaceutical
Company” (as such term is defined below) is or becomes the
“beneficial owner” (as defined below), directly or
indirectly, of shares of capital of the Company representing more
than 50% of the total voting power of all outstanding classes of
capital stock of the Company; or
(3) the Company sells, assigns,
conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of the Company to a Designated
Entity.
“ Beneficial owner
” shall be determined in accordance with Rule 13d-3
under the Exchange Act, as in effect on the date of this Note,
except that the number of shares of capital stock of the Company
shall be deemed to include, in addition to all outstanding shares
of capital stock of the Company and Unissued Shares deemed to be
held by the “person” or “group” (as such
terms are defined above) or other Person with respect to which the
Change in Control determination is being made, all Unissued Shares
deemed to be held by all other Persons
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“
Debt-to-Equity-Ratio” means the ratio of
(a) aggregate Indebtedness of an entity to (b) the
stockholders’ equity of that entity (determined in accordance
with GAAP).
A “ Fundamental Change
” shall be deemed to have occurred upon the occurrence of
either a Change in Control or a Termination of Trading.
A “ Termination of
Trading ” shall be deemed to have occurred if, after the
date hereof, the Common Stock (or other common stock into which the
Securities are then convertible) is not listed for trading on a
United States national securities exchange, quoted on the Nasdaq
National Market, or approved for trading and/or eligible for
quotation on an established automated over-the-counter trading
market in the United States, including the OTC Bulletin Board, but
excluding the “pink sheets” or any similar quotation
system.
The term “ Designated
Entity ” means (i) any Person having, on a
consolidated basis and measured pro forma for the completion of the
Change in Control transaction as of the date on which the Change in
Control is consummated, (A) stockholders equity determined in
accordance with GAAP of less than $43,127,000 or (B) a
Debt-to-Equity-Ratio greater than 1.5:1 or (ii) a Major
Pharmaceutical Company.
“ GAAP ” means
generally accepted accounting principles in the United States of
America as in effect from time to time.
“ Major Pharmaceutical
Company ” means (A) a pharmaceutical or
biotechnology company (excluding Holder or any Affiliates of
Holder) (x) whose worldwide net sales on a consolidated basis
of human pharmaceutical products, including consumer
over-the-counter pharmaceutical products in the most recently
completed fiscal year for which audited financial statements are
publicly available at the time such Change in Control occurs, total
$1,000,000,000 or more, as reported in such financial statements,
or if such information is not publicly available, as reasonably
calculated and provided by the Company, or (y) whose worldwide
net sales on a consolidated basis of human pharmaceutical products
approved for the treatment of HIV in the most recently completed
fiscal year for which audited financial statements are publicly
available at the time such Change in Control occurs, or if such
information is not publicly available, as reasonably calculated and
provided by the Company, is in excess of $100,000,000 or
(B) any one or more Persons which are direct or indirect
parent holding companies of a Person identified in clause
(A) or is an Affiliate of a Person identified in clause
(A).
The term “ Unissued
Shares ” means shares of capital stock not outstanding
that are subject to options, warrants, rights to purchase or
conversion privileges exercisable within 60 days of the date
of determination of a Change in Control.
(c) Upon (i) the earlier of
public announcement of any transaction, that if consummated, would
result in a Change in Control or the date on which a Change in
Control occurs, or (i) in the case of a Termination of
Trading, within 5 days of such termination, the Company shall mail
a written notice of the Change in Control or Termination of
Trading, as applicable, to the Holder. The notice shall include the
form of a Fundamental Change Purchase Notice to be completed by the
Holder and shall state:
(1) the actual or anticipated date
of such Fundamental Change and, briefly, the events causing such
Change in Control;
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(2) the date by which the
Fundamental Change Purchase Notice pursuant to this Section 5
must be given;
(3) the Fundamental Change Purchase
Date; and
(4) the Fundamental Change Purchase
Price.
(d) The Holder may exercise its
rights specified in subsection (a) of this Section 5 upon
delivery of a written notice in the form delivered by the Company
pursuant to Section 5(c) (a “ Fundamental Change
Purchase Notice ”) to the Company at any time prior to
the close of business on the Business Day next preceding the
Fundamental Change Purchase Date. The “ Fundamental Change
Purchase Date ” is the later of (i) the fifth
business day following delivery of the notice contemplated by
subsection (c) of this Section 5 and (ii) in case of
a Change in Control, the date on which the Change in Control
occurs. The delivery of this Note to the Company (together with all
necessary endorsements) at the office of the Company shall be a
condition to the receipt by the Holder of the Fundamental Change
Purchase Price therefor.
6. CONVERSION
(a) Subject to the second proviso of
this Section 6(a), the Holder may convert the principal amount
of and any accrued but unpaid interest on this Note (or any portion
thereof equal to $1,000 or any integral multiple of $1,000 in
excess thereof) into shares of Common Stock at any time prior to
the close of business on May 19, 2010, at the Conversion Price
(as defined below) then in effect; provided, however , that
if the Note is subject to purchase upon a Change in Control, the
conversion right will terminate at the close of business on the
business day immediately preceding the Change in Control Purchase
Date for the Note or such earlier date as the Holder presents the
Note for purchase (unless the Company shall default in paying the
Change in Control Purchase Price when due, in which case, without
limiting any other rights of the Holder, the conversion right shall
terminate at the close of business on the date such default is
cured and the Note is purchased); provided further that if
any limitation imposed by the Nasdaq Marketplace Rules would
prevent the Company from issuing the full number of shares of
Common Stock issuable upon such conversion, then the portion of the
principal amount of and any accrued but unpaid interest on this
Note for which such conversion right has been exercised, the
conversion of which would exceed such limitation, shall be repaid
in accordance with the terms hereof or, at the written election of
the Holder, shall instead be treated as an advance of monies
then-owed or thereafter owing to the Company by the Holder under
the Master Services Agreement or the Collaboration Agreement and
shall thereby reduce the obligations of the Holder thereunder by
the amount that is deemed advanced. Upon conversion of any portion
of the principal amount of this Note, or Holder’s election to
treat such as an advance of monies under the Master Services
Agreement or the Collaboration Agreement, the Company shall be
forever released from all its obligations and liabilities under
this Note with respect to such amount.
