Cell Therapeutics, Inc. 7.5% Convertible Senior Notes Due 2011 Registration Rights Agreement

Exhibit 4.2

CELL THERAPEUTICS, INC.

7.5% CONVERTIBLE SENIOR NOTES DUE 2011

REGISTRATION RIGHTS AGREEMENT

April 27,2006

Cell Therapeutics, Inc., a corporation organized under the laws of the State of Washington (the “Company”),proposes to issue to the investors listed on Schedule I (the “Investors”) of the Exchange Agreement, dated April 24, 2006, by and among the Investors and the Company (the “Exchange Agreement”) andsignatory hereto, its 7.5% Convertible Senior Notes due 2011 (the “Securities”) upon the terms and subject to the conditions set forth in such Exchange Agreement. As an inducement to the Initial Purchaser to enter into thePurchase Agreement and the Investors to enter into the Exchange Agreement and in satisfaction of conditions to the obligations of the Initial Purchaser and the Investors thereunder, the Company agrees with the Initial Purchaser and the Investors forthe benefit of Holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows:

1.Definitions.

Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement. Asused in this Registration Rights Agreement (this “Agreement”), the following defined terms shall have the following meanings:

“Additional Interest” has the meaning assigned thereto in Section 8(a) hereof.

“Affiliate” of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified person. For purposes of this definition, controlof a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms “controlling” and “controlled” have meaningscorrelative to the foregoing.

“Applicable Amount” means, at the time of computation of any Additional Interest,(i) with respect to the Securities, the principal amount of the Securities then outstanding, and (ii) with respect to shares of Common Stock which have been issued upon conversion of the Securities pursuant to the Indenture and not sold bya Holder, the principal amount of Securities that was converted into such number of shares.

“Business Day” means eachMonday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in the City of New York, State of New York are authorized or obligated by law or executive order to close.

 

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“Commission” means the United States Securities and Exchange Commission, or any otherfederal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.

“Common Stock” means the Company’s common stock, without par value.

“DTC” means TheDepository Trust Company.

“Effectiveness Period” has the meaning assigned thereto in Section 2(b)(i) hereof.

“Effective Time” means the time at which the Commission declares any Shelf Registration Statement effective or at whichtime any Shelf Registration Statement otherwise becomes effective.

“Equity Security” has the meaning assigned thereto inSection 5 hereof.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Holder” means any person that is the record owner of Registrable Securities (and includes any person that has a beneficial interest inany Registrable Security in book-entry form).

“Indenture” means the Indenture, dated as of or around April 27, 2006,by and between the Company and U.S. Bank National Association, pursuant to which the Securities are to be issued, and as amended and supplemented from time to time in accordance with its terms.

“Issue Date” means the first date of original issuance of the Securities.

“Majority of Holders” means Holders holding over fifty percent (50%) of the aggregate principal amount of Registrable Securitiesoutstanding.

“Managing Underwriter” has the meaning assigned thereto in Section 9 hereof.

“Notice and Questionnaire” means a Notice of Registration Statement and Selling Securityholder Election and Questionnaire substantiallyin the form of Appendix A hereto.

“Notice Holder” has the meaning assigned thereto in Section 3(a)(i) hereof.

The term “person” means an individual, partnership, limited liability company, corporation, trust or unincorporatedorganization, or a government or agency or political subdivision thereof.

“Prospectus” means the prospectus included inany Shelf Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the Offering of any portion of the Registrable Securities covered by any Shelf Registration Statement and by all other amendmentsand supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Securities Act or the Exchange Act and incorporated byreference therein.

 

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“Registrable Securities” means all or any portion of the Securities issued from time totime under the Indenture and the shares of Common Stock issuable upon conversion of the Securities, provided, however, that a security ceases to be a Registrable Security when it is no longer a Restricted Security.

“Restricted Security” means any Security or share of Common Stock issuable upon conversion thereof except any such Security or share ofCommon Stock that (i) has been registered pursuant to an effective registration statement under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto) or (iii) has otherwise been transferred and a new Security or share of CommonStock not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with Section 2.6 of the Indenture.

“Registration Default” has the meaning assigned thereto in Section 8(a) hereof.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Shelf Registration” means a registration effected pursuant to Section 2 hereof.

“Shelf Registration Statement” means a “shelf” registration statement filed under the Securities Act providing for theregistration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission, filed by the Companypursuant to the provisions of Section 2 of this Agreement, including the Prospectus contained therein, any amendments and supplements to such registration statement and Prospectus, including post-effective amendments, and all exhibits and allmaterial incorporated by reference in such registration statement and Prospectus, and any additional “shelf” registration statements filed under the Securities Act to permit the registration and sale of Registrable Securities pursuant toSection 3(a)(ii) hereof.

“Strategic Partner” means (i) a pharmaceutical or biotechnology company with bookequity of at least U.S.$200,000,000, (ii) a pharmaceutical or biotechnology company with sales of at least U.S.$150,000,000, or (iii) a publicly traded, or division or subdivision of a publicly traded, pharmaceutical or biotechnologycompany with market capitalization in excess of U.S.$200,000,000.

“Suspension Period” has the meaning assigned thereto inSection 2(c) hereof.

“Trust Indenture Act” means the Trust Indenture Act of 1939, or any successor thereto, and therules, regulations and forms promulgated thereunder, as the same shall be amended from time to time.

The term“underwriter” means any underwriter, or any person deemed to be an underwriter pursuant to the Securities Act and Exchange Act and the respective rules and regulations thereunder, as in effect at any relevant time, of RegistrableSecurities in connection with an offering thereof under a Shelf Registration Statement.

 

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Wherever there is a reference in this Agreement to a percentage of the “principal amount” ofRegistrable Securities or to a percentage of Registrable Securities, each share of Common Stock issued upon conversion of the Securities which is a Registrable Security shall represent a principal amount or percentage of Registrable Securitiesdetermined based on the aggregate principal amount of Securities that were converted into shares of Common Stock (as adjusted for any stock splits, stock dividends, recapitalizations, combinations, reorganizations and like events) as of the date ofdetermination.

2. Shelf Registration.

(a) The Company shall, as soon as practicable, but no later than ten (10) calendar days following the Issue Date, use its best efforts file with the Commission a Shelf Registration Statement to provide for theoffer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and, thereafter, shall use its best efforts to cause such initial Shelf Registration Statement to bedeclared effective under the Securities Act no later than sixty (60) calendar days following the Issue Date; provided, however, that the Company may, upon written notice to all the Holders (which notice shall contain no materialnonpublic information), postpone having the Shelf Registration Statement declared effective for a period not to exceed sixty (60) days if the Company is in possession of material non-public information other than any of the results of theCompany’s clinical trails, the disclosure of which would have a material adverse effect on the business, operations, properties, condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole; provided further,however, that only Holders who are Notice Holders shall be entitled to be named as a selling securityholder in any Shelf Registration Statement as of the date it is declared effective or to use the Prospectus forming a part thereof for offersand resales of Registrable Securities. None of the Company’s securityholders (other than Holders of Registrable Securities) shall have the right to include any of the Company’s other securities in the Shelf Registration Statement.Notwithstanding anything to the contrary contained herein, neither the Company nor any of its subsidiaries or affiliates shall disclose the name of any Investors in any filing, announcement, release or otherwise without the prior written consent ofthe applicable investor. The receipt of a Notice & Questionnaire shall be considered a valid consent for the purposes of this Section 2 for use of the information contained in such Notice & Questionnaire.

