Exhibit 10.4
RIBOZYME PHARMACEUTICALS, INC.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
February 11, 0000
Xxxx Xxxxxxxxxxxxx Services, Ltd.
Xxxxxxxxx Xxxxx
0 Xxxxxx Xx.
Xxxxxxxx, Xxxxxxx
Attn: Boards of Directors
Re: Securities Purchase Agreement, License Agreements and Subscription, Joint
Development and Operating Agreement (collectively, as amended, the
"Agreements"), dated as of January 7, 2000, and amended on December 21,
2001 and January 7, 2002, among Ribozyme Pharmaceuticals, Inc. (the
"Company"), Elan Corporation, plc, Elan International Services, Ltd.
("EIS") and certain affiliates (together with their respective subsidiaries
and affiliates "Elan"), and Medizyme Pharmaceuticals, Ltd.
Ladies and Gentlemen:
The Company has informed Elan on a confidential basis that the Company
intends to enter into a certain Common Stock and Warrant Purchase Agreement (the
"Stock Purchase Agreement") with certain investors named therein (the
"Investors"), providing for, among other things, the sale of a controlling
interest in the Company to the Investors on the terms set forth in the Term
Sheet (the "Term Sheet") attached hereto as EXHIBIT A (the "Transaction"). Such
Investors will include Oxford Bioscience Partners, The Sprout Group and Venrock
Associates, Inc. (the "New Investors"), who shall purchase 50% or more of the
shares of common stock, par value $0.01 per share, of the Company ("Common
Stock") to be issued under the Stock Purchase Agreement. The execution of the
Stock Purchase Agreement and the completion of the Transaction (the "Closing")
are subject to the satisfaction of various conditions, but is expected to occur
on or about April 10, 2003 (the "Closing Date"). Consummation of the Transaction
pursuant to the terms of the Stock Purchase Agreement would result in a change
in control of the Company.
The purpose of this letter is to obtain EIS's agreement, under certain
conditions, to:
(i) Convert all of the shares of Series A Preferred Stock and Series B
Preferred Stock of the Company beneficially owned by EIS (the "Elan Preferred
Stock"), including accrued and unpaid dividends thereon through January 31, 2003
(no dividends on the Elan Preferred Stock shall accrue beyond January 31, 2003),
into an aggregate of 2,594,168 shares (subject to adjustment as provided herein
below) of Common Stock (the "Conversion Shares"), in accordance with the
conversion schedule set forth on Schedule A to this letter. Upon such
conversion, all preferences and rights, including without limitation liquidation
preferences and protective provisions, associated with each of the Series A
Preferred Stock and Series B Preferred Stock shall terminate automatically. The
conversion of the Elan Preferred Stock shall occur simultaneously with the
Closing. EIS acknowledges that the Elan Preferred Stock has limited voting
rights, and that EIS will not have the right as holder of the Elan Preferred
Stock to vote in connection with the Transaction;
(ii) waive its pre-emptive rights under the Securities Purchase
Agreement dated as of January 7, 2000, as amended on December 31, 2001, with
respect to the Transaction; and
(iii) waive, conditioned and effective upon Closing, its right to
nominate a director for election to Company's Board provided for in Section 5(b)
of the Securities Purchase Agreement dated as of January 7, 2000, as amended on
December 31, 2001.
In consideration of the conversion and waiver set forth herein, the Company
agrees that it shall take the following actions:
1. Issue to EIS at the Closing an additional 657,406 shares (subject to
adjustment as set forth below) of Company Common Stock (the
"Additional Shares");
2. Issue to EIS at the Closing warrants (the "Warrants") to purchase up
to 514,310 shares of Common Stock (subject to adjustment as provided
below) of the Company, with a 5-year term from their date of issuance
and an exercise price per share at $0.42 (subject to adjustment as set
forth herein below) in substantially the same form as the Warrants
delivered to the Investors upon the Closing; provided, however, that
in any event the Warrants shall allow for "cashless exercise" by the
holder thereof;
3. Cause the number of Conversion Shares, Additional Shares and Warrants
and the exercise price of the Warrants to be proportionately and
appropriately adjusted for any forward or reverse stock split or other
recapitalization or reclassification of the Company's securities
occurring prior to or after the Closing Date whether occurring prior
or subsequent to, or simultaneously with, the conversion of the Elan
Preferred Stock;
4. Cause the issuance of the Conversion Shares, Additional Shares and the
Warrants to take place concurrent with Elan's conversion of the Elan
Preferred Stock as set forth above under paragraph (i);
5. Grant EIS upon the Closing the same participation rights (on a PRO
RATA basis) as the participation rights granted by the Company to the
Investors in connection with their investment in Common Stock in
connection with the Transaction.