(b) Following the registration of
the shares of Common Stock issuable upon conversion of this Note
pursuant to Section 10 of the Purchase Agreement pursuant to
an effective registration statement, the outstanding principal and
accrued interest due under this Note shall automatically convert
into shares of the Company’s Common Stock at the Conversion
Price on the Trading Day immediately following any period in which
the Closing Price is equal to or greater than 150% of the
Conversion Price (as such amount shall be adjusted in the same
manner as the Conversion Price shall be adjusted as provided in
this Note) for 20 out of 30 consecutive Trading Days.
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(c) The initial conversion price is
$2.7048 per share, subject to adjustment under certain
circumstances as provided in this Note (as adjusted, the “
Conversion Price ”). The number of shares of Common
Stock issuable upon conversion of this Note is determined by
dividing the principal amount of this Note, or portion thereof
surrendered for conversion, together with any accrued interest due
thereunder, by the Conversion Price in effect on the Conversion
Date (as defined below). No fractional shares will be issued upon
conversion; in lieu thereof, the Company will pay to the Holder in
cash the amount that would have otherwise been converted into such
fractional share. Immediately following the Conversion Date, the
Company shall deliver to the Holder a certificate for the number of
whole shares of Common Stock issuable upon conversion of this
Note.
(d) The Holder must
(i) complete and manually sign the conversion notice attached
to this Note and deliver such notice to the Company,
(ii) surrender the Note, duly endorsed, to the Company, and
(iii) pay any transfer or similar tax, if required. The date
on which the Holder satisfies all of the foregoing requirements
shall be the “ Conversion Date .”
(e) The Note or portion thereof in
respect of which a Change in Control Purchase Notice has been given
by the Holder may not be converted into shares of Common Stock
pursuant to this Section 6 on or after the date of the
delivery of such Change in Control Purchase Notice unless such
Change in Control Purchase Notice has first been validly
withdrawn.
7. ADJUSTMENT OF CONVERSION
PRICE
The Conversion Price shall be
adjusted from time to time by the Company as follows:
(a) In case the Company shall
hereafter pay a dividend or make a distribution to all holders of
the outstanding shares of Common Stock in shares of Common Stock,
the Conversion Price shall be reduced so that the same shall equal
the price determined by dividing the Conversion Price in effect at
the opening of business on the date following the Record Date for
such dividend or distribution by a fraction,
(i) the numerator of which shall be
the sum of the number of shares of Common Stock outstanding at the
close of business on such Record Date plus the total number of
shares of Common Stock constituting such dividend or other
distribution; and
(ii) the denominator of which shall
be the a number of shares of Common Stock outstanding at the close
of business on such Record Date,
such decrease to become effective
immediately after the opening of business on the day following such
Record Date. If any dividend or distribution of the type described
in this Section 7(a) is declared but ultimately not so paid or
made, the Conversion Price shall again be adjusted to the
Conversion Price that would then be in effect if such dividend or
distribution had not been declared.
(b) In case the Company shall issue
rights or warrants to all holders of its outstanding shares of
Common Stock entitling them (for a period expiring within
forty-five (45) days after the Record Date for the issuance of
such rights and warrants) to subscribe for or purchase shares of
Common Stock at a price per share less than the average of the
Closing Sale Prices of the Common Stock for the ten
(10) Trading Days immediately preceding the date such
distribution is first publicly announced by the Company (other than
any rights or warrants referred to in Section 7(d) or
Rights
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(as defined in Section 7(d)) distributed
pursuant to a Rights Plan (as defined in Section 7(d))), the
Conversion Price shall be reduced so that the same shall equal the
price determined by dividing the Conversion Price in effect
immediately prior to such Record Date by a fraction,
(i) the numerator of which shall be
the number of shares of Common Stock outstanding on such Record
Date plus the total number of additional shares of Common Stock
offered for subscription or purchase, and
(ii) the denominator of which shall
be the sum of the number of shares of Common Stock outstanding at
the close of business on such Record Date plus the number of shares
that the aggregate offering price of the total number of shares so
offered would purchase at a price equal to the average of the
Closing Sale Prices of the Common Stock for the ten
(10) Trading Days immediately preceding the date such
distribution is first publicly announced by the Company.
Such adjustment shall be
successively made whenever any such rights or warrants are issued,
and shall become effective immediately after the opening of
business on the day following the Record Date for the issuance of
such rights or warrants. To the extent that shares of Common Stock
ultimately are not delivered after the expiration of such rights or
warrants, the Conversion Price shall be readjusted to the
Conversion Price that would then be in effect had the adjustments
made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock
actually delivered. If such rights or warrants ultimately are not
so issued, the Conversion Price shall again be adjusted to be the
Conversion Price that would then be in effect if such Record Date
had not been fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common
Stock at a price less than the average of the Closing Sale Prices
of the Common Stock for the ten (10) Trading Days immediately
preceding the date such distribution is first publicly announced by
the Company, and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account any
consideration received by the Company for such rights or warrants
and any amount payable on exercise or conversion thereof, the value
of such consideration, if other than cash, to be determined by the
Board of Directors with the consent of the Holder (not to be
unreasonably withheld).
(c) In case outstanding shares of
Common Stock shall be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and conversely,
in case outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to
b