(b) Subject to Section 2(c) hereof, the Company shall use its best efforts:

(i) to keep any Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions ofSection 3(j) hereof, in order to permit the Prospectus forming a part thereof to be usable by Holders until the earlier of: (x) all of the Holders of Registrable Securities are able to sell all Registrable Securities immediately withoutrestriction pursuant to Rule 144(k) under the Securities Act or any successor rule thereto, (y) all Registrable Securities registered under the Shelf Registration Statements have been sold, or (z) all Registrable Securities have ceased tobe outstanding (such period being referred to herein as the “Effectiveness Period”); and

(ii) afterthe Effective Time of the initial Shelf Registration Statement, to take the actions provided for in Section 3(a)(ii) hereof after the receipt of a completed and

 

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signed Notice and Questionnaire from any Holder of Registrable Securities that is not then a Notice Holder; provided, however, thatnothing in this subparagraph shall relieve such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 2(a)(ii) hereof.

(iii) If at any time the Securities are convertible into securities other than Common Stock, the Company shall, or shall cause anysuccessor under the Indenture to, cause such securities to be included in the Shelf Registration Statement no later than the date on which the securities may then be convertible into such securities.

(c) After the Effective Time of the initial Shelf Registration Statement, the Company may suspend the use of any Prospectus by written notice to theNotice Holders for a period not to exceed an aggregate of 60 calendar days in any 12-month calendar period and not in excess of 30 consecutive calendar days in any such 12-month calendar period (each such period, a “SuspensionPeriod”) if:

(i) an event has occurred and is continuing, as a result of which the Shelf RegistrationStatement would, in the Company’s reasonable judgment, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and

(ii) the Company determines in good faith that the disclosure of such event at such time would have a material adverse effect on theCompany and its subsidiaries taken as a whole.

3. Registration Procedures.

In connection with the Shelf Registration Statements, the following provisions shall apply:

(a) (i) not less than twenty (20) calendar days prior to the time the Company in good faith intends to have the initial ShelfRegistration Statement declared effective, the Company shall distribute the Notice and Questionnaire to the Holders of Registrable Securities. The Company shall take action to name as a selling securityholder in the initial Shelf RegistrationStatement at the Effective Time each Holder that completes, executes and delivers a Notice and Questionnaire to the Company (a “Notice Holder”) prior to or on the tenth (10th) calendar day after such Holder’sreceipt thereof so that such Holder is permitted to deliver the Prospectus forming a part thereof to purchasers of such Holder’s Registrable Securities in accordance with applicable law. The Company shall not be required to take any action toname any Holder as a selling securityholder in the initial Shelf Registration Statement at the time of its effectiveness or to enable any Holder to use the Prospectus forming a part thereof for resales of Registrable Securities unless such Holderhas returned a completed and signed Notice and Questionnaire to the Company in a timely manner.

(ii) After the EffectiveTime of the initial Shelf Registration Statement, the Company shall, upon the request of any Holder of Registrable Securities that is not then a Notice Holder, promptly send a Notice and Questionnaire to such Holder. After the

 

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Effective Time of the initial Shelf Registration Statement, the Company shall (A) as promptly as practicable, after the date a completed and signedNotice and Questionnaire is delivered to the Company, and in any event within five (5) Business Days or, if the Company is required to file with the Commission a new Shelf Registration, thirty (30) calendar days, after such date, prepareand file with the Commission (1) a supplement to the Prospectus or, if required by applicable law, a post-effective amendment to the Shelf Registration Statement or an additional Shelf Registration Statement, and (2) any other documentrequired by applicable law, so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in a Shelf Registration Statement and is permitted to deliver the Prospectus to purchasers of such Holder’s RegistrableSecurities in accordance with applicable law, and (B) use its best efforts to cause any post-effective amendment or such additional Shelf Registration Statement to become effective under the Securities Act as promptly as is practicable; but inany event by the date that is (i) ten (10) Business Days after the date of such post-effective amendment, or (ii) forty-five (45) calendar days after the date such additional Shelf Registration Statement is required to be filed;provided, however, that if a Notice and Questionnaire is delivered to the Company during a Suspension Period, the Company shall not be obligated to take the actions set forth in this clause (ii) until the termination of such SuspensionPeriod.

(b) The Company shall furnish to each Notice Holder no fewer than five (5) Business Days prior to the initial filing of theShelf Registration Statement, a copy of such Shelf Registration Statement, and shall furnish to such holders no fewer than two (2) Business Days prior to the filing of any amendment to the Shelf Registration Statement, a copy of such amendment,and shall use its best efforts to reflect in each such document when so filed with the Commission such comments as such holders and their respective counsel reasonably may propose; provided, however, that the Company shall make the finaldecision as to the form and content of each such document. If any such Shelf Registration Statement refers to any Notice Holder by name or otherwise as the holder of any securities of the Company, then such Notice Holder shall have the right torequire (i) the insertion therein of language, in form and substance reasonably satisfactory to such Notice Holder, to the effect that the holding by such Notice Holder of such securities is not to be construed as a recommendation by suchNotice Holder of the investment quality of the Company’s securities covered thereby and that such holding does not imply that such Electing Holder will assist, in meeting any future financial requirements of the Company or (ii) in theevent that such reference to such Electing Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such Electing Holder in any amendment or supplement to theRegistration Statement filed or prepared subsequent to the time that such reference ceases to be required.

(c) The Company shall promptlytake such action as may be necessary so that (i) each of the Shelf Registration Statements and any amendment or supplement thereto and the Prospectus forming a part thereof and any amendment or supplement thereto (and each report or otherdocument incorporated therein by reference in each case) complies in all material respects with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, as in effect at any relevant time, (ii) each of theShelf Registration Statements and any amendment or supplement thereto does not, when it becomes effective, contain an untrue

 

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statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading,(iii) each Prospectus forming a part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, in the form delivered to purchasers of the Registrable Securities during the Effectiveness Period, does not include anuntrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of circumstances in which they were made, not misleading, and (iv) a Prospectus filed in compliance with Rule 424(or any similar provision then in force) under the Securities Act shall be filed within two (2) Business Days of the time the Shelf Registration Statement becomes effective.

(d) The Company shall promptly give notice to each Notice Holder, and shall confirm such notice in writing if so requested by any such Notice Holder:

(i) when the initial Shelf Registration Statement has been filed with the Commission and when the initial ShelfRegistration Statement has become effective;

(ii) when any supplement to the Prospectus, Shelf Registration Statement orpost-effective amendment to a Shelf Registration has been filed with the Commission and, with respect to a Shelf Registration Statement or any post-effective amendment, when the same has been declared effective by the Commission;

(iii) of any request by the Commission for amendments or supplements to any Shelf Registration Statement or the Prospectus includedtherein or for additional information;

(iv) of the issuance by the Commission of any stop order suspending theeffectiveness of any Shelf Registration Statement or the initiation of any proceedings for such purpose;

(v) of the receiptby the Company of any notification with respect to the suspension of the qualification of the securities included in any Shelf Registration Statement for sale in any jurisdiction or the initiation of any proceeding for such purpose; and

(vi) of the happening of any event or the existence of any state of facts that requires the making of any changes in any ShelfRegistration Statement or the Prospectus included therein so that, as of such date, such Shelf Registration Statement and Prospectus do not contain an untrue statement of a material fact and do not omit to state a material fact required to be statedtherein or necessary to make the statements therein not misleading (which advice shall be accompanied by an instruction to such Holders to suspend the use of the Prospectus until the requisite changes have been made, which notice need not specifythe nature of the event giving rise to such suspension).