6. Use its reasonable efforts to cause all shares (including, without
limitation, the Conversion Shares and the Additional Shares) of the
Common Stock of the Company issuable to Elan upon exercise of the
Warrants to be included in the registration statement, as provided in
the Stock Purchase Agreement, to be filed by the Company after the
Closing of the Transaction (the "Investors' Shelf") on the same basis
as for Common Stock issued in connection with the Transaction. To the
extent such registration statement shall not include such shares or
shall cease to be effective before Elan has sold all of such
Registrable Securities, Elan shall have piggyback registration rights
(but no demand registration rights) with respect to such Registrable
Securities. Such piggyback registration rights shall be on the same
basis as those granted for Common Stock issued in connection with the
Transaction.
7. Notwithstanding the foregoing, nothing herein shall affect the
registration rights set forth in the Securities Purchase Agreement
dated December 21, 2001 by and between EIS and the Company (the "2001
SPA"). The Company acknowledges that the Conversion Shares and the
Additional Shares constitute Registrable Securities (as defined in the
2001 SPA) and agrees to maintain the effectiveness of, and make any
required amendments to, that certain registration statement dated
December 26, 2001 (the "Elan Shelf") on file with the Securities and
Exchange Commission to ensure inclusion of the Additional Shares
therein and compliance with the 2001 SPA; provided, however, that Elan
shall not object to the integration of the Elan Shelf with and into
the Investors' Shelf.
Notwithstanding anything herein to the contrary, Elan may terminate this letter
agreement, which there upon shall be null and void and without any force or
effect, if:
1. The Closing shall not have occurred on or prior to June 30, 2003 or
such later date as may be agreed upon by the Investors and the Company
to close the Transaction; or
2. There is (a) any material adverse change to the terms and conditions
under which the Transaction is to be consummated from those set forth
in the Term Sheet or (b) any material adverse change to the interests
of Elan (with the understanding that the determination as to whether a
change is material and/or adverse shall be made by Elan reasonably and
in good faith) that, in either case, has not been approved in writing
by EIS, including, without limitation, a decrease in the amount of new
money being invested in the Company below $40 million.
Upon the Closing, the Company will remain responsible for the performance
of the Company's obligations and liabilities under the Agreements. The Company
will provide Elan at least five (5) business days' prior written notice of the
Closing and Elan will be promptly notified if and when the Closing has occurred.
In addition, Elan agrees to use its reasonable best efforts to review the signed
Transaction documents (the "Transaction Documents") as soon as practicable after
their having been filed by the Company with the Securities and Exchange
Commission and to make a good faith, reasonable determination as to whether the
terms and provisions set forth therein differ materially and/or adversely to the
interests of Elan from those set forth in the Term Sheet. The Company agrees to
provide Elan with written notice at least three (3) business days' prior to the
Closing, of any provisions or changes made made to the Transaction Documents
that differ from the terms and conditions of the Term Sheet so that Elan can
assess whether such changes are of a material and adverse nature.
Notwithstanding , Elan reserves all rights privileges under contract, at law or
in equity, to not deliver notice of conversion with respect to the Elan
Preferred Stock to effect the conversion thereof if there is any (a) material
adverse change to the terms and conditions under which the Transaction is to be
consummated from those set forth on the Term Sheet or (b) material adverse
change to the interests of Elan (with the understanding that the determination
as to whether a change is material and/or adverse shall be made by Elan
reasonably and in good faith).
EIS shall not transfer any of the Elan Preferred Securities to a third
party unless such third party transferee agrees to assume EIS's obligations
hereunder and to be bound by the terms of this letter agreement.
Except as specifically set forth above, all other terms and conditions of
the Agreements and all other documents executed in connection therewith shall
remain in full force and effect.