(e) The Company shall use its best efforts to prevent the issuance, and if issuedto obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of any Shelf Registration Statement.

 

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(f) The Company shall, as promptly as reasonably practicable, furnish to each Notice Holder, upon theirrequest and without charge, at least one conformed copy of the Shelf Registration Statement and any amendment or supplement thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporatedtherein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder).

(g) The Company shall, duringthe Effectiveness Period, deliver to each Notice Holder, without charge, as many copies of each Prospectus in which the Notice Holder is listed as a selling securityholder included in the applicable Shelf Registration Statement and any amendment orsupplement thereto as such Notice Holder may reasonably request; and the Company consents (except during a Suspension Period or during the continuance of any event described in Section 3(d) (iii)-(vi) above, limited, in the case ofSection 3(d)(v), to the jurisdiction in question thereunder) to the use of the Prospectus and any amendment or supplement thereto by each of the Notice Holders in connection with the offering and sale of the Registrable Securities covered bythe Prospectus and any amendment or supplement thereto during the Effectiveness Period.

(h) Prior to any offering of RegistrableSecurities pursuant to a Shelf Registration Statement, the Company shall (i) register or qualify or cooperate with the Notice Holders and their respective counsel in connection with the registration or qualification (or exemption from suchregistration or qualification) of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as any Notice Holder may reasonably request in writing, (ii) keepsuch registrations or qualifications or exemptions therefrom in effect and comply with such laws so as to permit the continuance of offers and sales in such jurisdictions for so long as may be necessary to enable any Notice Holder or underwriter, ifany, to complete its distribution of Registrable Securities pursuant to such Shelf Registration Statement, and (iii) take any and all other actions necessary or advisable to enable the disposition in such jurisdictions of such RegistrableSecurities; provided, however, that in no event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for thisSection 3(h), or (B) subject itself to general or unlimited service of process in any such jurisdiction if it is not otherwise so subject.

(i) Unless any Registrable Securities shall be in book-entry only form, the Company shall cooperate with the Notice Holders to facilitate the timely preparation and delivery of certificates representing RegistrableSecurities to be sold pursuant to any Shelf Registration Statement, which certificates, if so required by any securities market or exchange upon which any Registrable Securities are quoted or listed, shall be penned, lithographed or engraved, orproduced by any combination of such methods, on steel engraved borders, and which certificates shall be free of any restrictive legends and in such permitted denominations and registered in such names as Notice Holders may request in connection withthe sale of Registrable Securities pursuant to such Shelf Registration Statement.

(j) Upon the occurrence of any event or the existence ofany fact contemplated by paragraph 3(d)(vi) above, subject to Section 2(c) hereof, the Company shall promptly, but in any event within ten (10) Business Days following such occurrence or existence, prepare and file (and have declaredeffective) a post-effective amendment to any Shelf Registration Statement or

 

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an amendment or supplement to the related Prospectus included therein or file any other document with the Commission so that, as thereafter delivered topurchasers of the Registrable Securities, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading. If the Company notifies the Notice Holdersof the occurrence of any event or the existence of any fact contemplated by paragraph 3(d)(vi) above, the Notice Holder shall suspend the use of the Prospectus and keep the notification provided pursuant to paragraph 3(d)(vi) above confidentialuntil (i) such Electing Holder has received copies of the supplemented or amended Prospectus contemplated by the preceding sentence or (ii) such Electing Holder is advised in writing by the Company that the use of the Prospectus may beresumed and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. Notwithstanding the foregoing, but subject to Section 8 hereof, the Company shall not be required to amend orsupplement the Shelf Registration Statement, any related Prospectus or any document incorporated by reference for a period not to exceed an aggregate of sixty (60) calendar days in any 12-month calendar period if the Company is in possession ofmaterial non-public information the disclosure of which would have a material adverse effect on the business, operations, prospects, condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole.

(k) Not later than the Effective Time of a Shelf Registration Statement, the Company shall provide a CUSIP number for the debt securities to be soldpursuant to a Shelf Registration Statement.

(l) The Company shall comply with the Securities Act and the Exchange Act and the respectiverules and regulations thereunder, as in effect at any relevant time, and make generally available to its securityholders earnings statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule158 thereunder (or any similar rule promulgated under the Securities Act) no later than ninety (90) days after the end of any 12-month period (or ninety (90) days after the end of any 12-month period if such period is a fiscal year), orsuch shorter period as required by the Securities Act and the Exchange Act and the respective rules and regulations thereunder, as in effect at any relevant time.

(m) Not later than the Effective Time of the initial Shelf Registration Statement, the Company shall use its best efforts to cause the Indenture to be qualified under the Trust Indenture Act; in connection with suchqualification, the Company shall cooperate with the Trustee under the Indenture to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and the Companyshall execute, and shall use all efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be soqualified in a timely manner. In the event that any such amendment or modification referred to in this Section 3(m) involves the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant tothe applicable provisions of the Indenture.

(n) The Company shall make reasonably available for inspection by one or more representativesof the Notice Holders, designated in writing by a Majority of Holders whose Registrable Securities are included in a Shelf Registration Statement, any underwriter

 

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participating in any disposition pursuant to any Shelf Registration Statement, and any attorney, accountant or other agent retained by such Notice Holders orany such underwriter (i) all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and (ii) cause the Company’s officers, directors and employees to make available forinspection all information reasonably requested by such Notice Holders or any such underwriter, attorney, accountant or agent in connection with such Shelf Registration Statement, in each case, as is customary for similar due diligence examinations;provided, however, that such persons shall, at the Company’s request, first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time ofdelivery or inspection, as the case may be, of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless such disclosure is made in connection with a courtproceeding or required by law, or such records, information or documents become available to the public generally or through a third party without an accompanying obligation of confidentiality or the content of such disclosure was already known andindependently developed by the relevant Notice Holder; provided further, however, that, if the foregoing inspection and information gathering would otherwise disrupt the Company’s conduct of its business, such inspectionand information gathering shall, to the greatest extent possible, be coordinated on behalf of the Notice Holders and the other parties entitled thereto by one counsel designated by and on behalf of the Notice Holders and other parties.

(o) The Company will use its best efforts to cause the Common Stock issuable upon conversion of the Securities to be quoted or listed on the NasdaqNational Market or other market or stock exchange on which the Common Stock primarily trades on or prior to the Effective Time of each Shelf Registration Statement hereunder.

(p) The Company will cooperate and assist in any filings required to be made with National Association of Securities Dealers, Inc or other market orstock exchange on which the Common Stock may trade.

(q) The Company shall use its best efforts to take all other steps necessary to effectthe registration, offering and sale of the Registrable Securities covered by each Shelf Registration Statement contemplated hereby, including, without limitation, entering into an underwriting agreement in customary form (if the distribution ofRegistrable Securities is to be made pursuant to an underwritten public offering) and such other customary agreements as may be necessary, desirable or appropriate, and taking all such other necessary actions in connection therewith.

(r) The Company shall:

(i)(A) make reasonably available for inspection by requesting Electing Holders, any underwriter participating in any disposition pursuant to the Shelf Registration Statement, and any attorney selected in accordance with Section 4(b) hereof,one accountant and any other agent retained by such holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (B) cause the Company’sofficers, directors and employees to supply all information reasonably requested by such holders or any such underwriter, attorney, accountant or agent in connection

 

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with the Shelf Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that all records, informationand documents that are designated in writing by the Company, in good faith, as confidential shall be kept confidential by such holders and any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a courtproceeding or required by law, or such records, information or documents become available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that, if the foregoing inspectionand information gathering would otherwise disrupt the Company’s conduct of its business, such inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of the requesting Electing Holders and the otherparties entitled thereto by one counsel designated by and on behalf of Electing Holders and other parties;

(ii) inconnection with any underwritten offering conducted pursuant to Section 9 hereof, make such representations and warranties to the Electing Holders participating in such underwritten offering and to the Managing Underwriter, in form, substanceand scope as are customarily made by the Company to underwriters in primary underwritten offerings of equity and convertible debt securities;

(iii) in connection with any underwritten offering conducted pursuant to Section 9 hereof, obtain opinions of counsel to the Company (which counsel and opinions (in form, scope and substance) shall be reasonablysatisfactory to the Managing Underwriter) addressed to each requesting Electing Holder, covering such matters as are customarily covered in opinions requested in primary underwritten offerings of equity and convertible debt securities and such othermatters as may be reasonably requested by such Electing Holders and underwriters (it being agreed that the matters to be covered by such opinions shall include, without limitation, as of the date of the opinion and as of the Effective Time or thedate of the most recent post-effective amendment thereto, as the case may be, the absence from the Shelf Registration Statement and the Prospectus, including the documents incorporated by reference therein, of an untrue statement of a material factor the omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading);

(iv) in connection with any underwritten offering conducted pursuant to Section 9 hereof, obtain “cold comfort” letters andupdates thereof from the independent public accountants of the Company (and, if necessary, from the independent public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements andfinancial data are, or are required to be, included in the Shelf Registration Statement), addressed to each requesting Electing Holder (if such Electing Holder has provided such letter, representations or documentation, if any, required for suchcold comfort letter to be so addressed) and the underwriters, in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with primary underwritten offerings;

(v) in connection with any underwritten offering conducted pursuant to Section 9 hereof, deliver such documents and certificates asmay be reasonably requested by any Electing Holders and the Managing Underwriter, if any, including without limitation certificates to evidence compliance with Section 3(j) hereof and with any conditions contained in the underwriting agreementor other agreements entered into by the Company.

 

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4. Registration Expenses.

The Company shall bear all fees, costs and expenses incurred in connection with the performance by the Company of all of its obligations under Sections 2and 3 of this Agreement whether or not any of the Shelf Registration Statements are declared effective. Such fees, costs and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, feesand expenses (A) with respect to filings required to be made with the National Association of Securities Dealers, Inc., and (B) of compliance with United States federal and state securities or “blue sky” laws (including, withoutlimitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with “blue sky” qualifications of the Registrable Securities under the laws of such jurisdictions as a Majority of the Holders whoseRegistrable Securities are included in a Shelf Registration Statement may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with TheDepository Trust Company), (iii) duplication expenses relating to copies of any Shelf Registration Statement, Prospectus and other documents delivered to any Holder hereunder, (iv) fees and disbursements of counsel and independentaccountants for the Company in connection with the Shelf Registration Statement, and (v) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock. In addition, the Companyshall bear or reimburse the Notice Holders for the reasonable fees and disbursements of one firm of legal counsel for the Holders, which shall initially be counsel to the Initial Purchaser, but which may, upon the written consent of a majority ofthe then current Holders, be another nationally recognized law firm experienced in securities law matters designated by the Company. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salariesand expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similarsecurities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company.

5. Restrictive Covenant

The Company agrees that prior to sixty (60) days after the date on which the ShelfRegistration Statement is first declared effective and available for use, the Company will not (i) directly or indirectly issue, offer, sell, agree to issue, offer or sell, solicit offers to purchase, grant any call option, warrant or otherright to purchase, purchase any put option or other right to sell, pledge, borrow or otherwise dispose of any Common Stock or any security convertible into, or exercisable or exchangeable for, Common Stock (an “EquitySecurity”), (ii) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Rule 16a-1 under of the Exchange Act)with respect to any Equity Security, and (iii) will not otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of an Equity Security,whether or not such transaction is to be settled by delivery of Equity Securities, other securities, cash or other consideration, provided, however, that the preceding restrictions shall not apply to the issuance by the Company of theSecurities, the Common Stock issuable upon conversion of the Securities, and Common Stock issuable upon (1) the conversion of convertible securities or exchange of exchangeable securities outstanding on the date hereof in accordance with theterms thereof; (2) the exercise of options outstanding on

 

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the date hereof; (3) the exercise of warrants outstanding on the date hereof; (4) the grant to and exercise of options by, or the issuance and saleof shares to, employees, directors and consultants as approved by the compensation committee of the Board of Directors of the Company; (5) to a Strategic Partner(s) in connection with a biopharmaceutical licensing and/or partner arrangement;(6) in order to effect the Exchange Agreement; and (7) pursuant to an equity line of credit arrangement; provided further, however, that any issuance of Common Stock pursuant to clause (7) above shall only be permitted to theextent that such issuance is (i) at a per share price at or above the Conversion Price (as such term is defined in the Indenture) then in effect and (ii) any such issuance or issuances shall not exceed, in the aggregate, $50 million ingross proceeds to the Company.

6. Indemnification and Contribution.

(a) Indemnification by the Company. The Company shall indemnify and hold harmless each Holder, each Investor, the Initial Purchaser, anyunderwriter, each person, if any, who controls any such Holder, such Investor, the Initial Purchaser or any underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the respective officers,directors, partners, employees, representatives and agents of any such Holder, such Investor, the Initial Purchaser, any underwriter or any controlling person, from and against any loss, claim, damage, liability, cost or expense whatsoever asincurred (including, but not limited to, attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amountspaid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as any such loss, claim, damage, liability, cost or expense (or actionin respect thereof) arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or any amendment thereto or supplement thereof or any related preliminaryprospectus or the Prospectus or any amendment thereto or supplement thereof, or arises out of, or is based upon, the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statementstherein, in light of the circumstance in which they were made, not misleading; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent that any such loss, claim, damage, liability,cost or expense arises out of, or is based upon, any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalfof such indemnified party specifically for use therein; provided further, however, that the Company shall not be liable to any such indemnified party in any such case to the extent that such loss, claim, damage, liability, cost or expensearises from an offer or sale by a Notice Holder of Registrable Securities during a Suspension Period, if such indemnified party is a Notice Holder that received from the Company a notice of the commencement of such Suspension Period prior to themaking of such offer or sale. The foregoing indemnity agreement is in addition to any liability that the Company may otherwise have to any indemnified party, and the Company hereby confirms that it will indemnify the indemnified party with respectto any breach by the Company of its indemnity obligations hereunder. The Company shall not be liable under this Section 6(a) for any settlement of any action effected without its written consent, which shall not be unreasonably withheld;provided, however, that with respect to actions pursuant to clauses (i), (ii) and (iii) of Section 6(c), no such consent shall be required.