[INTENTIONALLY LEFT BLANK]
If the foregoing meets with your approval, kindly sign and date both copies
of this letter in the space provided below, retain one copy for your records and
return one copy to the undersigned, whereupon this letter shall serve as an
agreement by the parties of all the terms and conditions set forth herein,
effective as of the Closing.
Very truly yours,
RIBOZYME PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------
Xxxxxx X. Xxxxx
President & CEO
ACKNOWLEDGED AND AGREED
as of this 11th day of February 2003.
ELAN INTERNATIONAL SERVICES.
By: /s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
Schedule A
Ribozyme Pharmaceuticals, Inc.
Elan Conversion
As of January 2003
Accrued -----Future Conversions-----
Per share Original Dividends Accrued Div
Equity Conversion Amount 1/31/2003 Total Shares at end of year Total Shares
------ ---------- ------ --------- ----- ------ -------------- ----- ------
Series A 12,015,000.00 2,388,138.38 14,403,138.38 end of
< 3 Years $ 12.00 1,200,262 2002 2,314,366.00 14,329,366 1,194,114
---------
3 - 4 years $ 13.20 1,091,147 2003 3,187,024.39 15,202,024 1,151,669
---------
4 - 5 years $ 14.40 1,000,218 2004 4,112,827.67 16,127,828 1,119,988
5 - 6 years $ 15.00 960,209 2005 5,095,012.38 17,110,012 1,140,667
Series B
Sep-00 Draw #1 $ 38.31 1,171,740.39 367,861.47 1,539,601.86 40,186 2005 990,827.75 2,162,568.14 56,447
Dec-00 Draw #2 $ 29.03 1,529,610.88 428,787.53 1,958,398.41 67,452 2005 1,220,496.34 2,750,107.22 94,720
May-01 Draw #3 $ 11.31 1,637,255.97 365,952.99 2,003,208.96 177,189 2005 1,176,142.65 2,813,398.62 248,852
May-01 Draw #4 $ 11.20 1,642,196.97 352,910.73 1,995,107.70 178,198 2005 1,159,624.77 2,801,821.74 250,252
Nov-01 Draw #5 $ 10.48 1,613,399.18 249,479.64 1,862,878.82 177,747 2005 1,002,921.73 2,616,320.91 249,637
Dec-01 Draw #6 $ 8.15 647,684.72 89,863.35 737,548.07 90,502 2005 388,020.22 1,035,704.94 127,088
Apr-02 Draw #7 $ 5.06 560,606.56 53,954.62 614,561.18 121,503 2005 302,569.11 863,175.67 170,656
Jun-02 Draw #8 $ 2.90 529,553.48 38,232.31 567,785.79 195,721 2005 267,746.28 797,299.76 274,836
Oct-02 Draw #9 $ 1.36 597,164.64 22,577.73 619,742.37 454,523 2005 273,318.41 870,483.05 638,418
---------------------------------------------------------- ------------------------
Series B Subtotal 9,929,212.79 1,969,620.37 11,898,833.16 1,503,022 16,710,880.05 2,110,906
---------------------------------------------------------- ------------------------
---------------------------------------------------------- ------------------------
21,944,212.79 4,357,758.75 26,301,971.54 2,594,168 end of 2005 33,820,892.43 3,251,574
---------------------------------------------------------- ------------------------
NOTES:
-----
- Includes accrued dividends through December 2005.
- Dividends accrue 6% and 12% semi-annually on Series A and B, respectively.
- Conversion price for Series A is at $15.00 since assumption is 2005.
- Conversion price for the Series B is at 150% of the 60 day average closing
price for RPI stock prior to request of each draw-down.
--------------------------------------------------------------------------------
Summary of Elan Shares
Common Stock owned as of January 29, 2003 1,891,526
Conversion assuming accruals through 2005 (per above):
Series A 1,140,667
Series B 2,110,906
---------
Total Conversion 3,251,574
---------
Total Common Stock owned after conversion 5,143,100
=========
Existing Warrants @ $20 share 300,000
Existing Warrants @ $5 share 75,000
New Warrant coverage @ 10% of all shares, exercise price - $0.42 514,310
---------
Fully Diluted Ownership including conversion & warrants 6,032,410
=========
--------------------------------------------------------------------------------