 

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(b) Indemnification by the Notice Holders. Each Notice Holder, severally and not jointly, shallindemnify and hold harmless the Company, each Investor, the Initial Purchaser, each underwriter, each other Holder, each person, if any, who controls the Company, each Investor, the Initial Purchaser, any underwriter or another Holder within themeaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the respective officers, directors, partners, employees, representatives and agents of the Company, each Investor, the Initial Purchaser, any underwriter,any other Holder or any controlling person, from and against any loss, claim, damage, liability, cost or expense whatsoever as incurred (including, but not limited to, attorneys’ fees and any and all expenses whatsoever incurred ininvestigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subjectunder the Securities Act, the Exchange Act or otherwise, insofar as any such loss, claim, damage, liability, cost or expense (or action in respect thereof) arises out of, or is based upon, any untrue statement or alleged untrue statement of amaterial fact contained in the Shelf Registration Statement or any amendment thereto or any related preliminary prospectus or the Prospectus or any amendment thereto or supplement thereof, or arises out of, or is based upon, the omission or allegedomission to state therein, in light of the circumstances in which they were made, any material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, thatsuch untrue statement or alleged untrue statement or omission or alleged omission made therein was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Notice Holder specifically for usetherein. In no event shall the liability of any selling Notice Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Notice Holder upon the sale of the Registrable Securities pursuant to the ShelfRegistration Statement giving rise to such indemnification obligation. The foregoing indemnity agreement is in addition to any liability that any Notice Holder may otherwise have to the Company, each Investor, the Initial Purchaser and any suchother person.

(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under this Section 5 of notice of anyclaim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the claim or the commencement ofthat action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 6. If any such claim or action shall be brought against an indemnified party,and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof withcounsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party underthis Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the indemnified party shall havethe right to employ counsel to represent jointly the indemnified party and its respective officers, directors, partners, employees, representatives, agents and controlling persons who may be subject to liability arising out of any claim in respectof which indemnity may be sought by the indemnified party against the indemnifying party under this Section 6 if (i) employment of such counsel has

 

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been authorized in writing by the indemnifying party, or (ii) such indemnifying party shall not have employed counsel satisfactory to the indemnifiedparty to have charge of the defense of such proceeding within thirty (30) days of the receipt of notice thereof, or (iii) such indemnified party shall have reasonably concluded that the representation of such indemnified party and thoseofficers, directors, partners, employees, representatives, agents and controlling persons by the same counsel representing the indemnifying party would be inappropriate under applicable standards of professional conduct due to actual or potentialdiffering interests between them or where there may be one or more defenses available to them that are different from, additional to or in conflict with those available to the indemnifying party, and in any such event ((i), (ii) or (iii)) thefees and expenses of such separate counsel shall be paid by the indemnifying party as incurred. It is understood that the indemnifying party shall not be liable for the fees and expenses of more than one separate firm (in addition to local counselin each jurisdiction) for all indemnified parties in connection with any proceeding or related proceedings. No indemnifying party shall, without the prior written consent of the indemnified parties, effect any settlement or compromise of, or consentto the entry of judgment with respect to, any pending or threatened claim, investigation, action, suit or proceeding in respect of which indemnity or contribution may be or could have been sought hereunder (whether or not the indemnified party orparties are actual or potential parties thereto) unless (A) such settlement, compromise or judgment (1) includes an unconditional release of such indemnified party from all liability arising out of such claim, investigation, action, suitor proceeding, and (2) does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party, and (B) the indemnifying party confirms in writing its indemnification obligationshereunder with respect to such settlement, compromise or judgment.

(d) Contribution. If the indemnification provided for in thisSection 6 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result ofthe losses, claims, damages, costs, expenses or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by theindemnifying party or parties on the one hand and the indemnified party on the other from the registration of the Registrable Securities pursuant to the Shelf Registration, or (ii) if the allocation provided by the foregoing clause (i) isnot permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnifiedparty on the other in connection with the statements or omissions that resulted in such losses, claims, damages, costs, expenses or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relativefault of the parties 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 theCompany on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Theamount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 6(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnifiedparty in connection with investigating or defending any action or claim which is the subject of this Section 6(d). The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6(d)

 

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were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to herein.Notwithstanding any other provision of this Section 6(d), no Holder of the Registrable Securities shall be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of itsRegistrable Securities pursuant to the Shelf Registration Statement exceeds the amount of damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No personguilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of thisSection 6(d), each officer, director, partner, employee, representative or agent of an indemnified party, and each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act, shall have thesame rights to contribution as such indemnified party and each officer, director, partner, employee, representative and agent of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act or the ExchangeAct, shall have the same rights to contribution as the Company. The Holders’ respective obligations to contribute pursuant to this Section 6(d) are several in proportion to the respective amount of Registrable Securities they have soldpursuant to a Shelf Registration Statement and not joint. The remedies provided for in this Section 6(d) are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

(e) Survival. The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full forceand effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchaser, any Investor, any underwriter, any Holder, any officer, director, partner, employee, representative oragent of the Initial Purchaser, any Investor, any underwriter, or any Holder, or any person controlling the Initial Purchaser, any Investor, any underwriter or any Holder, or by or on behalf of the Company, its officers, directors, partners,employees, representatives or agents or any person controlling the Company, and (iii) any sale of Registrable Securities pursuant to a Shelf Registration Statement.

7. Holder’s Obligations.

Each Holder agrees, by acquisition of the Registrable Securities, thatno Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Shelf Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice andQuestionnaire as required pursuant to Section 3(a) hereof (including all the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees to promptly furnishto the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of suchRegistrable Securities as may be required to be disclosed in the Shelf Registration Statement under applicable law, pursuant to comments from the Commission or as the Company may from time to time reasonably request. Any sale of any RegistrableSecurities by any Notice Holder shall constitute a representation and warranty by such Notice Holder that the information relating to such Notice Holder and its plan of distribution is as set forth in the Prospectus delivered by such Notice

 

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Holder in connection with such disposition, that such Prospectus does not, as of the time of such sale, contain any untrue statement of a material factrelating to such Notice Holder or its plan of distribution, and that such Prospectus does not, as of the time of such sale, omit to state any material fact relating to or provided by such Notice Holder or its plan of distribution necessary in orderto make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in reliance on and inconformity with written information furnished to the Company by or on behalf of such Notice Holder

8. Additional Interest.

(a) Notwithstanding any postponement of the effectiveness of the Shelf Registration Statement pursuant to Section 2(a) hereof, if:

(i) on or prior to the sixtieth (60th) day following the Issue Date, such initial Shelf Registration Statement is notdeclared effective by the Commission, or

(ii) after the effectiveness date of any Shelf Registration Statement,(A) such Shelf Registration Statement ceases to be effective or usable for the offer and sale of Registrable Securities (other than due to a Suspension Period), and the Company fails to file (and have declared effective), within five(5) Business Days, a post-effective amendment to such Shelf Registration Statement or amendment or supplement to the Prospectus contained therein or such other document with the Commission to make such Shelf Registration Statement effective orsuch Prospectus usable, or (B) the Suspension Periods exceed sixty (60) calendar days, whether or not consecutive, in any 12-month calendar period, or

(iii) the Company shall have failed to timely comply with any of its obligations set forth in Section 3(a)(ii) hereof, provided thatsuch failure is not solely due to the failure of a Holder of Registrable Securities to perform its obligations set forth in Section 3(a)(ii) hereof (each of (i) through (iii) a “Registration Default”),

the Company shall be required to pay additional interest (“Additional Interest”), from and including the dayfollowing such Registration Default to but excluding the day on which such Registration Default is cured, at a rate per annum equal to an additional one-half of one percent per annum (0.50%) of the Applicable Amount for each 30-day period followingthe date of a Registration Default. The Company shall notify the Trustee as promptly as possible, but in no event later than three (3) Business Days after each and any date on which a Registration Default occurs. The requirement of the Companyto pay Additional Interest ceases on the day such Registration Default is cured.

(b) In the case of a Registration Default described inSections 8(a)(i)-(ii) above, Additional Interest, if any, shall be payable only to Notice Holders of the Securities and, in respect of a Registration Default described in Section 8(a)(iii) above, Additional Interest, if any, shall bepayable only to Notice Holders of the Securities to whom such Registration Default relates.

 

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(c) Any amounts to be paid as Additional Interest pursuant to paragraph (a) of this Section 8shall be paid by wire transfer of immediately available funds or by federal funds check on the first interest payment date in respect of the Registrable Securities following the date on which such Additional Interest begins to accrue.

(d) Except as provided in Section 8(a) hereof, the Additional Interest as set forth in this Section 8 shall be the exclusive cash remedyavailable to the Holders of Registrable Securities for such Registration Default. In no event shall the Company be required to pay Additional Interest in excess of the applicable maximum amount of four and one-half percent (4.5%) per annum asset forth above, or twelve percent (12%) per annum when combined with the stated interest on the Securities, regardless of whether one or multiple Registration Defaults exist.

9. Underwritten Offering.

Any holderof Registrable Securities who desires to do so may sell Registrable Securities (in whole or in part) in an underwritten offering; provided, however, the Company shall not be required to facilitate an underwritten offering pursuant to the ShelfRegistration Statement by any holders unless the offering relates to at least $10,000,000 principal amount of Securities or the equivalent number of shares of Common Stock in which such Securities are convertible. In any such underwritten offering,the investment banker or investment bankers and manager or managers (the “Managing Underwriter”) that will administer the offering will be selected by, and the underwriting arrangements with respect thereto (including thesize of the offering) will be approved by, the holders of a majority of the Registrable Securities to be included in such offering; provided, however, that such investment bankers and managers and underwriting arrangements must be reasonablysatisfactory to the Company. No holder may participate in any underwritten offering contemplated hereby unless (a) such holder agrees to sell such holder’s Registrable Securities to be included in the underwritten offering in accordancewith any approved underwriting arrangements, (b) such holder completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of suchapproved underwriting arrangements and (c) if such holder is not then an Electing Holder, such holder returns a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(ii) hereof within a reasonableamount of time before such underwritten offering. The holders participating in any underwritten offering shall be responsible for any underwriting discounts and commissions and fees and, subject to Section 4 hereof, expenses of their owncounsel. The Company shall pay all expenses customarily borne by issuers, including but not limited to filing fees, the fees and disbursements of its counsel and independent public accountants and any printing expenses incurred in connection withsuch underwritten offering. Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon receipt of a request from the Managing Underwriter or a representative of holders of a majority of the Registrable Securities to beincluded in an underwritten offering to prepare and file an amendment or supplement to the Shelf Registration Statement and Prospectus in connection with an underwritten offering, the Company may delay the filing of any such amendment or supplementfor up to sixty (60) days if the Company is in possession of material non-public information the disclosure of which would have a material adverse effect on the business, operations, prospects, condition (financial or otherwise) of the Companyand its subsidiaries, taken as a whole.

 

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10. Rule 144 and 144A.

The Company covenants to the Holders of the Registrable Securities that the Company shall use its best efforts to make available, upon request of anyholder of Registrable Securities, to such holder or beneficial owner of Registrable Securities in connection with any sale thereof and any prospective purchaser of such Registrable Securities designated by such holder or beneficial owner, theinformation required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Securities pursuant to Rule 144A of the Securities Act, and to timely file the reports required to be filed by it under the Exchange Actor the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 of the Securities Act) and the rules and regulations adopted by the Commission thereunder, all to theextent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such may be amended fromtime to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities in connection with that Holder’s sale pursuant to Rule 144, the Company shall deliver tosuch Holder a written statement as to whether it had complied with such requirements.

11. Miscellaneous.

(a) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of itsobligations hereunder and that the Initial Purchaser, the Investors and the Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that the Initial Purchaser, such Investors and such Holders, in addition toany other remedy to which they may be entitled at law or in equity and without limiting the remedies available to the Notice Holders under Section 8 hereof, shall be entitled to compel specific performance of the obligations of the Companyunder this Agreement in accordance with the terms and conditions of this Agreement, in any court of the United States or any State thereof having jurisdiction.

(b) Amendments and Waivers. This Agreement, including this Section 10(b), may be amended, and waivers or consents to departures from the provisions hereof may be given, only by a written instrument dulyexecuted by the Company and a Majority of Holders. Each Holder of Registrable Securities outstanding at the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment, waiver or consent effected pursuant to thisSection 10(b), whether or not any notice, writing or marking indicating such amendment, waiver or consent appears on the Registrable Securities or is delivered to such Holder.

(c) Other Registration Rights. The Company will not, on or after the date of this Agreement, enter into any agreement with respect to itssecurities that is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The Company shall not permit any securities other than the Registrable Securitiesto be included in any Shelf Registration Statement without consent of a majority of the then current Holders. The rights granted to the holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with therights granted to the holders of the Company’s securities under any agreement in effect on the date hereof.

 

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(d) Third Party Beneficiary. The holders of Registrable Securities shall be third partybeneficiaries to the agreements made hereunder between the Company, on the one hand, and the Purchasers and the Investors, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcementnecessary or advisable to protect its rights or the rights of holders of Registrable Securities hereunder.

(e) Notices. All noticesand other communications provided for or permitted hereunder shall be made in writing, shall be delivered by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall bedeemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier (provided notice is also given by some other means permitted by this Section 11(e)), (iii) one Business Day after being depositedwith such courier, if made by overnight courier, or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the parties as follows:

 

  (x) if to a Holder of Registrable Securities, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto;

 

  (y) if to the Company, to:

CellTherapeutics, Inc.

201 Elliott Avenue West, Suite 400

Seattle, Washington 98119

Attention: Louis A. Bianco

Telephone: (206) 282-7100

Facsimile: (206) 272-4397

with a copy to:

O’Melveny & Myers LLP

275 Battery Street, Suite 2600

San Francisco, California 94111

Attention: Michael J. Kennedy, Esq. and David M. Miscia,Esq.

Facsimile: (415) 984-8701

 

  (z) if to the Investors, to the address of each Investor set forth on Schedule I hereto, with a copy to such counsel as they may indicate on Schedule I hereto;

or to such other address as such person may have furnished to the other persons identified in this Section 11(e) in writing in accordanceherewith.

(f) Parties in Interest. The parties to this Agreement intend that all Holders of Registrable Securities shall beentitled to receive the benefits of this Agreement and that any Notice Holder shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Registrable Securities which are included in a ShelfRegistration Statement. All of the terms and provisions of this Agreement shall be binding upon, shall inure

 

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to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto and any Holder from time to time of the RegistrableSecurities to the aforesaid extent. In the event that any transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transfereeshall, without any further writing or action of any kind, be entitled to receive the benefits of and, if a Notice Holder, be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement to theaforesaid extent.

(g) Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts and by theparties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Facsimile signatures shall constitute original signatures for allpurposes of this Agreement.

(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limitor otherwise affect the meaning hereof.

(i) Governing Law. This Agreement shall be governed by and construed in accordance with thelaws of the State of New York, without giving effect to any provisions relating to conflicts of law.

(j) Severability. In the eventthat any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision inevery other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted bylaw.

(k) Survival. The respective indemnities, agreements, covenants, representations, warranties and other provisions set forth inthis Agreement or made pursuant hereto shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of the Initial Purchaser, any Investor, any Holder, or any officer,director, partner, employee, representative or agent of the Initial Purchaser or such Investor or Holder, any agent or underwriter, any officer, director, partner, employee, representative or agent of such agent or underwriter, or any controllingperson of any of the foregoing, and shall survive the transfer and registration of the Registrable Securities of such Holder.

12.Submission to Jurisdiction; Appointment of Agent for Service.

The Company agrees that any suit, action or proceeding against theCompany arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any state or federal court in The City of New York, New York, and waives any objection which it may now or hereafter have to the layingof venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding. The Company expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit,action or proceeding. The Company agrees that a final judgment in any such proceeding brought in any such court shall be conclusive and binding thereupon and may be

 

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enforced in any other court in the jurisdiction to which the Company is or may be subject by suit upon such judgment.

[Remainder of Page Intentionally Left Blank]

 

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Please confirm that the foregoing correctly sets forth the agreement between the Company and you.

 

Very truly yours,

 

Cell Therapeutics, Inc.

By:   /s/ James A. Bianco
  Name:   James A. Bianco, M.D.
  Title:   President & Chief Executive Officer

 

Accepted as of the date hereof:

 

[INVESTOR]

By:   /s/ [Investor Representative]
 

Name:

Title:

[Signature Page to Registration Rights Agreement]


APPENDIX A

CELL THERAPEUTICS, INC.

FORM OF NOTICE OF REGISTRATION STATEMENT AND

SELLING SECURITYHOLDER ELECTION AND QUESTIONNAIRE

7.5% CONVERTIBLE SENIOR NOTES DUE 2011

NOTICE

Cell Therapeutics, Inc. (the “Company”) has filed, or intends shortly to file, with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 or such other Formas may be available (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Company’s 7.5% Convertible Senior Notes due2011 (CUSIP No. 150934 AJ6) (the “Notes”), and common stock, no par value (the “Common Stock”), issuable upon conversion of the Notes (the “Shares” and together with the Notes, the “Transfer RestrictedSecurities”) in accordance with the terms of the Registration Rights Agreement, dated as of April 27, 2006 (the “Registration Rights Agreement”), between the Company and the investors signatory thereto. A copy of the RegistrationRights Agreement is available from the Company. All capitalized terms not otherwise defined herein have the meanings ascribed thereto in the Registration Rights Agreement.

To sell or otherwise dispose of any Transfer Restricted Securities pursuant to the Shelf Registration Statement, a beneficial owner of TransferRestricted Securities generally will be required to be named as a Selling Securityholder in the related Prospectus, deliver a Prospectus to purchasers of Transfer Restricted Securities, be subject to certain civil liability provisions of theSecurities Act and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification rights and obligations, as described below). To be included in the Shelf RegistrationStatement, this Notice and Questionnaire must be completed, executed and delivered to the Company at the address set forth herein for receipt prior to or on the 20th calendar day from the receipt hereof (the “Notice and QuestionnaireDeadline”). Beneficial Owners that do not complete and return this Notice and Questionnaire prior to the Notice and Questionnaire Deadline and deliver it to the Company as provided below will not be named as Selling Securityholders in the ShelfRegistration Statement and, therefore, will not be permitted to sell any Transfer Restricted Securities pursuant to the Shelf Registration Statement.

Certain legal consequences arise from being named as a Selling Securityholder in the Shelf Registration Statement and the related Prospectus. Accordingly, holders and beneficial owners of Transfer RestrictedSecurities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a Selling Securityholder in the Shelf Registration Statement and the related Prospectus.


ELECTION

The undersigned holder (the “Selling Securityholder”) of Transfer Restricted Securities hereby elects to include in the Shelf Registration Statement the Transfer Restricted Securities beneficially owned byit and listed below in Item III (unless otherwise specified under Item III). The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound with respect to such Transfer Restricted Securities by the termsand conditions of this Notice and Questionnaire and the Registration Rights Agreement.

Pursuant to the Registration Rights Agreement, theSelling Securityholder has agreed to indemnify and hold harmless the Company, the Initial Purchaser, any underwriter, each other Holder, their respective officers, directors, partners, employees, representatives and agents, and each person, if any,who controls the Company, the Initial Purchaser, any underwriter and any other Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against certain losses arising in connectionwith statements concerning the Selling Securityholder made in the Shelf Registration Statement or the related Prospectus in reliance upon the information provided in this Notice and Questionnaire.

The Selling Securityholder hereby provides the following information and represents and warrants that such information is accurate and complete:

QUESTIONNAIRE

I. A.    Full Legal Name of Selling Securityholder:

 

  B. Full legal name of registered holder (if not the same as (a) above) through which Transfer Restricted Securities listed in (3) below are held:

                                                                                                                                                                                                                                     

 

  C. Full legal name of DTC participant (if applicable and if not the same as (b) above) through which Transfer Restricted Securities listed in Item III are held:

                                                                                                                                                                                                                                     

 

  D. Taxpayer identification or social security number of Selling Securityholder:

                                                                                                                                                                                                                                     

II.        Address for notices to Selling Securityholder:

                                                                                                                                                                                                                                              

                                                                                                                                                                                                                                              

 

Telephone:                                                                                 
Fax:                                                                                              
Email:                                                                                          
ContactPerson:                                                                        


  III. Beneficial ownership of Transfer Restricted Securities:

 

  A. Type of Transfer Restricted Securities beneficially owned, and principal amount of Notes or number of shares of Common Stock, as the case may be, beneficially owned:

                                                                                                                                                                                                                                     

 

  B. CUSIP No(s). of such Transfer Restricted Securities beneficially owned:

                                                                                                                                                                                                                                     

 

  C. Amount of Transfer Restricted Securities that the undersigned wishes to be included in the Shelf Registration Statement:

                                                                                                                                                                                                                                     

 

  IV. Beneficial ownership of the Company’s securities owned by the Selling Securityholder:

EXCEPT AS SET FORTH BELOW IN THIS ITEM IV, THE UNDERSIGNED IS NOT THE BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF THE COMPANY OTHER THAN THETRANSFER RESTRICTED SECURITIES LISTED ABOVE IN ITEM III (“Other Securities”).

 

  A. Type and amount of Other Securities beneficially owned by the Selling Securityholder:

                                                                                                                                                                                                                                     

 

  B. CUSIP No(s). of such Other Securities beneficially owned:

                                                                                                                                                                                                                                     

 

  V. Relationship with the Company:

Except as set forth below,neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) duringthe past three years.

State any exception here:

                                                                                                                                                                                                                                                        

                                                                                                                                                                                                                                                        

                                                                                                                                                                                                                                                        

 

  VI. Nature of the Selling Securityholder:

 

  (a) Identify any natural person or other person having voting and investment control over the Company securities owned by the Selling Securityholder.

                                                                                                                                                                                                                                                                 

Is the SellingSecurityholder a reporting company under the Exchange Act, a majority owned subsidiary of a reporting company under the Exchange Act or a


registered investment company under the Investment Company Act? If so, please state which one.

                                                                                                                                                                                                                                                                 

If the entity is amajority owned subsidiary of a reporting company, identify the majority stockholder that is a reporting company.

                                                                                                                                                                                                                                                                 

  (b) Is the Selling Securityholder a registered broker-dealer?

¨ Yes ¨ No

If yes, state whether the Selling Securityholder received the Transfer Restricted Securities as compensation for underwriting activities and, if so,provide a brief description of the transaction(s) involved.

                                                                                                                                                                                                                                                                 

State whether theSelling Securityholder is an affiliate of a broker-dealer and if so, list the name(s) of the broker-dealer affiliate(s). For the purposes of this Item VI(b), an “affiliate” of a broker-dealer includes any company that directly, orindirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such broker-dealer, and does not include individuals employed by any such broker-dealers or by their affiliates.

¨ Yes ¨ No

 

If the answer is “Yes”, you must answer the following:

If the Selling Securityholder is an affiliate of aregistered broker-dealer, the Selling Securityholder purchased the Transfer Restricted Securities (i) in the ordinary course of business, and (ii) at the time of the purchase of the Transfer Restricted Securities, had no agreements orunderstanding, directly or indirectly, with any person to distribute the Transfer Restricted Securities.

¨ Yes ¨ No

 

If the answer is “No”, state any exceptions here:

                                                                                                                                                                                                                                                                 

If the answer is“No”, this may affect your ability to be included in the Shelf Registration Statement.

 

  VII. Plan of Distribution:

Except as set forth below, theundersigned (including its donees or pledgees) intends to distribute the Transfer Restricted Securities listed above in Item III pursuant to the Shelf Registration Statement only as follows (if at all). Such Transfer Restricted Securities may be


sold from time to time directly by the undersigned or, alternatively, through underwriters, broker-dealers or agents. If the Transfer Restricted Securitiesare sold through underwriters or broker-dealers, the Selling Securityholder will be responsible for underwriting discounts or commissions or agent’s commissions. Such Transfer Restricted Securities may be sold in one or more transactions atfixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions):

 

  1. on any national securities exchange or quotation service on which the Transfer Restricted Securities may be listed or quoted at the time of sale;

 

  2. in the over-the-counter market;

 

  3. in transactions otherwise than on such exchanges or services or in the over-the-counter market; or

 

  4. through the writing of options.

In connection with salesof the Transfer Restricted Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Transfer Restricted Securities and deliver Transfer Restricted Securities toclose out such short positions, or loan or pledge Transfer Restricted Securities to broker-dealers that in turn may sell such securities. State any exceptions here:

                                                                                                                                                                                                                                                        

                                                                                                                                                                                                                                                        

By signing below, the Selling Securityholder acknowledges that itunderstands its obligation to comply, and agrees it will comply, with the prospectus delivery requirements and other provisions of the Securities Act and Exchange Act and the respective rules and regulations promulgated thereunder, particularlyRegulation M thereunder (or any successor rules or regulations), in connection with any offering of Transfer Restricted Securities pursuant to the Shelf Registration Statement.

If the Selling Securityholder transfers all or any portion of the Transfer Restricted Securities listed in Item III above after the date on which suchinformation is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement and agrees todeliver a notice of such transfer to the Trustee and the Company (i) in the case of a transfer of the Notes or the shares of Common Stock issuable upon conversion of the Notes, in substantially the form attached as Exhibit 1 to this Notice andQuestionnaire, or (ii) in the case of a transfer of shares of Common Stock issuable upon conversion of the Warrants, in substantially the form attached as Exhibit 2 to this Notice and Questionnaire.

By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items I through VI aboveand the inclusion of such information in the Shelf Registration Statement and the related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation or amendment ofthe Shelf Registration Statement and the related Prospectus.


In accordance with the Selling Securityholder’s obligation under the Registration Rights Agreementto provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that mayoccur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below.

Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company, the terms of this Notice and Questionnaire andthe representations and warranties contained herein shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the Selling Securityholderwith respect to the Transfer Restricted Securities beneficially owned by such Selling Securityholder and listed in Item III above. It shall be governed by, and construed in accordance with, the laws of the State of New York without regard to theconflict of laws provisions thereof.


IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire tobe executed and delivered either in person or by its authorized agent.

Dated:

 

BENEFICIAL OWNER
  
By:     
 

Name:

Title:

Please return the completed and executed Notice and Questionnaire for receipt prior to or onthe 20th calendar day from receipt hereof to:

Cell Therapeutics, Inc. at:

201 Elliott Avenue West, Suite 400

Seattle,Washington 98119

Attention: Louis A. Bianco

with a copy to:

O’Melveny & Myers LLP at:

275 Battery Street, Suite 2600

SanFrancisco, California 94111

Attention: Michael J. Kennedy, Esq. and David M. Miscia, Esq.


EXHIBIT 1 TO NOTICE AND QUESTIONNAIRE

NOTICE OF TRANSFER PURSUANT

TO REGISTRATION STATEMENT

Cell Therapeutics, Inc.

201 Elliott Avenue West, Suite 400

Seattle, Washington 98119

 

Re: Cell Therapeutics, Inc.

7.5% Convertible Senior Notes due2011 (the “Notes”)

Ladies and Gentlemen:

Please be advised that                  has transferred$                 aggregate principal amount of the above-referenced Notes or                 shares of the Company’s common stock issued on conversion or repurchase of Notes, pursuant to the Registration Statement on Form S-3 (FileNo. 333-                ) filed by the Company.

We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied with respect to the transfer described above and that the above named beneficial owner of the Notes orcommon stock is named as a selling securityholder in the Prospectus, dated             , or in amendments or supplements thereto, and that the aggregate principal amount of the Notesor number of shares of common stock transferred are [all] [a portion of] the Notes or common stock listed in such Prospectus, as amended or supplemented, opposite such owner’s name.

 

Very truly yours,

[name]

By:     
  (Authorized Signature)

Dated: