SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
SIGA TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, New York 10170
(212) 672-9100
November __, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
SIGA Technologies, Inc. which will be held at the offices of Kramer Levin
Naftalis & Frankel LLP, 919 Third Avenue, 37th Floor, New York, New York 10022
at 9:00 a.m. (local time) on _______, December __, 2003, and at any adjournment
or postponement thereof. On the following pages you will find the formal notice
of annual meeting and proxy statement.
To assure that you are represented at the Annual Meeting, whether or not
you plan to attend the meeting in person, please read carefully the accompanying
proxy statement, which describes the matters to be voted upon, and please
complete, date, sign and return the enclosed proxy card promptly.
I hope that you will attend the meeting and I look forward to seeing you
there.
Sincerely,
DONALD G. DRAPKIN
Chairman of the Board
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, New York 10170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER __, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of SIGA Technologies, Inc., a Delaware corporation ("SIGA"),
will be held on _____, December __, 2003, at 9:00 a.m. (local time), at the
offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, 37th Floor,
New York, New York 10022, and at any adjournment.
At the Annual Meeting, SIGA's stockholders will be voting on proposals to
do the following:
1. To elect eight directors to the Board of Directors of SIGA;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent auditors of SIGA for the fiscal year ending
December 31, 2003;
3. To approve the issuance to MacAndrews & Forbes Holdings Inc.
("MacAndrews & Forbes"), TransTech Pharma, Inc. ("TransTech
Pharma") and certain other investors of shares of common
stock, par value $.0001 per share, of SIGA ("Common Stock"),
warrants to purchase shares of Common Stock, shares of Common
Stock issuable upon exercise of such warrants, including,
without limitation, shares of Common Stock issuable as a
result of anti-dilution protection provisions contained
therein, and shares of Common Stock issuable upon exercise of
certain warrants issued prior to the date hereof, as a result
of anti-dilution protection provisions contained therein, in
accordance with NASD Rule 4350(i);
4. To approve an amendment to the SIGA Technologies, Inc. Amended
and Restated 1996 Incentive and Non-Qualified Stock Option
Plan (the "Plan") to increase the maximum number of shares of
Common Stock available for issuance under the Plan from
7,500,000 shares to 10,000,000 shares; and
5. To transact such other business as may properly come before
the Annual Meeting or at any adjournment or postponement
thereof.
Stockholders of record at the close of business on November __, 2003 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or
postponement thereof. A list of such stockholders will be available at the
Annual Meeting and for any purpose related to the Annual Meeting, during the ten
days prior to the Annual Meeting, at SIGA's office, during ordinary business
hours.
All stockholders are cordially invited to attend the Annual Meeting. If
you do not expect to be present at the Annual Meeting, you are requested to fill
in, date and sign the enclosed proxy and mail it promptly in the enclosed
envelope to make sure that your shares are represented at the Annual Meeting. In
the event you decide to attend the Annual Meeting in person, you may, if you
desire, revoke your proxy and vote your shares in person.
YOUR VOTE IS IMPORTANT
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
Thomas N. Konatich
Secretary
New York, New York
November __, 2003
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, New York 10170
----------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER __, 2003
----------
This proxy statement is furnished to stockholders of SIGA Technologies,
Inc. ("SIGA") in connection with the solicitation of proxies, in the
accompanying form, by the Board of Directors of SIGA (the "Board of Directors")
for use in voting at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third
Avenue, 37th Floor, New York, New York 10022, on ______, December __, 2003, at
9:00 a.m., and at any adjournment or postponement thereof.
This proxy statement, and the accompanying form of proxy are first being
mailed to stockholders on or about November __, 2003.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Purpose of the Annual Meeting
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this proxy statement.
Record Date and Outstanding Shares
The Board of Directors has fixed the close of business on November __,
2003 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting. Only
stockholders of record at the close of business on the Record Date will be
entitled to vote at the Annual Meeting or any and all adjournments or
postponements thereof. As of the Record Date, SIGA had issued and outstanding
________ shares of common stock, par value $.0001 per share ("Common Stock"),
and _____ shares of series A convertible preferred stock, par value $.0001 per
share ("Series A Preferred Stock"). The Common Stock and the Series A Preferred
Stock together comprise all of SIGA's issued and outstanding voting stock.
Voting at the Annual Meeting
Each share of Common Stock and each share of Series A Preferred Stock
outstanding on the Record Date will be entitled to one vote on each matter
submitted to a vote of the stockholders; provided, however, that, in accordance
with Rule 4350(i) of the National Association of Securities Dealers, Inc. (the
"NASD"), the vote of any stockholder who participates in the transactions
described in Proposal No. 3 shall be excluded from the tabulation of votes cast
in connection with such matter because of such stockholder's interest therein.
Cumulative voting by stockholders is not permitted.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote at the Annual
Meeting is necessary to constitute a quorum. Abstentions and broker "non-votes"
are counted as present and entitled to vote for purposes of determining a
quorum. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
For the election of directors, a plurality of the votes cast is required.
Since, however, the number of candidates is equal to the number of vacancies,
receipt of any votes in favor of any candidate will ensure that that candidate
is elected. Abstentions and broker "non-votes" are not considered for the
purpose of the election of directors.
For the ratification of the appointment of PricewaterhouseCoopers LLP as
the independent auditors of SIGA for the fiscal year ending December 31, 2003,
the affirmative vote of a majority of the total votes cast on such proposal in
person or by proxy at the Annual Meeting is required. Abstentions and broker
"non-votes" for such proposal are not considered to have been voted on the
proposal.
For the approval of the issuance to MacAndrews & Forbes Holdings Inc.
("MacAndrews & Forbes"), TransTech Pharma, Inc. ("TransTech Pharma"), and
certain other investors described herein of the Tranche C Shares, the Tranche C
Warrants and the Warrant Shares (each as defined herein) as described in
Proposal No. 3, the affirmative vote of a majority of the total votes cast on
such proposal in person or by proxy at the Annual Meeting is required. In
accordance with Rule 4350(i) of the NASD, the shares of Common Stock held by
MacAndrews & Forbes and certain other investors described herein will not be
counted for purposes of determining whether approval of Proposal No. 3 has been
obtained. Abstentions and broker "non-votes" for such proposal are not
considered to have been voted on the proposal.
For the approval of an amendment to the SIGA Technologies, Inc. Amended
and Restated 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") to
increase the maximum number of shares of Common Stock available for issuance
under the Plan from 7,500,000 shares to 10,000,000 shares, the affirmative vote
of a majority of the total votes cast on such proposal in person or by proxy at
the Annual Meeting is required. Abstentions and broker "non-votes" for such
proposal are not considered to have been voted on the proposal.
Revocability and Voting of Proxies
Any person signing a proxy in the form accompanying this proxy statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by any of the
following methods:
o by writing a letter delivered to Thomas N. Konatich, Secretary
of SIGA, stating that the proxy is revoked;
o by submitting another proxy with a later date; or
o by attending the Annual Meeting and voting in person.
Please note, however, that if a stockholder's shares are held of record by
a broker, bank or other nominee and that stockholder wishes to vote at the
Annual Meeting, the stockholder must bring to the Annual Meeting a letter from
the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
Unless we receive specific instructions to the contrary or unless such
proxy is revoked, shares represented by each properly executed proxy will be
voted: (i) FOR the election of each of SIGA's nominees as a director; (ii) FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as the
independent auditors of SIGA for the fiscal year ending December 31, 2003; (iii)
FOR the approval of the issuance to MacAndrews & Forbes, TransTech Pharma and
certain other investors of the Tranche C Shares, the Tranche C Warrants and the
Warrant Shares as described in Proposal No. 3; (iv) FOR the approval of an
amendment to the Plan to increase the maximum number of shares of Common Stock
available for issuance under the Plan from 7,500,000 shares to 10,000,000
shares; and (v) with respect to any other matters that may properly come before
the Annual Meeting, at the discretion of the proxy holders. SIGA does not
presently anticipate that any other business will be presented for action at the
Annual Meeting.
Solicitation
SIGA will pay the costs relating to this proxy statement, the proxy card
and the Annual Meeting. SIGA may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to beneficial owners. Directors, officers and regular
employees may also solicit proxies by telephone, facsimile or other means or in
person. They will not receive any additional payments for the solicitation.
SIGA has retained the firm of Georgeson Shareholder to provide services as
proxy solicitor in connection with this proxy statement. SIGA estimates that the
costs for such services will be in the aggregate amount of $16,500, including a
base fee of $8,000, telephone call charges and out-of-pocket expense
reimbursements.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting to hold office
until the next Annual Meeting of Stockholders and until their successors have
been duly elected and qualified. Unless otherwise instructed, the proxy holders
will vote the proxies received by them FOR the election of the eight persons
named in the table below as directors of SIGA. Proxies cannot be voted for a
greater number of persons than the nominees named. In the event that any of the
below listed nominees for director should become unavailable for election for
any presently unforeseen reason, the persons named in the accompanying proxy
form have the right to use their discretion to vote for a substitute.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION (ITEM 1 OF THE ENCLOSED PROXY CARD) OF MESSRS. DRAPKIN, BRENT, CANTOR,
CONSTANCE, KASTEN, OZ, ROSE AND WEINER, AS DIRECTORS.
Director Information
The following table sets forth biographical information of each director
nominee, including their ages, data on their business backgrounds and the names
of public companies and other selected entities for which they also serve as
directors:
Name Age Position
---- --- --------
Donald G. Drapkin 55 Chairman of the Board of Directors
Roger Brent, Ph.D. 47 Director
Charles Cantor, Ph.D. 61 Director
Thomas E. Constance 67 Director
Bernard L. Kasten Jr., M.D. 57 Director
Mehmet C. Oz, M.D. 43 Director
Eric A. Rose, M.D. 51 Director
Michael A. Weiner, M.D. 57 Director
Donald G. Drapkin has served as Chairman of the Board and a director of
SIGA since April 19, 2001. Mr. Drapkin has been Vice Chairman and a director of
MacAndrews & Forbes Holdings Inc. and various of its affiliates since 1987.
Prior to joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP for more than five years. Mr.
Drapkin is also a director of the following corporations which file reports
pursuant to the Securities Exchange Act of 1934: Anthracite Capital, Inc., The
Molson Companies Limited, Playboy Enterprises, Inc., Revlon Consumer Products
Corporation and Revlon Inc. Mr. Drapkin is also a director of Nephros, Inc.,
Pharmacore, Inc. and TransTech Pharma, Inc.
Roger Brent, Ph.D. has been a director of SIGA since May 23, 2003. Since
2001, Dr. Brent has served as the President and Director of The Molecular
Sciences Institute in Berkeley California. Dr. Brent was formerly a faculty
member at Harvard Medical School and Massachusetts General Hospital in Boston.
Dr. Brent advises agencies of the US government, including the Defense Advanced
Research Projects Agency, on genomics, and The Wellcome Trust. Dr. Brent founded
Current Protocols in Molecular Biology. Dr. Brent is an inventor on twelve
issued patents and his work is widely known on biological technologies to map
genetic networks and test functions for genes and alleles.
Charles Cantor, Ph.D. has served as a director of SIGA since May 23, 2003.
Since 1998, Dr. Cantor has served as Chief Scientific Officer of Sequenom Inc.,
a discovery genetics company. Dr. Cantor is Director of the Center for Advanced
Biotechnology at Boston University. Dr. Cantor was also the Director of the
Human Genome Center of the Department of Energy at Lawrence Berkley Laboratory
and has held positions at Columbia University and the University of California
Berkeley. Dr. Cantor has been granted 26 patents and published 360 peer-reviewed
articles.
Thomas E. Constance has served as a director of SIGA since April 19, 2001.
Mr. Constance is Chairman and, since 1994, a partner of Kramer Levin Naftalis &
Frankel LLP, a law firm in New York City. Mr. Constance is a director of the
following corporations which file reports pursuant to the Securities Exchange
Act of 1934: Uniroyal Technology Corporation and Kroll Inc. Mr. Constance serves
as a Trustee of the M.D. Sass Foundation and St. Vincent's Services. He also
serves on the Advisory Board of Directors of Barington Capital, L.P.
3
Bernard L. Kasten Jr., M.D. has been a director of SIGA since May 23,
2003. Since February 2002, Dr. Kasten has been Vice President, Medical Affairs
of MedPlus Inc., a healthcare information technology company and a wholly-owned
subsidiary of Quest Diagnostics, Inc., a diagnostic testing, information and
services company. Since 1975, Dr. Kasten has been a Diplomat of the American
Board of Pathology with a sub-specialty certification in 1976 in Medical
Microbiology. Dr. Kasten's staff appointments have included service in the
Division of Laboratory Medicine at The Cleveland Clinic; Associate Director of
Pathology and Laboratory Services at the Bethesda Hospital Systems in
Cincinnati, Ohio and Chief Laboratory Officer at Quest Diagnostics Incorporated.
Dr. Kasten was a founder of Plexus Vaccine Inc., a vaccine company of which SIGA
acquired substantially all of the assets in May 2003. Dr. Kasten is an author of
"Infectious Disease Handbook" 5th Edition, 2003, Lexi-Comp Inc.
Mehmet C. Oz, M.D. has served as a director of SIGA since April 19, 2001.
Dr. Oz has been a Cardiac Surgeon at Columbia University Presbyterian Hospital
since 1993 and a Professor of Surgery and Vice Chairman for Cardiovascular
Services of the Department of Surgery there since July 2001. Dr. Oz directs the
following programs at New York University Presbyterian Hospital, Columbia
University: the Cardiovascular Institute, the complementary medicine program,
the clinical profusion program and clinical trials of new surgical technology.
Dr. Oz received his undergraduate degree from Harvard University in 1982, and,
in 1986, he received a joint M.D./M.B.A. degree from the University of
Pennsylvania Medical School and the Wharton School of Business.
Eric A. Rose, M.D. has served as a director of SIGA since April 19, 2001.
From April 19, 2001 until June 21, 2001, Dr. Rose served as Interim Chief
Executive Officer of SIGA. Dr. Rose is currently Chairman of the Department of
Surgery and Surgeon-in-Chief of the Columbia Presbyterian Center of New York
Presbyterian Hospital, a position he has held since August 1994. Dr. Rose is a
past President of the International Society for Heart and Lung Transplantation.
Dr. Rose was recently appointed as Morris & Rose Milstein Professor of Surgery
at Columbia University's College of Physicians and Surgeons' Department of
Surgery. Dr. Rose is a director of TransTech Pharma, Inc. and a former director
of Nexell Therapeutics Inc. (f/k/a VimRx). Dr. Rose is a graduate of both
Columbia College and Columbia University College of Physicians & Surgeons.
Michael A. Weiner, M.D. has served as a director of SIGA since April 19,
2001. Dr. Weiner is the Hettinger Professor of Pediatrics at Columbia University
College of Physicians and Surgeons since 1996. Dr. Weiner is also the Director
of Pediatric Oncology at New York Presbyterian Hospital. Dr. Weiner was a
director of Nexell Therapeutics, Inc. (f/k/a VimRx) from March 1996 to February
1999. Dr. Weiner is a 1972 graduate of the New York State Health Sciences Center
at Syracuse, and he was a post graduate student at New York University and Johns
Hopkins University.
Board of Directors Meetings and Committees
During the 2002 fiscal year, there were two meetings of the Board of
Directors. A quorum of directors was present, either in person or
telephonically, for both meetings. Actions were also taken during such year by
the unanimous written consent of the directors.
The Board of Directors has an audit committee (the "Audit Committee") and
a compensation committee (the "Compensation Committee"), but not a standing
nominating committee. The members of the Audit Committee since June 29, 2001 are
Drs. Mehmet C. Oz and Michael A. Weiner, neither of whom is or has been an
employee of SIGA. SIGA has adopted a written charter for the Audit Committee
which was filed as an appendix to SIGA's proxy statement relating to SIGA's
Annual Meeting of Stockholders held in 2001. Through its written charter, the
Audit Committee has been delegated the responsibility of reviewing with the
independent auditors the plans and results of the audit engagement, reviewing
the adequacy, scope and results of the internal accounting controls and
procedures, reviewing the degree of independence of the auditors, reviewing the
auditor's fees and recommending the engagement of the auditors to the full Board
of Directors. During the 2002 fiscal year, there were four meetings of the Audit
Committee. Actions were also taken during such year by the unanimous written
consent of the Audit Committee.
The members of the Compensation Committee since June 29, 2001 are Drs.
Mehmet C. Oz and Michael A. Weiner, neither of whom is or has been an employee
of SIGA. The Compensation Committee administers SIGA's stock option plan and
other corporate benefits programs. The Compensation Committee also reviews and
approves bonuses, stock option grants, compensation, philosophy and current
competitive status, and executive officer
4
compensation. During the 2002 fiscal year, there were no meetings of the
Compensation Committee. However, actions were taken during such year by the
unanimous written consent of the Compensation Committee.
Audit Committee Report
During the fiscal year 2002, the Audit Committee consisted solely of
independent members of the Board of Directors, as defined in Rule 4200(a)(14) of
the NASD listing standards. The Audit Committee reviewed and discussed with
SIGA's management the audited financial statements included in SIGA's Annual
Report on Form 10-KSB for fiscal year 2002, as amended. Additionally, the Audit
Committee discussed with SIGA's independent auditors the matters required to be
discussed by SAS 61. The Audit Committee received the written disclosures and
the letter from PricewaterhouseCoopers LLP, SIGA's independent accountants,
required by Independence Standards Board Standard No. 1 and discussed with the
independent accountant the independent accountant's independence. Based upon the
above review and discussions, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in SIGA's Annual
Report on Form 10-KSB for the fiscal year 2002, as amended, for filing with the
Securities and Exchange Commission.
The members of the Audit Committee are Dr. Mehmet C. Oz and Dr. Michael A.
Weiner, neither of whom is or, during the fiscal year 2002, was, an employee of
SIGA.
MANAGEMENT
Officers
The following table sets forth certain information with respect to the
executive officers of SIGA:
Name Age Position
- ---- --- --------
Susan K. Burgess, Ph.D. 57 President
Thomas N. Konatich 57 Acting Chief Executive Officer, Chief Financial Officer,
Secretary and Treasurer
Dennis E. Hruby, Ph.D. 52 Vice President - Chief Scientific Officer
Susan K. Burgess, Ph.D., has served as President of SIGA since May 2003,
at which time SIGA acquired substantially all of the assets of Plexus Vaccine
Inc., a vaccine company of which she was a founder, Chief Executive Officer and
President since its inception in May of 2001. Dr. Burgess was Principle of The
Remuda Group, a biotech consulting firm, and founder and organizer of The
Cienaga Forum, a non-profit educational organization that convened the "After
the Genome" series of postgenomic cross-disciplinary think-tanks. Dr. Burgess
was a Co-founder and VP of Corporate Development for Structural Bioinformatics
Inc from 1995-1999, and co-founder in 1994 of MesaGnostics, Inc, a San Diego
systems biology company. She has research and business development experience in
the biopharmaceutical industry at Alza Corporation, Burroughs Wellcome Fund, and
Glaxo Wellcome plc, with a Ph.D. (pharmacology/toxicology) from the University
of Kansas and postdoctoral training (molecular neurobiology) at the University
of North Carolina at Chapel Hill where she was adjunct professor of Cell
Biology.
Thomas N. Konatich has served as Vice President, Chief Financial Officer
and Treasurer of SIGA since April 1, 1998. He was named Secretary of SIGA on
June 29, 2001 and has been our Acting Chief Executive Officer since October 5,
2001. From November 1996 through March 1998, Mr. Konatich served as Chief
Financial Officer and a director of Innapharma, Inc., a privately held
pharmaceutical development company. From 1993 through November 1996, Mr.
Konatich served as Vice President and Chief Financial Officer of Seragen, Inc.,
a publicly traded biopharmaceutical development company. Mr. Konatich has an MBA
from the Columbia Graduate School of Business.
Dennis E. Hruby, Ph.D. has served as Vice-President - Chief Scientific
Officer of SIGA since June 2000. From April 1, 1997 through June 2000, Dr. Hruby
was SIGA's Vice President of Research. From January 1996
5
through March 1997, Dr. Hruby served as a senior scientific advisor to SIGA. Dr.
Hruby is a Professor of Microbiology at Oregon State University, and, from 1990
to 1993, was director of the Molecular and Cellular Biology Program and
associate director of the Center for Gene Research and Biotechnology. Dr. Hruby
specializes in virology and cell biology research and the use of viral and
bacterial vectors to produce recombinant vaccines. He is a member of the
American Society of Virology, the American Society for Microbiology and a fellow
of the American Academy of Microbiology. Dr. Hruby received a Ph.D. in
microbiology from the University of Colorado Medical Center and a B.S. in
microbiology from Oregon State University.
Summary Compensation Table
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 2002, 2001 and 2000 for the person who acted as
SIGA's Chief Executive Officer during the year ended December 31, 2002 and
SIGA's most highly compensated executive officer, other than its Acting Chief
Executive Officer, whose salary and bonus for the fiscal year ended December 31,
2002 was in an aggregate amount to exceed $100,000 each (collectively, the
"Named Officers").
Annual Compensation
---------------------------------
Long-Term
Compensation
Other Annual Securities
Compensation Underlying Options
Name and Principal Position (1) Year Salary ($) ($) (#)
---- ---------- ------------ ------------------
Thomas N. Konatich ............................ 2002 188,333 -- 200,000
Chief Financial Officer and Acting 2001 177,542 -- --
Chief Executive Officer 2000 170,000 -- 100,000
Dennis E. Hruby, Ph.D. ........................ 2002 195,000 -- 300,000
Chief Scientific Officer 2001 196,055 -- --
2000 170,000 -- 125,000
- ----------
(1) Susan K. Burgess, Ph.D. became President of SIGA on May 23, 2003.
Option Grants for the Year Ended December 31, 2002
The following table sets forth grants of stock options during the year
ended December 31, 2002 to each of the Named Officers during such year. The
exercise price at the time of the grant was equal to or above the fair market
value at the time of the grant.
Number of
Shares of Percent of
Common Stock Total Exercise
Underlying Options Granted Price Per Expiration
Name (1) Options Granted to Employees Share Date
- -------- --------------- --------------- --------- ----------
Thomas N. Konatich............................. 150,000 19.3% $2.50 11/15/12
50,000 6.4% $3.94 1/31/12
Dennis E. Hruby, Ph.D.......................... 300,000 38.6% $2.50 10/15/12
- ----------
(1) Susan K. Burgess, Ph.D. became President of SIGA on May 23, 2003.
6
Option Exercises in Fiscal Year Ended December 31, 2002 and Fiscal Year-End
Option Values
The following table provides certain summary information concerning stock
options held as of December 31, 2002 by each of the Named Officers. No options
were exercised during the year ended December 31, 2002 by any of the Named
Officers.
Value of Unexercised
Number of Securities Underlying In-The-Money Options
Unexercised Options # at Fiscal Year-End ($) (2)
------------------------------- -------------------------------
Name (1) Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------- ---------------
Thomas N. Konatich ............................... 288,750 106,250 0 0
Dennis E. Hruby, Ph.D. ........................... 250,000 225,000 0 0
- ----------
(1) Susan K. Burgess, Ph.D. became President of SIGA on May 23, 2003.
(2) Based upon the closing price on December 31, 2002 as reported on the
Nasdaq SmallCap Market and the exercise price per option.
Long Term Incentive Plan Awards in Fiscal Year Ended December 31, 2002
The SIGA Technologies, Inc. 1996 Incentive and Non-Qualified Stock Option
Plan was initially adopted in 1996 and was subsequently amended in 1998, 1999
and 2000 to increase the number of shares of Company Stock with respect to which
awards may be granted thereunder. An amendment and restatement of such plan was
adopted by the Board of Directors on May 3, 2001 and was further refined by the
Board of Directors on June 29, 2001, which amendment and restatement, among
other things, renamed such plan the "SIGA Technologies, Inc. Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan." The amendment and
restatement of such plan was approved by SIGA's stockholders at an annual
meeting on August 15, 2001. In November 2003, the Board of Directors approved an
amendment to the Plan to increase the maximum number of shares of Common Stock
available for issuance thereunder from 7,500,000 shares to 10,000,000 shares.
Such amendment shall become effective upon approval of Proposal No. 4 by SIGA's
stockholders.
The Plan is administered by the Compensation Committee which is comprised
of disinterested directors. The Compensation Committee determines persons to be
granted stock options, the amount of stock options to be granted to each such
person, and the terms and conditions of any stock options as permitted under the
Plan. The members of the Compensation Committee are Mehmet C. Oz, M.D. and
Michael A. Weiner, M.D.
The Plan provides for the grant of (i) stock options not intended to
qualify as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) stock options
that are intended to qualify as incentive stock options within the meaning of
Section 422 of the Code. A stock option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code that is granted under
the Plan will have an exercise price of not less than 100% of the fair market
value of the shares on the date on which such option is granted. With respect to
such an incentive stock option granted to an employee who owns more than 10% of
the total combined voting stock of SIGA or of any parent or subsidiary of SIGA,
the exercise price for such option must be at least 110% of the fair market
value of the shares subject to the option on the date the option is granted.
An aggregate of 7,500,000 shares of Common Stock have been reserved for
issuance under the Plan, subject to an increase to 10,000,000 shares of Common
Stock if Proposal No. 4 is approved by SIGA's stockholders. As of December 31,
2002 and October 31, 2003, an aggregate of 5,807,761 and 6,913,811 shares of
Common Stock, respectively, had been issued under the Plan.
During the fiscal year ended December 31, 2002, the Named Officers
received long-term incentive compensation under the Plan as shown in the
following table.
7
Estimated Future Payouts Under
Non-Stock Price Based Plans
-----------------------------------------
Number of Shares, Performance or
Units or Other Other Period Until
Rights Maturation of Threshold Target Maximum
Name (#) Payout ($ or #) ($ or #) ($ or #)
----------------------------------------------------------------------------------
Thomas N. Konatich.............. 50,000 1/31/12 0 0 0
150,000 11/15/12 0 0 0
Dennis E. Hruby, Ph.D........... 300,000 10/15/12 0 0 0
Directors Compensation
During fiscal year 2002, no fees were paid to directors, and no directors
were reimbursed for expenses incurred.
Employment Contracts
Dr. Susan K. Burgess is employed as President of SIGA under an employment
agreement, dated May 23, 2003. This agreement expires on December 31, 2005 and
is cancelable by SIGA only for Cause (as defined in the agreement). Dr. Burgess
receives an annual base salary of $216,000. On the date of the agreement, Dr.
Burgess received options to purchase an aggregate of 300,000 shares of Common
Stock at an exercise price of $1.81 per share. Options to purchase the first
100,000 shares vested on the date of the agreement and options to purchase the
remaining shares vest on a pro rata basis on the second and third anniversaries
of the agreement. Dr. Burgess is also eligible to receive additional stock
options and bonuses at the discretion of the Board of Directors.
Thomas N. Konatich, SIGA's Vice President, Chief Financial Officer,
Secretary, Treasurer and Acting Chief Executive Officer, is employed by SIGA
under an employment agreement, dated April 1, 1998, as amended on January 19,
2000, as amended and restated on October 6, 2000, as amended as of January 31,
2002 and as amended on November 5, 2002. This agreement expires on September 30,
2004 and is cancelable by SIGA only for Cause (as defined in the agreement). Mr.
Konatich receives an annual base salary of $210,000. On April 1, 1998, he
received options to purchase 95,000 shares of Common Stock at an exercise price
of $4.44 per share. These options vested on a pro rata basis on the first,
second, third and fourth anniversaries of the agreement. On January 19, 2000, he
received an additional grant to purchase 100,000 shares at an exercise price of
$2.00 per share. These options vest on a pro rata basis each quarter through
January 19, 2002. On January 31, 2002, Mr. Konatich was granted an "Incentive
Stock Option" to purchase 50,000 shares at an exercise price of $3.94 per share.
Such options vest in eight equal quarterly installments beginning on April 20,
2002. On November 5, 2002, Mr. Konatich was granted an Incentive Stock Option to
purchase 150,000 shares at an exercise price of $2.50 per share. 75,000 of these
options vested immediately and 75,000 options vested on September 1, 2003. Mr.
Konatich is also eligible to receive additional stock options and bonuses at the
discretion of the Board of Directors.
Dr. Dennis Hruby, Chief Scientific Officer, is employed by SIGA under an
employment agreement, dated January, 1, 1998, as amended on June 16, 2000, as
amended on January 31, 2002, and as amended on October 3, 2002. This Agreement
expires on December 31, 2005, except that SIGA may terminate the agreement upon
180 days written notice. Dr. Hruby receives a base salary of $210,000 per year.
Dr. Hruby received options to purchase 10,000 shares of Common Stock at an
exercise price of $5.00 per share on April 1, 1997 and 40,000 shares of Common
Stock at an exercise price of $4.63 per share on April 1, 1998. These options
became exercisable on a pro rata basis on the first, second, third and fourth
anniversaries of the agreement. Dr. Hruby is eligible to receive additional
stock options and bonuses at the discretion of the Board of Directors. Under the
June 16, 2000 amendment, Dr. Hruby was granted options to purchase 125,000
shares of Common Stock at $2.00 per share. These options vest ratably over the
remaining term of the agreement. Under the January 31, 2002 amendment, Dr. Hruby
was granted an "Incentive Stock Option" to purchase 50,000 shares of Common
Stock at an exercise price of $3.94 per share; however, as part of the October
3, 2002 amendment, Dr. Hruby surrendered such option and was granted
8
an option to purchase 300,000 shares of Common Stock at an exercise price of
$2.50 per share. Of the 300,000 options granted under the October 3, 2002
amendment, (i) options with respect to 75,000 shares vested upon the signing of
the amendment, (ii) options with respect to 75,000 shares vested on September 1,
2003, and (iii) options with respect to the remaining 150,000 shares shall vest
on a pro rata basis on September 1 of each of 2004 and 2005.
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan
information with respect to equity compensation plans approved by SIGA's
stockholders and equity compensation plans not approved by SIGA's stockholders,
as of December 31, 2002:
Number of Securities
Remaining Available for
Number of Securities Weighted-Average Future Issuance Under
to be Issued Upon Exercise Price of Equity Compensation
Exercise of Outstanding Plans (Excluding
Outstanding Options, Options, Warrants Securities Reflected in
Warrants and Rights and Rights Column (a))
Plan Category (a) (b) (c)
- ------------- -------------------- ----------------- -----------------------
Equity compensation plans approved by
security holders (1) 5,807,561 $2.52 1,480,314
Equity compensation plans not approved by
security holders 250,000 $2.00 0
Total 6,057,561 $2.50 1,480,314
- ----------
(1) SIGA Technologies, Inc. Amended and Restated 1996 Incentive and
Non-Qualified Stock Option Plan
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of SIGA's voting securities as of October 31, 2003 of (i)
each person known to SIGA to beneficially own more than 5% of the applicable
class of voting securities, (ii) each director and director nominee of SIGA,
(iii) each Named Officer and (iv) all directors and executive officers of SIGA
as a group. As of October 31, 2003, a total of 18,676,851 shares of Common Stock
and a total of 72,992 shares of Series A Preferred Stock were outstanding. Each
share of Common Stock and Series A Preferred Stock is entitled to one vote on
matters on which holders of Common Stock are eligible to vote. The column
entitled "Percentage of Total Voting Stock" shows the percentage of total voting
stock beneficially owned by each listed party.
The number of shares beneficially owned is determined under rules
promulgated by the Securities and Exchange Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
those rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and also any shares which
the individual has the right to acquire within 60 days of October 31, 2003,
through the exercise or conversion of any stock option, convertible security,
warrant or other right. Unless otherwise indicated, each person or entity named
in the table has sole voting power and investment power (or shares that power
with that person's spouse) with respect to all shares of capital stock listed as
owned by that person or entity.
Ownership of Common Stock
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
- -------------------- -------------------- ------------- -----------------
Beneficial Holders
Gabriel M. Cerrone (3)
265E. 66th Street, Suite 16G
New York, NY 10021 .......................... 1,075,000(4) 5.4 5.4
Howard Gittis (5)
35 East 62nd Street
New York, NY 10021 .......................... 1,005,902(6) 5.3 5.3
MacAndrews & Forbes Holdings Inc. (7)
35 East 62nd Street
New York, NY 10021 .......................... 3,618,099(8) 18.4 18.3
Directors and Director Nominees
Donald G. Drapkin (9)
35 East 62nd Street
New York, NY 10021 .......................... 1,798,326(10) 8.9 8.9
Roger Brent, Ph.D 125,712(11)
2168 Shattuck--Floor 2
Berkeley, CA 94704 .......................... * *
Charles Cantor, Ph.D.
c/o Sequenom Inc.
3595 John Hopkins Court
San Diego, CA 92121 ......................... 100,000(12) * *
Thomas E. Constance
919 Third Avenue, 41st Floor
New York, NY 10022 .......................... 253,467(13) * *
Bernard L. Kasten Jr., M.D. 408,801(14)
4690 Parkway Drive
Cincinnati, OH 45040 ........................ 2.2 2.2
10
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
- -------------------- -------------------- ------------- -----------------
Mehmet C. Oz, M.D
177 Fort Washington Ave
New York, NY 10032 .......................... 125,000(15) * *
Eric A. Rose, M.D. (16)
122 East 78th Street
New York, NY 10021 .......................... 790,090(17) 4.1 4.1
Michael A. Weiner, M.D
161 Fort Washington Ave
New York, NY 10032 .......................... 125,000(15) * *
Named Officers
Susan K. Burgess, Ph.D. (18) ................ 427,783(19) 2.3 2.3
Thomas N. Konatich .......................... 395,000(20) 2.1 2.1
Dennis E. Hruby, Ph.D ....................... 325,000(20) 1.7 1.7
All Executive Officers and Directors as a
group (eleven persons) ...................... 4,874,179(21) 21.8 21.7
- ----------
* Less than 1%
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 601, New York, NY 10170.
(2) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire
within 60 days after such date. For purposes of computing the percentage
of outstanding shares held by each person or group of persons named above
on a given date, any security which such person or persons has the right
to acquire within 60 days after such date is deemed to be outstanding for
the purpose of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
(3) Mr. Cerrone is the sole general partner of Panetta Partners Ltd. and, as
such, may be deemed to beneficially own the securities held by Panetta
Partners Ltd. The address of Panetta Partners Ltd. is 265 E. 66th St.
Suite 16G New York, NY 10021.
(4) Includes 1,075,000 shares of Common Stock issuable upon exercise of
options held by Mr. Cerrone, but does not include 141,084 shares of Common
Stock held by Panetta Partners Ltd. or 649,388 shares of Common Stock
issuable upon exercise of warrants held by Panetta Partners Ltd. Panetta
Partners Ltd. holds a warrant (the "Distributor Warrant") to purchase up
to 210,000 shares of Common Stock, a warrant (the "Consulting Warrant") to
purchase up to 303,200 shares of Common Stock, two warrants (the "Panetta
May 2001 Warrants") to purchase an aggregate of up to 121,500 shares of
Common Stock and a warrant (the "Panetta September 2001 Warrant") to
purchase up to 14,688 shares of Common Stock. However, the Distributor
Warrant, the Consulting Warrant, the Panetta May 2001 Warrants and the
Panetta September 2001 Warrant provide that, with certain limited
exceptions, they are not exercisable if, as a result of such exercise, the
number of shares of Common Stock beneficially owned by Panetta Partners
Ltd. and its affiliates, including Mr. Cerrone (other than shares of
Common Stock which may be deemed beneficially owned through the ownership
of the unexercised portion of such Consulting Warrant, Distributor
Warrant, Panetta May 2001 Warrant and/or Panetta September 2001 Warrant),
would exceed 9.99% of the outstanding shares of Common Stock.
(5) Mr. Gittis is a director and Vice Chairman of Mafco Holdings Inc. and
MacAndrews & Forbes.
(6) Includes 745,724 shares of Common Stock, of which 32,250 shares are held
by The Gittis Family Foundation, a charitable foundation, a warrant to
purchase up to 226,087 shares of Common Stock at an exercise price of
$3.4059 per share and a warrant to purchase up to 34,091 shares of Common
Stock at an exercise price of $3.552 per share (the "2001 Gittis
Warrant"). The 2001 Gittis Warrant provides that, within certain limited
exceptions, it is not exercisable if, as a result of such exercise, the
number of shares of Common Stock beneficially owned by Mr. Gittis and his
affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion of
such warrant) would exceed 9.99% of the outstanding shares of Common
Stock. Does not include shares of Common Stock that Mr. Gittis, as a
director and Vice Chairman of Mafco Holdings Inc. and MacAndrews & Forbes,
may be deemed to beneficially own and as to which Mr. Gittis disclaims
beneficial ownership. The business address of the Gittis Family Foundation
is The Gittis Family Foundation, c/o Howard Gittis, 35 East 62nd Street,
New York, New York 10021.
11
(7) MacAndrews & Forbes is a direct wholly-owned subsidiary of Mafco Holdings
Inc., a holding company whose sole stockholder is Ronald O. Perelman.
Pursuant to a securities purchase agreement dated as of August 13, 2003,
MacAndrews & Forbes acquired (i) 682,986 shares of Common Stock and a
warrant to purchase 341,493 shares of Common Stock, and (ii) an option to
purchase (x) up to 6,146,875 shares of Common Stock and (y) a warrant, for
no additional consideration, to purchase a number of shares of Common
Stock equal to 50% of the number of shares described in (ii)(x). On
October 8, 2003, (i) MacAndrews & Forbes exercised of a portion of the
option described above pursuant to which it acquired 1,396,462 shares of
Common Stock and warrants to purchase an aggregate of up to 698,232 shares
of Common Stock, and (ii) assigned a portion of such option to its
affiliate, TransTech Pharma. As a result of such exercise and such
assignment, subject to stockholder approval, (i) MacAndrews & Forbes has
an option to purchase (x) up to 1,278,191 shares of Common Stock and (y)
warrants, for no additional consideration, to purchase a number of shares
of Common Stock equal to 50% of the number of shares described in (i)(x)
and (ii) TransTech Pharma has an option to purchase (x) up to 3,472,222
shares of Common Stock and (y) warrants, for no additional consideration,
to purchase a number of shares of Common Stock equal to 50% of the number
of shares described in (ii)(x).
(8) Includes 1,039,725 shares of Common Stock issuable upon exercise of
warrants. Does not include an aggregate of up to 1,917,286 shares of
Common Stock that may be purchased by MacAndrews & Forbes or an aggregate
of up to 5,208,333 shares of Common Stock that may be purchased by
TransTech Pharma, if approval of SIGA's stockholders is obtained.
(9) Mr. Drapkin is a director and Vice Chairman of Mafco Holdings Inc. and
MacAndrews & Forbes and a director of TransTech Pharma.
(10) Includes 1,125,000 shares of Common Stock issuable upon exercise of
options, shares of Common Stock underlying a warrant to purchase up to
347,826 shares of Common Stock and shares of Common Stock underlying a
warrant to purchase up to 30,500 shares of Common Stock (the "Drapkin
September 2001 Investor Warrant"). However, the Drapkin September 2001
Investor Warrant provides that, with certain limited exceptions, such
warrant is not exercisable if, as a result of such exercise, the number of
shares of Common Stock beneficially owned by Mr. Drapkin and his
affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion of the
Drapkin September 2001 Investor Warrant) would exceed 9.99% of the
outstanding shares of Common Stock. Does not include shares of Common
Stock that Mr. Drapkin, as a director and Vice Chairman of Mafco Holdings
Inc. and MacAndrews & Forbes or as director of TransTech Pharma, may be
deemed to beneficially own and as to which Mr. Drapkin disclaims
beneficial ownership.
(11) Includes 121,250 shares of Common Stock issuable upon exercise of options.
(12) Includes 100,000 shares of Common Stock issuable upon exercise of options.
(13) Includes 12,200 shares issuable upon exercise of warrants and 225,000
shares of Common Stock issuable upon exercise of options.
(14) Includes 1,350 shares of Common Stock issuable upon exercise of warrants
and 100,000 shares of Common Stock issuable upon exercise of options.
(15) Includes 12,500 shares issuable upon exercise of warrants and 100,000
shares issuable upon exercise of options.
(16) Dr. Rose is a director of TransTech Pharma.
(17) Includes 88,610 shares of Common Stock issuable upon exercise of warrants
and 600,000 shares of Common Stock issuable upon exercise of options. Does
not include shares of Common Stock that Dr. Rose, as a director of
TransTech Pharma, may be deemed to beneficially own and as to which Dr.
Rose disclaims beneficial ownership.
(18) Susan K. Burgess, Ph.D. became SIGA's President on May 23, 2003.
(19) Includes 125,000 shares of Common Stock issuable upon exercise of options.
(20) Neither of Messrs. Konatich and Hruby own shares of Common Stock. All
shares listed as beneficially owned by each of Messrs. Konatich and Hruby
are shares issuable upon exercise of stock options.
(21) See footnotes (9), (10), (11), (12), (13), (14), (15), (16), (17), (18),
(19) and (20).
12
Ownership of Series A Preferred Stock
Name and Address of Percentage of Series A
Beneficial Owner Amount of Beneficial Ownership Preferred Shares Outstanding(1)
Alfons Melhon 13,328 18.3%
Frank J. and Mary Ann Loccisano 56,490 77.4%
J. Jay Lobell 3,174 4.3%
- ----------
(1) Percentage of beneficial ownership of Series A Preferred Stock is
calculated based on the assumption that there were 72,992 shares of Series
A Preferred Stock outstanding on October 31, 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 13, 2003, SIGA entered into the Purchase Agreement (as defined
herein) with MacAndrews & Forbes and the August Assignment Agreement (as defined
herein) with MacAndrews & Forbes and certain of its employees (the "Assignees"),
and, on October 8, 2003, SIGA entered into the October Assignment Agreement (as
defined herein) with MacAndrews & Forbes and TransTech Pharma. Pursuant to the
Purchase Agreement, the August Assignment Agreement and the October Assignment
Agreement, (i) MacAndrews & Forbes acquired 2,079,448 shares of Common Stock at
a price of $1.44 per share and warrants, for no additional consideration, to
purchase 1,039,725 shares of Common Stock at an initial exercise price of $2.00
per share, (ii) certain employees of MacAndrews & Forbes acquired an aggregate
of 114,583 shares of Common Stock at a price of $1.44 per share and warrants,
for no additional consideration, to purchase an aggregate of 57,291 shares of
Common Stock at an initial exercise price of $2.00 per share, (iii) MacAndrews &
Forbes acquired an option, subject to the approval of Proposal No. 3 by SIGA's
stockholders, to purchase (x) up to 1,278,191 shares of Common Stock at a price
of $1.44 per share and (y) warrants, for no additional consideration, to
purchase a number of shares of Common Stock equal to 50% of the number of shares
described in (iii)(x) at an initial exercise price of $2.00 per share, and (iv)
TransTech Pharma acquired an option, subject to the approval of Proposal No. 3
by SIGA's stockholders, to purchase (x) up to 3,472,222 shares of Common Stock
at a price of $1.44 per share and (y) warrants, for no additional consideration,
to purchase a number of shares of Common Stock equal to 50% of the number of
shares described in (iv)(x) at an initial exercise price of $2.00 per share. On
October 8, 2003, MacAndrews & Forbes and TransTech Pharma provided SIGA with
notice of their intent to exercise in full their options, described in clauses
(iii) and (iv) above, subject to the approval of Proposal No. 3 by SIGA's
stockholders, to purchase an aggregate of 4,750,413 shares of Common Stock and,
for no additional consideration, warrants to purchase up to an aggregate of
2,375,206 shares of Common Stock. Descriptions of the Purchase Agreement, August
Assignment Agreement and October Assignment Agreement and the transactions
contemplated thereby are set forth under the caption "Description of Proposed
Issuance" in the discussion of Proposal No. 3 in this proxy statement.
Set forth below are descriptions of certain of the investors who are
parties to the Purchase Agreement, the August Assignment Agreement and the
October Assignment Agreement, including such investors' relationships to SIGA
and the other investors, and the nature and amount of such investors' interests
in the transactions contemplated by such agreements:
o Donald G. Drapkin, the Chairman of the Board of Directors, is
a director and Vice Chairman of Mafco Holdings Inc., a holding
company whose sole stockholder is Ronald O. Perelman, and
MacAndrews & Forbes and a director of TransTech Pharma. Mr.
Drapkin may be deemed to beneficially own 1,798,326 shares of
Common Stock. Mr. Drapkin holds an aggregate of 295,000 shares
of Common Stock and may purchase up to an aggregate of
approximately 1,503,326 additional shares of Common Stock
pursuant to the Drapkin Warrants (as defined below) and the
Drapkin Options (as defined below). Mr. Drapkin holds a
warrant (the "Investor Warrant") to purchase up to 347,826
shares of Common Stock at an exercise price of $3.4059 per
share, and a warrant (the "Drapkin September 2001 Investor
Warrant" and, together with the Investor Warrant, the "Drapkin
Warrants") to purchase up to 30,500 shares of Common Stock at
an exercise price of $3.552 per share. The Drapkin September
2001
13
Investor Warrant provides that, with certain limited
exceptions, it is not exercisable if, as a result of such
exercise, the number of shares of Common Stock beneficially
owned by Mr. Drapkin and his affiliates (other than shares of
Common Stock which may be deemed beneficially owned through
the ownership of the unexercised portion of such warrant)
would exceed 9.99% of the outstanding shares of Common Stock.
SIGA may require the Drapkin Warrants to be exercised (subject
to the 9.99% limitation with respect to the Drapkin September
2001 Investor Warrant) if certain conditions set forth in the
Drapkin Warrants have been fulfilled. In addition, Mr. Drapkin
holds options (the "Drapkin Options") pursuant to the Plan to
purchase 1,125,000 shares of Common Stock at an exercise price
of $2.50 per share. Mr. Drapkin beneficially owns
approximately 3.7%, on a fully diluted basis, of the voting
power of TransTech Pharma.
o Howard Gittis is a director and Vice Chairman of Mafco
Holdings Inc. and MacAndrews & Forbes. Mr. Gittis may be
deemed to beneficially own 1,005,902 shares of Common Stock.
Mr. Gittis holds an aggregate of 745,724 shares of Common
Stock and may purchase up to an aggregate of approximately
260,178 additional shares of Common Stock pursuant to the
Gittis Warrants (as defined below). Of these shares, 32,250
are held by The Gittis Family Foundation, a charitable
foundation. Mr. Gittis holds a warrant (the "2000 Gittis
Warrant") to purchase up to 226,087 shares of Common Stock at
an exercise price of $3.4059 per share and a warrant (the
"2001 Gittis Warrant" and, together with the 2000 Gittis
Warrant, the "Gittis Warrants") to purchase up to 34,091
shares of Common Stock at an exercise price of $3.552 per
share. The 2001 Gittis Warrant provides that, within certain
limited exceptions, it is not exercisable if, as a result of
such exercise, the number of shares of Common Stock
beneficially owned by Mr. Gittis and his affiliates (other
than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of such
warrant) would exceed 9.99% of the outstanding shares of
Common Stock. SIGA may require the Gittis Warrants to be
exercised (subject to the 9.99% limitation with respect
to the 2001 Gittis Warrant) if certain conditions set forth in
the Gittis Warrants have been fulfilled. Mr. Gittis
beneficially owns approximately 4.2%, on a fully diluted
basis, of the voting power of TransTech Pharma.
o Matthew A. Drapkin, an Assignee, is the son of Donald G.
Drapkin. On August 13, 2003, Matthew A. Drapkin acquired
(i)(x) 1,389 shares of Common Stock and (y) a warrant, for no
additional consideration, to purchase 695 shares of Common
Stock; and (ii) an option to purchase (x) up to 12,500 shares
of Common Stock at an exercise price of $1.44 per share and
(y) a warrant, for no additional consideration, to purchase a
number of shares of Common Stock equal to 50% of the shares of
Common Stock described in (ii)(x), for a purchase price of
approximately $2,000. On October 14, 2003, Matthew A. Drapkin
exercised his option and purchased (x) 12,500 shares of Common
Stock at a price of $1.44 per share and (y) a warrant, for no
additional consideration, to purchase 6,249 shares of Common
Stock, for an aggregate purchase price of $18,000. Matthew A.
Drapkin beneficially owns less than 1.0%, on a fully diluted
basis, of the voting power of TransTech Pharma.
o TransTech Pharma, an assignee pursuant to the October
Assignment Agreement, is an affiliate of MacAndrews & Forbes.
Ronald O. Perelman beneficially owns approximately 43.8% on a
fully diluted basis of the voting power of TransTech Pharma,
and beneficially owns 100% of the common stock of Mafco
Holdings Inc. Mafco Holdings Inc. beneficially owns 100% of
the common stock of MacAndrews & Forbes. TransTech Pharma is a
privately held drug discovery and development company. In
October 2002, SIGA and TransTech Pharma entered into a drug
discovery collaboration agreement under which TransTech Pharma
is required to collaborate with SIGA on the discovery,
optimization and development of lead compounds to therapeutic
agents. SIGA and TransTech Pharma have agreed to share the
costs of development and revenues generated from licensing and
profits from any commercialized product sales. The agreement
will be in effect until terminated by the parties or upon
cessation of research or sales of all products developed under
the agreement. SIGA is current in all of its obligations under
this agreement. In addition to its collaboration with SIGA,
TransTech Pharma has multi-year, multi-target drug discovery
collaborations with Novo Nordisk A/S and Cephalon, Inc., both
of which have an equity position in TransTech Pharma.
TransTech Pharma is also attempting to develop its own
pre-clinical and clinical pipeline of small molecule drug
candidates.
14
o Dr. Eric A. Rose, a director of SIGA, is a director of
TransTech Pharma. Dr. Rose may be deemed to beneficially own
790,090 shares of Common Stock. Dr. Rose holds an aggregate of
101,480 shares of Common Stock and may purchase up to an
aggregate of approximately 688,610 additional shares of Common
Stock pursuant to the May 2001 Investor Warrant, the September
2001 Rose Investor Warrant and the Rose Options (each as
defined below). Dr. Rose holds a warrant to purchase up to
50,000 shares of Common Stock (the "May 2001 Investor
Warrant"). The May 2001 Investor Warrant is exercisable for a
period of seven years at an exercise price of $2.94 per share.
The May 2001 Investor Warrant provides that, with certain
limited exceptions, it is not exercisable if, as a result of
such exercise, the number of shares of Common Stock
beneficially owned by the holder thereof and its affiliates
(other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised
portion of such warrant) would exceed 9.99% of the outstanding
shares of Common Stock (the "9.99% Limit"). Dr. Rose also
holds a warrant to purchase up to 38,610 shares of Common
Stock (the "September 2001 Rose Investor Warrant"). The
September 2001 Rose Investor Warrant is exercisable for a
period of seven years at an exercise price of $3.552 per share
and contains provisions analogous to the 9.99% Limit described
above; provided, however, that the 9.99% Limit shall not apply
(i) during the existence of a tender offer for the Common
Stock or (ii) at the option of Dr. Rose, on at least 65 days'
advance written notice with respect to the September 2001 Rose
Investor Warrant. In addition, Dr. Rose holds options (the
"Rose Options") pursuant to the Plan to purchase 600,000
shares of Common Stock at an exercise price of $2.50 per
share. Dr. Rose beneficially owns approximately 2.8%, on a
fully diluted basis, of the voting power of TransTech Pharma.
Thomas E. Constance, a director of SIGA, is Chairman of Kramer Levin
Naftalis & Frankel LLP, a law firm in New York City, which SIGA has retained to
provide legal services.
15
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as SIGA's independent auditors to audit the financial statements of SIGA for the
fiscal year ending December 31, 2003, and recommends that stockholders vote for
ratification of this appointment. PricewaterhouseCoopers LLP has audited SIGA's
financial statements since January 1997. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so, and are
expected to be available to respond to appropriate questions. The affirmative
vote of a majority of the total votes cast on such proposal in person or by
proxy at the Annual Meeting will be required to ratify the selection of
PricewaterhouseCoopers LLP.
If the stockholders fail to ratify the selection, the Audit Committee and
the Board of Directors will reconsider its selection of auditors. Even if the
selection is ratified, the Board of Directors, in its discretion, may direct the
appointment of different independent auditors at any time during the year, if it
determines that such change would be in the best interests of SIGA and its
stockholders.
PricewaterhouseCoopers LLP provides SIGA with both audit and non-audit
services. The Audit Committee has reviewed the non-audit activities of the
independent auditors and believes that these activities are compatible with
maintaining the auditor's independence.
Audit Fees
PricewaterhouseCoopers LLP billed SIGA $101,580 and $135,870, in the
aggregate, for professional services rendered by them for each of the fiscal
years ended December 31, 2002 and December 31, 2001, respectively, for the audit
of SIGA's annual financial statements for each of such fiscal years, review of
the interim financial statements included in SIGA's Form 10-QSB filed during
each of such fiscal years and review of SIGA's registration statements on Form
S-3 during the fiscal year ended December 31, 2001.
Audit-Related Fees
PricewaterhouseCoopers LLP billed SIGA $255,690 and $0, in the aggregate,
for professional services rendered by them for assurance and related services
related to the performance of the audit or review of SIGA's financial statements
for each of the fiscal years ended December 31, 2002 and December 31, 2001,
respectively (other than those covered above under "Audit Fees"). The services
rendered by PricewaterhouseCoopers LLP during the fiscal year ended December 31,
2002 comprising the fees for such year related primarily the proposed
acquisition of Allergy Therapeutics Holdings Ltd., which was not consummated.
Tax Fees
PricewaterhouseCoopers LLP did not render any professional services for
tax compliance, tax advice or tax planning during either of the fiscal years
ended December 31, 2002 or December 31, 2001.
All Other Fees
PricewaterhouseCoopers LLP did not provide any products or render any
professional services (other than those covered above under "Audit Fees,"
"Audited Related Fees," and "Tax Fees") during either of the fiscal years ended
December 31, 2002 or December 31, 2001.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION (ITEM 2 OF THE ENCLOSED PROXY CARD) OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS SIGA'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2003.
16
PROPOSAL NO. 3
APPROVAL OF THE ISSUANCE TO MACANDREWS & FORBES, TRANSTECH PHARMA AND CERTAIN
OTHER INVESTORS OF THE TRANCHE C SHARES, THE TRANCHE C WARRANTS AND THE WARRANT
SHARES, WHICH WILL RESULT IN (I) THE ISSUANCE OR POTENTIAL ISSUANCE OF SHARES
REPRESENTING 20% OR MORE OF THE TOTAL NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING BEFORE SUCH ISSUANCE OR (II) A CHANGE OF CONTROL OF SIGA.
Description of Proposed Issuance
Set forth below is a description of the terms and conditions of the
proposed issuance to MacAndrews & Forbes, TransTech Pharma and certain other
investors of the Tranche C Shares, the Tranche C Warrants and the Warrant
Shares, which will result in (i) the issuance or potential issuance of shares
representing 20% or more of the total number of shares of Common Stock
outstanding before such issuance or (ii) the issuance or potential issuance of
shares constituting a change of control of SIGA (the "Proposed Issuance").
THIS DESCRIPTION OF THE PROPOSED ISSUANCE IS INTENDED TO PROVIDE BASIC
INFORMATION CONCERNING SUCH ISSUANCE; HOWEVER, SUCH DESCRIPTION IS NOT A
SUBSTITUTE FOR REVIEWING THE DOCUMENTS RELATING TO THE PROPOSED ISSUANCE. EACH
STOCKHOLDER SHOULD READ SUCH DESCRIPTION IN CONJUNCTION WITH THE DOCUMENTS
RELATING TO THE PROPOSED ISSUANCE THAT ARE ATTACHED AS APPENDICES B THROUGH E
HERETO.
On August 13, 2003, SIGA entered into (i) a securities purchase agreement
(the "Purchase Agreement") with MacAndrews & Forbes, a corporation wholly-owned
by Ronald O. Perelman, the full text of which is attached hereto as Appendix B,
and (ii) an assignment letter agreement (the "August Assignment Agreement") with
MacAndrews & Forbes and certain of its employees. Pursuant to these agreements,
MacAndrews & Forbes and the Assignees invested an aggregate of $1,000,000 in
SIGA in exchange for an aggregate of 694,444 shares of Common Stock at a price
of $1.44 per share (the "Tranche A Shares") and warrants, for no additional
consideration, to purchase up to an aggregate of additional 347,222 shares of
Common Stock at an initial exercise price of $2.00 per share (the "Tranche A
Warrants"). MacAndrews & Forbes and the Assignees were also granted an option,
exercisable through October 13, 2003, and if required, subject to stockholder
approval, to make additional investments in SIGA of up to an aggregate amount of
$9,000,000 in exchange for an aggregate of up to an additional 6,250,000 shares
of Common Stock at a price of $1.44 per share and warrants, for no additional
consideration, to purchase up to an aggregate of an additional 3,125,000 shares
of Common Stock at an initial exercise price of $2.00 per share. The parties
negotiated the price taking into account the then-current market price of Common
Stock.
Pursuant to the Purchase Agreement, on August 13, 2003, MacAndrews &
Forbes acquired from SIGA for an aggregate purchase price of $983,500: (i)
682,986 shares of Common Stock and warrants to purchase 341,493 shares of Common
Stock and (ii) an option to purchase (x) up to 6,146,875 shares of Common Stock
at a price of $1.44 per share and (y) warrants, for no additional consideration,
to purchase a number of shares of Common Stock equal to 50% of the number of
shares described in clause (ii)(x) at an initial exercise price of $2.00 per
share.
Pursuant to the Purchase Agreement and the August Assignment Agreement, on
August 13, 2003, the Assignees acquired from SIGA for an aggregate purchase
price of approximately $16,500: (i) 11,458 shares of Common Stock and warrants
to purchase 5,729 shares of Common Stock, and (ii) an option to purchase (x) up
to 103,125 shares of Common Stock at a price of $1.44 per share and (y)
warrants, for no additional consideration, to purchase shares a number of shares
of Common Stock equal to 50% of the shares of Common Stock described in (ii)(x)
at an initial exercise price of $2.00 per share.
On October 8, 2003, the Assignees provided SIGA with notice of their
intent to exercise their option in full to acquire from SIGA, for an aggregate
purchase price of $148,500, 103,125 shares of Common Stock (the "Assignee
Tranche B Shares") and warrants to purchase 51,562 shares of Common Stock (the
"Assignee Tranche B Warrants"), and, on October 14, 2003, the transactions
contemplated by such exercise were consummated.
17
On October 8, 2003, pursuant to an assignment agreement (the "October
Assignment Agreement"), the full text of which is attached hereto as Appendix C,
MacAndrews & Forbes assigned a portion of the option granted to it pursuant to
the Purchase Agreement to its affiliate, TransTech Pharma, such that TransTech
Pharma acquired an option to purchase (x) up to 3,472,222 shares of Common Stock
at a price of $1.44 per share and (y) warrants, for no additional consideration,
to purchase a number of shares of Common Stock equal to 50% of the number of
shares described in (x) at an initial exercise price of $2.00 per share.
Immediately thereafter, MacAndrews & Forbes provided SIGA with notice of its
intent to exercise a portion of its option to acquire from SIGA, for an
aggregate purchase price of $2,010,905, 1,396,462 shares of Common Stock (the
"M&F Tranche B Shares" and together with the Tranche A Shares and the Assignee
Tranche B Shares, the "Tranche A&B Shares") and warrants to purchase an
aggregate of up to 698,232 shares of Common Stock (the "M&F Tranche B Warrants"
and together with the Tranche A Warrants and the Assignee Tranche B Warrants,
the "Tranche A&B Warrants"), and, on October 14, 2003, the transactions
contemplated by such exercise were consummated.
On October 8, 2003, MacAndrews & Forbes and TransTech Pharma also provided
SIGA with notice of their intent to exercise their options in full, subject to
stockholder approval, to acquire from SIGA an aggregate of 4,750,413 shares of
Common Stock at a price of $1.44 per share (the "Tranche C Shares") and
warrants, for no additional consideration, to purchase up to an aggregate of
2,375,206 shares of Common Stock at an initial exercise price of $2.00 per share
(the "Tranche C Warrants"). In accordance with and subject to the terms and
conditions of the Purchase Agreement and the October Assignment Agreement, if
stockholder approval is obtained, (i) MacAndrews & Forbes will acquire from
SIGA, for an aggregate purchase price $1,840,595, 1,278,191 shares of Common
Stock at a price of $1.44 per share and warrants to purchase up to an additional
639,095 shares of Common Stock at an initial exercise price of $2.00 per share,
and (ii) TransTech Pharma will acquire from SIGA, for an aggregate purchase
price of $5,000,000, 3,472,222 shares of Common Stock and warrants to purchase
up to an additional 1,736,111 shares of Common Stock, on the same terms.
Appointment of Directors Designated by MacAndrews & Forbes and TransTech Pharma
Terms and Conditions of Appointment
In accordance with and subject to the terms and conditions of the Purchase
Agreement and the October Assignment Agreement, SIGA has agreed to use its
reasonable best efforts to appoint to its Board of Directors one individual
designated by MacAndrews & Forbes and one individual designated by TransTech
Pharma at such time as MacAndrews & Forbes and TransTech Pharma shall have
invested an aggregate of at least $5,000,000 in SIGA, and for so long as, with
respect to the individual designated by MacAndrews & Forbes, MacAndrews &
Forbes, together with its affiliates (other than TransTech Pharma), beneficially
owns at least 1,700,000 shares of Common Stock and, with respect to the
individual designated by TransTech Pharma, TransTech Pharma together with its
affiliates (other than MacAndrews & Forbes or its officers or affiliates),
beneficially owns at least 1,700,000 shares of Common Stock. In connection
therewith, MacAndrews & Forbes has advised SIGA that it intends to designate
Paul G. Savas, and TransTech Pharma has advised SIGA that it intends to
designate Adnan M. M. Mjalli, Ph.D., as each of their respective designees for
director of SIGA. Assuming MacAndrews & Forbes and TransTech Pharma make the
required investments described above, SIGA intends to cause Mr. Savas and Dr.
Mjalli to be elected to the Board of Directors.
Biographical Information of Director Designees
The following table sets forth biographical information of each of Paul G.
Savas and Adnan M. M. Mjalli, Ph.D., including their ages, data on their
business backgrounds and the names of public companies and other selected
entities for which they serve as directors:
Name Age Position
---- --- --------
Paul G. Savas 40 None
Adnan M. M. Mjalli, Ph.D. 40 None
Paul G. Savas is the individual whom MacAndrews & Forbes has advised SIGA
that it intends to designate for appointment as a director of SIGA at such time
as MacAndrews & Forbes and TransTech Pharma shall have invested an aggregate of
at least $5,000,000 in SIGA, and for so long as MacAndrews & Forbes, together
with its
18
affiliates (other than TransTech Pharma), beneficially owns at least 1,700,000
shares of Common Stock. Mr. Savas has been Senior Vice President - Finance of
MacAndrews & Forbes and various of its affiliates since October 2002 and was
Vice President of MacAndrews & Forbes from 1998 to 2002. Mr. Savas beneficially
owns less than 1.0% of the voting power of TransTech Pharma.
Adnan M. M. Mjalli, Ph.D. is the individual whom TransTech Pharma has
advised SIGA that it intends to designate for appointment as a director of SIGA
at such time as MacAndrews & Forbes and TransTech Pharma shall have invested an
aggregate of at least $5,000,000 in SIGA, and for so long as TransTech Pharma,
together with its affiliates (other than MacAndrews & Forbes or its officers or
affiliates), beneficially owns at least 1,700,000 shares of Common Stock. From
1999 to the present, Dr. Mjalli has served as Chief Executive Officer and a
director of TransTech Pharma, a corporation which he founded. He also currently
serves as Chairman of the Board of PharmaCore, Inc. which provides chemical
building blocks and custom synthesis services to the pharmaceutical industry.
Dr. Mjalli previously served as President and Chief Executive Officer of
PharmaCore from December of 1998 to November 2000. Dr. Mjalli obtained his Ph.D.
in medicinal chemistry in 1989 from the University of Exeter, UK. His
postdoctoral work was carried out at the University of Rochester. Dr. Mjalli
beneficially owns approximately 20.1% of the voting power of TransTech Pharma.
Security Ownership of Director Designees
The following tables set forth certain information regarding the
beneficial ownership of SIGA's voting securities as of October 31, 2003 for each
director designee of MacAndrews & Forbes and TransTech. The number of shares
beneficially owned is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under those rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within 60 days of October 31, 2003, through the exercise or
conversion of any stock option, convertible security, warrant or other right.
Unless otherwise indicated, each person or entity named in the table has sole
voting power and investment power (or shares that power with that person's
spouse) with respect to all shares of capital stock listed as owned by that
person or entity.
Amount of Common Percentage of Percentage of
Name and Address of Stock Beneficialy Common Stock Total Voting
Beneficial Owner Owned (1) Outstanding Stock Outstanding
- ------------------- ----------------- ------------- -----------------
Paul G. Savas
c/o MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
New York, NY 10021........................... 26,042 (2) * *
Adnan M. M. Mjalli, Ph.D. (3)
c/o TransTech Pharma
4710 Mendenhall Oaks Pky #110
High Point, NC 27265......................... 0 (4) * *
- ----------
* Less than 1%
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire
within 60 days after such date. For purposes of computing the percentage
of outstanding shares held by each person or group of persons named above
on a given date, any security which such person or persons has the right
to acquire within 60 days after such date is deemed to be outstanding for
the purpose of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
(2) On August 13, 2003, Mr. Savas acquired, for an aggregate purchase price of
$2,500, (i)(x) 1,736 shares of Common Stock and (y) a warrant, for no
additional consideration, to purchases 868 shares of Common Stock; and
(ii) an option to purchase (x) up to 15,625 shares of Common Stock at an
exercise price of $1.44 per share and (y) a warrant, for no additional
consideration, to purchase a number of shares of Common Stock equal to 50%
of the shares of Common
19
Stock described in (ii) (x) at an initial exercise price of $2.00 per
share. On October 14, 2003, Mr. Savas exercised such option pursuant to
which he acquired, for an aggregate purchase price of $22,500, (x) 15,625
shares of Common Stock at a price of $1.44 per share and (y) a warrant,
for no additional consideration, to purchase 7,813 shares of Common Stock
at an initial exercise price of $2.00 per share.
(3) Dr. Mjalli is the Chief Executive Officer and a director of TransTech
Pharma.
(4) Does not include shares of Common Stock that Dr. Mjalli, as the Chief
Executive Officer and a director of TransTech Pharma, may be deemed to
beneficially own and as to which Dr. Mjalli disclaims beneficial
ownership.
Registration Rights
In connection with the Purchase Agreement, the August Assignment Agreement
and the October Assignment Agreement, SIGA, MacAndrews & Forbes, the Assignees
and TransTech Pharma have entered into a registration rights agreement (the
"Registration Rights Agreement"), the full text of which is attached hereto as
Appendix D, pursuant to which SIGA is required to file a "shelf" registration
statement covering the resale of certain shares of Common Stock held by
MacAndrews & Forbes, the Assignees and TransTech Pharma. In addition, in certain
instances, the holder of such shares has two "demand rights" to require SIGA to
file a registration statement covering certain shares of Common Stock held by
such holder, provided, among other conditions, the anticipated aggregate
offering price in each demand registration shall be at least $5,000,000. The
holder of such shares also has unlimited "piggyback" registration rights with
respect to certain shares of Common Stock that it holds, subject to certain
limitations. In addition, in certain instances, the holder has rights to demand
registration on Form S-3, provided, among other conditions, that the anticipated
aggregate offering price in each such registration shall be at least $500,000.
SIGA has certain limited rights to postpone shelf registrations and demand
registrations. All of the Tranche A Shares and the shares of Common Stock
underlying the Tranche A Warrants issued to MacAndrews & Forbes and the
Assignees were registered pursuant to a Registration Statement on Form S-3 of
SIGA, which was declared effective by the Securities and Exchange Commission on
September 22, 2003.
Interests of Certain Investors in the Proposed Issuance.
A description of interests of certain of the investors participating in
the transactions contemplated by the Purchase Agreement, the August Assignment
Agreement and the October Assignment Agreement, including the Proposed Issuance,
is set forth under the caption "Certain Relationships and Related Transactions"
under the discussion of Proposal No. 1 in this proxy statement.
Approval by the Board of Directors of the Proposed Issuance
Special Committee Formed to Evaluate Proposal
On July 10, 2003, the Board of Directors held a meeting at which Donald G.
Drapkin, Thomas E. Constance, Mehmet C. Oz, M.D., Michael A. Weiner, M.D., Eric
A. Rose, M.D., Roger Brent, Ph.D., Charles Cantor, Ph.D. and Bernard L. Kasten
Jr., M.D. were present either in person or by telephone. At such meeting, Mr.
Drapkin summarized the basic terms and conditions of the Purchase Agreement, as
initially proposed by MacAndrews & Forbes (the "Initial Proposal"). At the
meeting, Mr. Drapkin advised the Board of Directors of his relationship with
MacAndrews & Forbes and Mafco Holdings Inc., including, without limitation, his
status as director and Vice Chairman of each of such entities. Mr. Drapkin then
recused himself from all further discussions of such proposal by the Board of
Directors and left the meeting. The remaining directors created a special
committee of the Board of Directors (the "Special Committee") to evaluate the
Initial Proposal and make a recommendation to the Board of Directors. The
Special Committee consisted of Roger Brent, Ph.D., Charles Cantor, Ph.D.,
Bernard L. Kasten Jr., M.D., Mehmet C. Oz, M.D., Eric A. Rose. M.D. and Michael
A. Weiner, M.D. At the meeting, the Special Committee retained the law firm of
Kramer Levin Naftalis & Frankel LLP, a law firm of which Thomas Constance is
chairman, as counsel to the Special Committee ("Committee Counsel").
Engagement of Financial Advisor
At the meeting of the Special Committee held on July 10, 2003, Committee
Counsel advised the Special Committee that, in anticipation of the Initial
Proposal, Committee Counsel had contacted several investment banking firms to
assist the Board of Directors or Special Committee, as appropriate, in its
evaluation of such
20
proposal. The Special Committee authorized Committee Counsel to review the
proposals received from certain of such financial advisors, interview, as
appropriate, such financial advisors and negotiate an engagement letter with
respect to the retention by SIGA and the Special Committee of a financial
advisor.
In accordance with and subject to the terms and conditions of a letter
agreement, dated July 16, 2003 (the "Engagement Letter"), SIGA and the Special
Committee engaged Sutter Securities ("Sutter") to render an opinion to SIGA and
the Special Committee as to the fairness of the Proposed Issuance, from a
financial point of view, to SIGA's stockholders. SIGA and the Special Committee
retained Sutter based upon their understanding of Sutter's experience in
fairness opinions and valuations, mergers and acquisitions, public and private
financings and corporate restructurings.
Pursuant to the Engagement Letter, SIGA agreed to pay Sutter a fee in the
amount of $100,000 in exchange for Sutter's services in rendering an opinion to
SIGA and the Special Committee as to the fairness of the Proposed Issuance, from
a financial point of view, to SIGA's stockholders, plus reasonable out-of-pocket
expenses incurred by Sutter in connection therewith. In addition, SIGA agreed to
indemnify and hold harmless Sutter and its affiliated entities, directors,
officers, employees, legal counsel and controlling persons, within the meaning
of the federal securities laws, from and against certain liabilities arising
from such services.
On July 23, 2003, at a meeting of the Special Committee at which Charles
Cantor, Ph.D., Mehmet C. Oz, M.D., Eric A. Rose, M.D. and Michael A. Weiner,
M.D. were present, either in person or by telephone, Committee Counsel advised
the Special Committee of its negotiations with Sutter, and the Special Committee
approved the engagement of Sutter as financial advisor and approved the
execution and delivery of the Engagement Letter with Sutter by SIGA and the
Special Committee. At such meeting, Sutter made a presentation to the Special
Committee regarding the fairness, from a financial point of view, of the Initial
Proposal, including, among other things, a review of the terms and conditions of
the Initial Proposal and a comparison of such terms and conditions to similar
transactions recently completed. Sutter suggested certain modifications to the
Initial Proposal. The Special Committee then authorized Committee Counsel to
negotiate modifications to the Initial Proposal with respect to the treatment of
certain expenses, warrant coverage and cashless exercise and early call
provisions of the warrants contemplated by the Initial Proposal.
Negotiations and Revisions to Initial Proposal
On July 25, 2003, at a meeting of the Special Committee at which Roger
Brent, Ph.D., Charles Cantor, Ph.D., Mehmet C. Oz, M.D., Eric A. Rose, M.D. and
Michael A. Weiner, M.D. were present, either in person or by telephone,
Committee Counsel summarized the negotiations with MacAndrews & Forbes regarding
the Initial Proposal and reported that Committee Counsel had requested that,
among other things, (i) SIGA not be required to pay the legal expenses of
MacAndrews & Forbes, (ii) the warrant coverage be reduced, (iii) the proposed
warrants not be subject to cashless exercise, (iv) the exercise period of the
proposed warrants be shortened and (v) the price of the shares of common stock
and the exercise price of the proposed warrants be increased. Committee Counsel
further reported that, as a result of the negotiations, MacAndrews & Forbes
provided a revised version of the Initial Proposal, reflecting a reduction of
warrant coverage and certain concessions on expense reimbursement (the "Revised
Proposal"). The Revised Proposal was then summarized and provided to the Special
Committee.
Fairness Opinion of Financial Advisor
At the meeting of the Special Committee held on July 25, 2003, Sutter
summarized the substance of the opinion to be rendered to the Special Committee
and delivered an executed copy of its opinion which stated that, based on
certain assumptions made, matters considered and the review undertaken by
Sutter, the transactions contemplated by the Revised Proposal, which included
the Proposed Issuance, were fair, from a financial point of view, to SIGA's
stockholders (the "Fairness Opinion"). The full text of the Fairness Opinion is
attached to this proxy statement as Appendix E.
Sutter provided the Fairness Opinion for the information and assistance of
SIGA and the Special Committee in connection with their consideration of the
Revised Proposal. The Fairness Opinion is not a recommendation as to how any
stockholder should vote at the Annual Meeting and each stockholder is encouraged
to read the Fairness Opinion carefully in its entirety for a description of the
assumptions made, matters considered and limitations on the
21
review undertaken. The summary of the Fairness Opinion set forth herein is
qualified in its entirety by reference to the full text of the Fairness Opinion.
In the course of Sutter's analysis for rendering the Fairness Opinion,
among other things, Sutter did the following:
o reviewed SIGA's Annual Reports on Form 10-KSB for the fiscal
years ended December 31, 2000 through December 31, 2002, and
SIGA's Quarterly Report on Form 10-QSB for the period ended
March 31, 2003;
o reviewed certain operating and financial information,
including projections relating to SIGA's business and
prospects, provided to it by SIGA's management;
o met with certain members of SIGA's management to discuss
SIGA's operations, historical financial statements and future
prospects;
o visited SIGA's facilities in Corvallis, Oregon;
o reviewed the historical market prices and trading volume for
shares of Common Stock;
o reviewed publicly available data with respect to recent
private placements of equity by companies which Sutter deemed
generally comparable to SIGA; and
o conducted such other studies, analyses, inquiries and
investigations as Sutter deemed appropriate.
In the course of its analysis for rendering the Fairness Opinion, Sutter
relied upon, and assumed the accuracy and completeness of, the financial and
other information provided to it by SIGA. Sutter assumed that SIGA's projected
financial results had been reasonably prepared on a basis reflecting the best
currently available estimates and judgment of the management of SIGA. Sutter did
not assume any responsibility for the information or projections provided to it
by SIGA and further relied upon the assurance of the management of SIGA that it
was unaware of any facts that would have made the information or projections
provided to it incomplete or misleading. Sutter did not perform or obtain any
independent appraisals of SIGA's properties or assets, including, without
limitation, the quality or strength of SIGA's intellectual property portfolio.
The Fairness Opinion was based on economic, market and other conditions and the
information made available to Sutter, as of the date thereof, July 25, 2003.
As noted above, in the course of its analysis for rendering the Fairness
Opinion, Sutter considered financial projections that were prepared by SIGA's
management. As a matter of course, SIGA does not publicly disclose financial
projections. SIGA's financial projections were based on, among other things,
market conditions as they existed at July 23, 2003, and did not take into
account any circumstances or events occurring after such date. In addition,
factors such as industry performance, general business, economic, regulatory,
market and financial conditions, as well as changes to the business, financial
condition or results of operation of SIGA could cause the financial projections
or the underlying assumptions to be inaccurate, potentially in materially
adverse ways, and the actual results to differ materially from those projected.
The Fairness Opinion speaks only as of July 25, 2003, which is the date
the Revised Proposal was approved by the Special Committee and the Board of
Directors (as discussed below). Sutter has not revised or reaffirmed the
Fairness Opinion in connection with the Proposed Issuance, including to reflect
any circumstances or events that have occurred since such date.
No material relationship existed between Sutter and SIGA or any of its
affiliates, no such relationship has since developed and no such relationship is
mutually understood to be contemplated. No limitations were imposed by SIGA or
the Special Committee upon Sutter with respect to the investigations made or
procedures followed by it in rendering the Fairness Opinion.
Approval of Revised Proposal
At the meeting of the Special Committee held on July 25, 2003, after
considering and discussing the Revised Proposal and the Fairness Opinion, the
Special Committee voted to recommend that the full Board of Directors
22
accept the Revised Proposal. At a subsequent meeting of the Board of Directors
held on the same day, at which Roger Brent, Ph.D., Charles Cantor, Ph.D., Thomas
E. Constance, Mehmet C. Oz, M.D., Eric A. Rose, M.D. and Michael A. Weiner,
M.D., were present either in person or by telephone, Dr. Rose, Acting Chairman
of the Special Committee, (i) summarized the process that the Special Committee
had undertaken in evaluating the Revised Proposal; (ii) advised the Board of
Directors of the negotiations and resulting changes in the Revised Proposal from
those set forth in the Initial Proposal; (iii) summarized the process that
Sutter had undertaken in rendering its Fairness Opinion; and (iv) advised the
Board of Directors that the Special Committee had received the Fairness Opinion
from Sutter. The Special Committee advised the Board of Directors that it voted
to recommend that the full Board of Directors accept the Revised Proposal.
After discussing the Revised Proposal, the Board of Directors voted to
accept the Revised Proposal and authorized, empowered and directed the officers
of SIGA to negotiate and finalize and execute and deliver the Revised Proposal,
the Purchase Agreement and the related definitive documentation, and to issue or
reserve for issuance, as appropriate, the required number of shares of SIGA to
be issued or reserved for issuance by the Purchase Agreement and such other
definitive documentation, in the name and on behalf of SIGA, together with such
changes and additions as the officer executing the same, with and upon advice of
counsel, deemed necessary or appropriate.
In August 2003, the Audit Committee of the Board of Directors resolved
that, notwithstanding Mr. Drapkin's relationship with MacAndrews & Forbes and
Mafco Holdings Inc., the transactions contemplated by the Revised Proposal did
not present a potential conflict of interest for SIGA.
Reasons for Proposed Issuance
In early 2002, SIGA's management and Board of Directors recognized SIGA's
need to raise additional funds in order to continue its research and development
and initiate its clinical programs. SIGA's management and Board of Directors met
with individuals from a number of companies and institutions in the investment
field to discuss SIGA's need for funds. In light of the market conditions in
early 2002, SIGA determined that it was unlikely that SIGA would be able to
obtain the funds it needed from such companies and institutions or be able to
raise funds in an aggregate amount sufficient to provide the resources needed
for its longer-term development efforts. As a result, SIGA determined that its
most viable option to obtain funds for its immediate needs was to obtain such
funds through private placements of its securities. Between September 2002 and
June 2003, SIGA completed three private placements resulting in gross proceeds
in an aggregate amount of $4,407,500. In July 2003, the opportunity to enter
into the Purchase Agreement became available. SIGA determined that completion of
the transactions contemplated by the Purchase Agreement, including the Proposed
Issuance, would provide SIGA with the funds necessary to carry out its research
and development activity and begin clinical studies with respect to its leading
product candidates. After extensive discussions of the terms and conditions of
the Purchase Agreement, consideration of the absence of alternative financing or
other strategic prospects and receipt of the Fairness Opinion from Sutter, the
Board of Directors approved the Purchase Agreement and the transactions
contemplated thereby, including the Proposed Issuance.
SIGA entered into the Purchase Agreement to obtain funds for (i) research
and development of SIGA's leading product candidates, including a smallpox
anti-viral, a broad spectrum anti-infective and a SARS anti-viral, (ii) the
pursuit of growth opportunities and (iii) general corporate purposes. SIGA
estimates that the net proceeds from the transactions contemplated by the
Purchase Agreement, including the prior issuances of the Tranche A&B Shares and
the Tranche A&B Warrants and the issuance of the Tranche C Shares and the
Tranche C Warrants, if approved by SIGA's stockholders, will be approximately
$9.5 million, after deducting expenses. Of these net proceeds, SIGA anticipates
using approximately $6.5 million for research and development and an aggregate
of approximately $3.0 million for the pursuit of growth opportunities and
general corporate purposes. SIGA estimates that the net proceeds from the
issuance of the Tranche C Shares and the Tranche C Warrants alone, if approved
by SIGA's stockholders, will be approximately $6.6 million, after deducting
expenses. Of these net proceeds, SIGA anticipates using approximately $4.6
million for research and development and an aggregate of approximately $2.0
million for the pursuit of growth opportunities and general corporate purposes.
23
Potential Effects of Proposed Issuance
Dilution
As of October 31, 2003, MacAndrews & Forbes held 2,578,374 shares of
Common Stock and warrants to purchase 1,039,725 shares of Common Stock and the
Assignees held an aggregate of 114,583 shares of Common Stock and warrants to
purchase an aggregate of 57,291 shares of Common Stock. As a result of the
proposed issuance, if approved by SIGA's stockholders, (i) MacAndrews & Forbes
will hold 3,856,565 shares of Common Stock and warrants to purchase 1,678,820
shares of Common Stock, (ii) TransTech Pharma will hold an aggregate of
3,472,222 shares of Common Stock and warrants to purchase an aggregate of
1,736,111 shares of Common Stock and (iii) MacAndrews & Forbes, TransTech Pharma
and the Assignees will hold in the aggregate 7,443,370 shares of Common Stock
and warrants to purchase an aggregate of up to 3,472,222 shares of Common Stock.
As a result of the proposed issuance to MacAndrews & Forbes and TransTech
Pharma of the Tranche C Shares and Tranche C Warrants, if approved by SIGA's
stockholders, up to an additional 4,750,413 shares of Common Stock and warrants
to purchase an additional 2,375,206 shares of Common Stock will be issued and
outstanding, and, if all of the warrants held by MacAndrews & Forbes, TransTech
Pharma and the Assignees are fully exercised, the number of shares of Common
Stock that will be issued and outstanding would increase substantially. The
issuance of such additional shares and any adjustments to the exercise price of
the warrants as a result of anti-dilution protection provisions contained
therein will significantly dilute the ownership interests and proportionate
voting power of the existing stockholders. Such dilution could result in a
reduction of SIGA's per share earnings.
Effect of Actual or Potential Future Exercise Below Market Price
The issuance of the Tranche C Shares, if approved by SIGA's stockholders,
would substantially increase the number of shares of Common Stock that SIGA may
issue below the current market price of the Common Stock. The issuance of shares
of Common Stock upon exercise of the Tranche C Warrants, including without
limitation, shares of Common Stock issuable as a result of anti-dilution
protection provisions contained therein (the "Tranche C Warrant Shares"), if
approved by SIGA's stockholders, and the issuance of additional shares of Common
Stock resulting from anti-dilution protection provisions contained in the
Tranche A&B Warrants, upon exercise of the Tranche A&B Warrants (the "Tranche
A&B Warrant Shares" and together with the Tranche C Warrant Shares, the "Warrant
Shares"), if approved by SIGA's stockholders, could have a depressive effect on
the market price of, and reduce trading activity in, the Common Stock by
increasing the amount of shares of Common Stock outstanding. Such downward
pressure could encourage short sales by certain investors, which could place
further downward pressure on the price of the Common Stock.
Certain Purchasers May Become Significant Shareholders
Upon the issuance of the Tranche C Shares and the Warrant Shares, if
approved by SIGA's stockholders, MacAndrews & Forbes, TransTech Pharma and the
Assignees could collectively become significant stockholders and as such, could
have significant voting power with respect to their shares. As a result, these
stockholders or potential stockholders, as the case may be, may be able to
affect the outcome of matters brought before the stockholders, including,
without limitation, a vote for the election of directors, the approval of
mergers and other business combination transactions.
MacAndrews & Forbes and TransTech Pharma's Right to Designate Directors
In accordance with and subject to the terms and conditions of the Purchase
Agreement and the October Assignment Agreement, SIGA has agreed to use its
reasonable best efforts to appoint to its Board of Directors one individual
designated by MacAndrews & Forbes and one individual designated by TransTech
Pharma at such time as MacAndrews & Forbes and TransTech Pharma shall have
invested an aggregate of at least $5,000,000 in SIGA, and for so long as, with
respect to the individual designated by MacAndrews & Forbes, MacAndrews &
Forbes, together with its affiliates (other than TransTech Pharma), beneficially
owns at least 1,700,000 shares of Common Stock and, with respect to the
individual designated by TransTech Pharma, TransTech Pharma together with its
affiliates (other than MacAndrews & Forbes or its officers or affiliates),
beneficially owns at least 1,700,000 shares of Common Stock. In connection
therewith, MacAndrews & Forbes has advised SIGA that it intends to designate
24
Paul G. Savas, and TransTech Pharma has advised SIGA that it intends to
designate Adnan M. M. Mjalli, Ph.D., as each of their respective designees for
director of SIGA. Assuming MacAndrews & Forbes and TransTech Pharma make the
required investments described above, SIGA intends to cause Mr. Savas and Dr.
Mjalli to be elected to the Board of Directors.
Description of Securities
Common Stock
Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor, subject to any preferential dividend rights of any
outstanding shares of Preferred Stock. Upon the liquidation, dissolution or
winding up of SIGA, the holders of Common Stock are entitled to receive ratably
the net assets of SIGA available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which SIGA may designate and
issue in the future.
Series A Preferred Stock
Holders of Series A Preferred Stock are entitled to (i) cumulative
dividends at the annual rate of 6% payable when and if declared by the Board of
Directors; (ii) in the event of liquidation of SIGA, receive $1.4375 per share
(subject to certain adjustments) plus all accrued but unpaid dividends; (iii)
convert each share of Series A Preferred Stock to a number of fully paid and
non-assessable shares of Common Stock as calculated by dividing $1.4375 by the
conversion price of $1.4375 per share (subject to certain adjustments); and (iv)
vote with the holders of other classes of shares on an as converted basis.
Warrants
As of the date hereof, SIGA has issued to MacAndrews & Forbes and the
Assignees warrants to purchase up to an aggregate of 1,097,016 shares of Common
Stock and, subject to the approval of SIGA's stockholders, will issue to
MacAndrews & Forbes and TransTech Pharma additional warrants to purchase up to
an aggregate of 2,375,206 shares of Common Stock. SIGA has reserved an
equivalent number of shares of Common Stock for issuance upon exercise of these
warrants. The warrants may be exercised until the seventh anniversary of the
date of such issuance. The initial exercise price applicable to the warrants
will be $2.00 per share. The warrants may be exercised, in whole or in part, on
a cashless basis. The warrants contain provisions that protect their holders
against dilution by adjustment of the exercise price and number of shares
issuable upon exercise on the occurrence of specific events, such as stock
dividends or other changes in the number of SIGA's outstanding shares except for
shares issued under certain circumstances, including, without limitation,
pursuant to a public offering or an employee stock option plan or stock
incentive plan. No holder of these warrants will possess any rights as a
stockholder unless the warrants are exercised. The holders of the warrants will
be entitled to certain registration rights to register the shares underlying the
warrants as set forth in the Registration Rights Agreement.
Stockholder Approval Required
The Common Stock is listed on The Nasdaq SmallCap Market and as a result,
SIGA is subject to the rules of the NASD. Rule 4350(i)(1)(D) of the NASD
requires an issuer to obtain stockholder approval in connection with a
transaction other than a public offering involving: (i) the sale, issuance or
potential issuance by the issuer of common stock (or securities convertible into
or exercisable for Common Stock) at a price less than the greater of book or
market value which together with sales by officers, directors or substantial
shareholders of the company equals 20% or more of common stock or 20% or more of
the voting power outstanding before the issuance; or (ii) the sale, issuance or
potential issuance by the company of common stock (or securities convertible
into or exercisable common stock) equal to 20% or more of the common stock or
20% or more of the voting power outstanding before the issuance for less than
the greater of book or market value of the stock. In addition, Rule
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4350(i)(1)(B) of the NASD requires an issuer of stock to obtain stockholder
approval prior to the issuance of designated securities when the issuance or
potential issuance will result in a change of control of the issuer.
The issuance to MacAndrews & Forbes and TransTech Pharma of the Tranche C
Shares and the Tranche C Warrants, together with prior issuances to MacAndrews &
Forbes and the Assignees of the Tranche A&B Shares and the Tranche A&B Warrants,
assuming immediate exercise of all of such warrants, would result in an issuance
of approximately 68.5% of shares of Common Stock outstanding prior to the
issuance of such securities. Moreover, as a result of certain anti-dilution
protection provisions contained in all of such warrants, there is no limit on
the aggregate number of shares of Common Stock that could be issued upon
exercise thereof and any issuance upon such exercise, together with the issuance
of the shares of Common Stock described above, could result in an issuance of
more than 68.5% of shares of Common Stock outstanding prior to the issuance
thereof.
Since the proposed issuance of the Tranche C Shares and the Tranche C
Warrants, together with the prior issuance of the Tranche A&B Shares and the
Tranche A&B Warrants, and the potential issuance of shares of Common Stock upon
exercise of all such warrants, would result in an issuance of more than 20% of
the shares of Common Stock outstanding before such issuance and such issuances
would result in a change in control of SIGA, the proposed issuance of the
Tranche C Shares, the Tranche C Warrants and the Warrant Shares must be approved
by a majority of the total votes cast on such proposal in person or by proxy at
the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL (ITEM 3 OF THE ENCLOSED PROXY CARD) OF THE ISSUANCE OF THE TRANCHE C
SHARES, TRANCHE C WARRANTS, AND THE WARRANT SHARES, WHICH WILL RESULT IN (I) THE
ISSUANCE OR POTENTIAL ISSUANCE OF SHARES REPRESENTING 20% OR MORE OF THE TOTAL
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING BEFORE SUCH ISSUANCE OR (II) A
CHANGE OF CONTROL OF SIGA.
26
PROPOSAL NO. 4
APPROVAL OF AN AMENDMENT TO THE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES OF
COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 7,500,000 SHARES TO
10,000,000 SHARES
The SIGA Technologies, Inc. 1996 Incentive and Non-Qualified Stock Option
Plan was initially adopted in 1996 and was subsequently amended in 1998, 1999
and 2000 to increase the number of shares of Company Stock with respect to which
awards may be granted thereunder. An amendment and restatement of such plan was
adopted by the Board of Directors on May 3, 2001 and was further refined by the
Board of Directors on June 29, 2001, which amendment and restatement, among
other things, renamed such plan the "SIGA Technologies, Inc. Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan." The amendment and
restatement of such plan was approved by SIGA's stockholders at an annual
meeting on August 15, 2001.
An aggregate of 7,500,000 shares of Common Stock have been reserved for
issuance under the Plan. As of October 31, 2003, options to purchase an
aggregate of 6,913,811 shares of Common Stock had been issued under the Plan.
Accordingly, as of October 31, 2003, 586,189 shares remained available for
issuance under the Plan.
In November 2003, the Board of Directors approved an amendment to the Plan
to increase the maximum number of shares of Common Stock available for issuance
thereunder from 7,500,000 shares to 10,000,000 shares. Such amendment shall
become effective upon approval of this Proposal No. 4 by SIGA's stockholders.
The Board of Directors believes that increasing the maximum number of
shares of Common Stock available for issuance under the Plan from 7,500,000
shares to 10,000,000 is in the best interests of SIGA and its stockholders. The
proposed amendment to the Plan reflects the Board of Directors' determination
that ensuring the continued availability of a sufficient number of options
available for grant under the Plan is important to SIGA's ongoing and continuing
efforts to attract and retain key senior management personnel and to increase
the interest of executive officers of SIGA in the success of SIGA's business.
The following summary is qualified in its entirety by reference to the
Plan, a copy of which is attached hereto as Appendix F.
Description of the Plan
The purposes of the Plan are to attract and retain the best available
personnel, to provide an additional incentive to SIGA's employees, consultants
and non-employee directors and to promote the success of SIGA's business.
The Plan provides that it is to be administered by a committee appointed
by the Board of Directors, comprised of "non-employee directors" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside
directors" within the meaning of Section 162(m) of the Code. The Board of
Directors has appointed the Compensation Committee to administer the Plan.
However, with respect to the non-employee members of the Board of Directors and
any individuals that are not reasonably expected to be "covered employees" under
Section 162(m) of the Code or in any other situation that the Board of Directors
elects, the entire Board of Directors may act as the Compensation Committee. The
Compensation Committee designates the persons to receive options, the number of
shares subject to each option and the terms of the options, including the
option's price and period of exercisability, subject to certain limitations and
as permitted by the Plan.
The maximum number of shares of Common Stock currently available for
issuance under the Plan is 7,500,000 shares, subject to adjustment in the event
of stock splits, stock dividends, mergers, consolidations and the like. Shares
of Common Stock subject to options granted under the Plan that expire or
terminate are available for options to be issued under the Plan. The Plan
provides that no individual may be granted options with respect to more than
4,900,000 shares in any calendar year.
27
Eligibility
Options may be granted to (i) officers and salaried employees of SIGA and
its subsidiaries (including salaried employees who are also directors and
prospective salaried employees conditioned on their becoming salaried
employees), (ii) members of the Board of Directors, (iii) such consultants to
SIGA as the Compensation Committee shall select in its sole discretion and (iv)
any other key persons, as determined by the Compensation Committee in its sole
discretion. For this purpose, an employee means an individual who is (or is
expected to be) classified as an employee of SIGA for purposes of SIGA's
payroll. The granting of Options is discretionary, and SIGA cannot determine the
number or type of Options that will be granted in the future to any particular
person or group. The Plan provides that non-employee directors may be granted
options in the discretion of the Board of Directors.
Options
The Plan provides for the grant of (i) stock options not intended to
qualify as incentive stock options within the meaning of Section 422 of the Code
("NQSOs") and (ii) stock options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code ("ISOs" and together with
NQSOs, the "Options"). Each Option shall be evidenced by an "Option Agreement"
containing such terms and conditions as the Compensation Committee shall
determine.
Non-Qualified Stock Options. The exercise price-per-share of each NQSO
shall be determined by the Compensation Committee on the date of grant, but
shall not be less than that required by law. Each Option Agreement shall set
forth the vesting schedule for the Option. Unless the Option Agreement provides
for pre-vesting exercise, as described below, an NQSO first shall become
exercisable when, and to the extent that, it is vested, and shall remain
exercisable until the tenth anniversary of the date the NQSO was granted. The
exercise price shall be paid in cash or, unless provided otherwise in the
applicable Option Agreement, in shares of Common Stock valued at their fair
market value on the date of exercise or by means of a cashless exercise in which
some or all of the shares to be granted upon the exercise are sold to provide
the exercise price, or, at the discretion of the Compensation Committee, by such
other provision as the Compensation Committee may from time to time prescribe.
In addition, SIGA, in its sole discretion, may lend, with full recourse, the
exercise price to the participant or guarantee a loan from a third party to the
participant.
The following treatment applies to NQSOs in the event of a participant's
termination of employment, unless the Option Agreement provides otherwise: To
the extent that the option was not exercisable at the time of termination, it
shall expire at the close of business (the commencement of business in the case
of a termination for Cause, as defined in the Plan) on the date of termination.
To the extent that the option was exercisable at the time of termination, it
shall expire on the earlier of the expiration of its term and (i) 90 days after
the termination of employment, if the termination was any reason other than
"Cause," "Disability" (as defined in the Plan) or death and (ii) one year after
the termination of employment if the termination was by reason of Disability or
death. In the case of a termination of employment for Cause, the option shall
expire as of the commencement of business of the effective date of the
termination.
Incentive Stock Options. Generally, ISOs are options that may provide a
participant with certain federal income tax benefits that are not available with
NQSOs, provided that the participant holds the shares acquired upon exercise of
the ISO for at least two years after the date the ISO is granted and at least
one year after the exercise date. The rules for ISOs under the Plan are the same
as with respect to NQSOs, except as follows:
1. ISOs may only be granted to employees.
2. The exercise price-per-share of each ISO must be at least the
fair market value of a share of Common Stock on the date on
which such ISO is granted.
3. An ISO granted to any individual who owns stock possessing
more than ten percent of the total combined voting power of
all classes of stock of SIGA is subject to the following
additional limitations: (i) the exercise price-per-share of
the ISO must be at least 110% of the fair market
28
value of a share of Common Stock at the time any such ISO is
granted and (ii) the ISO cannot be exercisable after the
expiration of five years from the grant date.
4. The aggregate fair market value (determined on the grant date)
of shares of Common Stock with respect to which ISOs are
exercisable for the first time by a participant during any
calendar year under the Plan or any other plan of SIGA or its
subsidiaries may not exceed $100,000.
Reload Options. The Plan provides that in certain circumstances, the
Compensation Committee may include in an Option Agreement evidencing an option
(the "Original Option") a provision that a "reload option" shall be granted to
the participant if such participant delivers shares of Common Stock in partial
or full payment of the exercise price of the Original Option. The reload option
will relate to a number of shares of Common Stock equal to the number of shares
of Common Stock delivered, and will have an exercise price-per-share equal to
the fair market value of a share of Common Stock on the date of the exercise of
the Original Option.
Pre-Vesting Exercise. The Plan provides that the Compensation Committee,
in an Option Agreement, may permit a participant to exercise an ISO or NQSO
before it is vested. The shares of Common Stock that the participant receives
upon such pre-vesting exercise will be subject to certain restrictions. The
participant may not transfer the shares until they vest and if the participant's
employment with SIGA terminates for any reason, any unvested shares will be
forfeited and SIGA will repay the exercise price to the participant.
Transferability of Options
Options granted under the Plan are exercisable during the participant's
lifetime only by the participant and are not transferable by the participant,
other than by will or the laws of descent and distribution.
Forfeiture of Gain in Certain Events
The Plan provides that if, within one year after a participant exercises
an Option, the Compensation Committee determines in its discretion that SIGA has
been materially harmed by the participant, whether such harm (a) results in the
participant's termination of employment for Cause or (b) results from any
activity of the participant determined by the Compensation Committee to be in
competition with any activity of SIGA, or otherwise inimical, contrary or
harmful to SIGA's interests (including, but not limited to, accepting employment
with or serving as a consultant, adviser or in any other capacity to an entity
that is in competition with or acting against SIGA's interests), then any gain
realized by the participant from the exercise shall be paid by the participant
to SIGA upon notice from SIGA. Such gain shall be determined as of the date of
exercise, without regard to any subsequent change in the Fair Market Value of a
share of Company Stock. SIGA shall have the right to offset such gain against
any amounts otherwise owed to the participant by SIGA (whether as wages,
vacation pay, or pursuant to any benefit plan or other compensatory
arrangement).
Certain Corporate Changes
The Plan provides for an adjustment in the number of shares of Common
Stock available to be issued under the Plan and the number of shares of Common
Stock subject to existing options upon any change in SIGA's capitalization,
stock dividend or split, reverse stock split, merger, consolidation, combination
or exchange of shares and certain other similar events.
Amendment and Termination
The Board of Directors may suspend, discontinue, revise or amend the Plan
at any time and in any respect, subject to stockholder approval to the extent
necessary to comply with applicable law and listing requirements. Generally, no
amendment to the Plan may reduce a participant's rights under any previously
granted Option without the participant's prior written consent.
29
Limitations Imposed by Section 162(m)
If and to the extent that the Compensation Committee determines that
SIGA's federal tax deduction in respect of an Option may be limited as a result
of Section 162(m) of the Code, the Compensation Committee may delay payments to
the participant with respect to the option and, in exchange, the Compensation
Committee shall credit to an account on the books and records of SIGA a cash
amount equal to the fair market value of the shares of Common Stock subject to
such option (a "Book Account"). The amounts credited to the Book Account will be
paid to the participant within thirty days after the date the compensation paid
to the participant no longer is subject to the deduction limitation under
Section 162(m) of the Code.
Summary of Federal Tax Consequences
The following description of the principal federal income tax consequences
of Options under the Plan is based on present federal tax laws. Federal tax laws
may change from time to time and any legislation that may be enacted in the
future by the United States Congress may significantly affect the federal income
tax consequences described below. No representation is or can be made regarding
whether any such legislation will or may be enacted and/or the impact of any
such legislation. The description below does not purport to be a complete
description of the tax consequences associated with Options under the Plan
applicable to any particular award recipient. Differences in each individual's
financial situation may cause federal, state and local tax consequences of
awards to vary.
Non-Qualified Stock Options. In general, an optionee will not be deemed to
receive any income at the time an NQSO is granted, nor will SIGA be entitled to
a federal tax deduction at that time.
When an optionee exercises an NQSO, other than a pre-vesting exercise, the
optionee will recognize ordinary compensation income equal to the excess of (a)
the fair market value on the exercise date of the Common Stock received as a
result of such exercise over (b) the option exercise price, and SIGA will be
entitled to a tax deduction in that amount. The shares acquired by the optionee
upon exercise of the NQSO will have a tax basis equal to the fair market value
of the shares on the exercise date. Upon any subsequent sale of the Common Stock
received on exercise of the NQSO, the optionee will recognize a capital gain (or
loss) in an amount equal to the difference between the amount realized on the
sale and such tax basis. Any such gain (or loss) will be characterized as
long-term capital gain (or loss) if the shares have been held for more than one
year; otherwise, the gain (or loss) will be characterized as a short-term
capital gain (or loss). An optionee's holding period for federal income tax
purposes for such shares will commence on the date following the date of
exercise. Short-term capital gain is subject to tax at the same rate as is
ordinary income. Under current law, the rate at which net long-term capital gain
will be taxed will vary depending on how long the optionee held the Shares after
exercising the option. The Code currently provides that, in general, the net
long-term capital gain resulting from the sale of shares held for more than 12
months is subject to tax at a maximum rate of 15% (5% for individuals in the 10%
or 15% tax bracket). The Code currently provides that the tax rate on net
long-term capital gain will change in future years: The 15% rate will increase
to 20% in 2009 and the 5% rate will decrease to 0% in 2008 and then increase to
10% in 2009.
If all or any part of the exercise price of an NQSO is paid by the
optionee with shares of Common Stock (including, based upon proposed regulations
under the Code, shares previously acquired upon exercise of an ISO), no gain or
loss will be recognized by the optionee on the shares surrendered in payment.
The number of shares received on such exercise of the NQSO equal to the number
of shares surrendered will have the same tax basis and holding period, for
purposes of determining whether subsequent dispositions result in long-term or
short-term capital gain or loss and the applicable tax rates, as the basis and
holding period of the shares surrendered. The balance of the shares received on
such exercise will be treated for federal income tax purposes as described in
the preceding paragraph as though issued upon the exercise of the NQSO for an
exercise price equal to the consideration, if any, paid by the optionee in cash.
The optionee's compensation taxable as ordinary income upon such exercise, and
SIGA's deduction, will not be affected by whether the exercise price is paid in
cash or in shares of Common Stock.
Pre-Vesting Exercise of an NQSO. If an optionee exercises an NQSO before
it is vested, the optionee will not recognize any income and SIGA will not
receive a tax deduction until such time as the shares are no longer subject to a
substantial risk of forfeiture or restrictions on transferability (unless, as
described below, the recipient elects otherwise under Section 83(b) of the Code
within 30 days of the date of exercise). Upon lapse or release of such
restrictions (i.e., when the shares vest), the optionee generally will include
in gross income an amount equal to the
30
fair market value of the shares at the time they vested, less the exercise price
paid for them, and SIGA will be entitled to a tax deduction in the same amount.
The optionee's tax basis in the shares will equal their fair market value on the
date the shares vested. Any gain or loss upon a subsequent disposition of the
shares will be long-term capital gain or loss if the shares are held for more
than one year and otherwise will be short-term capital gain or loss. The federal
tax rate applicable to any long-term capital gain will depend upon the holding
period of the shares, as described above.
Pursuant to Section 83(b) of the Code, an optionee who exercises an option
before it is vested may, within 30 days of exercise, elect to be taxed at
ordinary income tax rates on the fair market value at the time of exercise of
the Common Stock acquired through the pre-vesting exercise. If the election is
made, the optionee will acquire a tax basis in the shares equal to the ordinary
income recognized by the optionee at the time of award plus any amount paid for
the shares, and SIGA will be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the optionee. No income will be
recognized upon lapse or release of the restrictions. Any gain or loss upon a
subsequent disposition of the shares will be long-term capital gain or loss if
the shares are held for more than one year and otherwise will be short-term
capital gain or loss. The federal tax rate applicable to any long-term capital
gain will depend upon the holding period of the shares. In the event of a
forfeiture of the shares with respect to which an optionee previously made a
Section 83(b) election, the optionee will not be entitled to a loss deduction,
unless the amount the optionee received upon forfeiture was less than the
exercise price the optionee previously paid for such stock.
Incentive Stock Options. In general, an optionee will not be deemed to
receive any income at the time an ISO is granted or exercised if the optionee
does not dispose of the shares acquired on exercise of the ISO within two years
after the grant of the ISO and one year after the exercise of the ISO (discussed
more fully in the next paragraph). In such a case, the gain (if any) on a
subsequent sale (the excess of the amount received over the exercise price) or
loss (if any) on a subsequent sale (the excess of the exercise price over the
amount received) will be a long-term capital gain or loss and will be subject to
tax based on the holding period of the shares, as described in the discussion of
NQSOs above. However, for purposes of computing the "alternative minimum tax"
applicable to an optionee, the optionee will include in the optionee's
alternative minimum taxable income the amount the optionee would have included
in income if the ISO were an NQSO. Such amount may be subject to an alternative
minimum tax of 26% or 28%. Similarly, for purposes of making alternative minimum
tax calculations, the optionee's basis in the stock received on the exercise of
an ISO will be determined as if the ISO were an NQSO.
If an optionee sells the shares acquired on exercise of an ISO within two
years after the date of grant of the ISO or within one year after the exercise
of the ISO, the disposition is a "disqualifying disposition," and the optionee
will recognize income in the year of the disqualifying disposition equal to the
excess of the amount received for the shares over the exercise price. Of that
income, the portion equal to the excess of the fair market value of the shares
at the time the ISO was exercised over the exercise price will be treated as
compensation to the optionee, taxable as ordinary income, and the balance (if
any) will be long- or short- term capital gain depending on whether the shares
were sold more than one year after the ISO was exercised. If the shares were
acquired through a pre-vesting exercise of the ISO, the portion of the income
that is treated as compensation to the optionee, taxable as ordinary income, is
the excess of the fair market value of the shares at the time they vested over
the exercise price and the balance (if any) will be long- or short-term capital
gain. The federal tax rate applicable to any long-term capital gain will depend
upon the holding period of the shares, as described above. If the optionee sells
the shares in a disqualifying disposition at a price that is below the exercise
price, the loss will be a short-term capital loss if the optionee has held the
shares for one year or less and otherwise will be a long-term capital loss.
If an optionee uses shares acquired upon the exercise of an ISO to
exercise an ISO, and the sale of the shares so surrendered for cash on the date
of surrender would be a disqualifying disposition of such shares, the use of
such shares also would constitute a disqualifying disposition. In such case,
proposed regulations under the Code appear to provide that the tax consequences
described above with respect to disqualifying dispositions would apply, except
that no capital gain would be recognized with respect to such disqualifying
disposition. In addition, the basis of the surrendered shares would be allocated
to the shares acquired upon exercise of the ISO, and the holding period of the
shares so acquired would be determined, in a manner prescribed in proposed
regulations under the Code.
SIGA is not entitled to a deduction as a result of the grant or exercise
of an ISO. If the optionee has compensation taxable as ordinary income as a
result of a disqualifying disposition, SIGA will be entitled to a
31
deduction in an amount equal to the compensation income resulting from the
disqualifying disposition in the taxable year of SIGA in which the disqualifying
disposition occurs.
Deduction Limit under Section 162(m) of the Code. In general, Section
162(m) of the Code (the "Million-Dollar Limit") provides that, subject to
certain exceptions, remuneration in excess of $1 million that is paid to certain
"covered employees" of a publicly held corporation (generally, the corporation's
Chief Executive Officer and its four most highly compensated employees other
than the Chief Executive Officer) will not be deductible by the corporation.
Grants of options generally will be eligible for an exception to the
Million-Dollar Limit applicable to certain qualified "performance-based
compensation." In addition, the Plan permits the Compensation Committee to defer
payments to covered employees until such individuals are no longer covered
employees with respect to the Section 162(m) limitations. Consequently, it would
appear that SIGA's deduction for such amounts would be preserved.
Withholding of Taxes. Whenever a participant is required to recognize
compensation income taxable as ordinary income in connection with an Option,
SIGA may be obligated to withhold amounts for the payment of federal, state and
local taxes. SIGA may withhold (i) an amount in cash sufficient to satisfy its
withholding obligations (when the income is recognized through the receipt of
cash) or (ii) a number of shares, the fair market value of which is sufficient
to satisfy such withholding requirements. Additionally, SIGA may require that
the participant remit to SIGA an amount in cash sufficient to satisfy SIGA's
withholding obligations. At the election of the participant and subject to the
approval of the Compensation Committee, the participant may satisfy any such
withholding obligations by remitting to SIGA shares of Common Stock with a fair
market value sufficient to satisfy the withholding obligations.
Other Tax Matters. Tax consequences different from or in addition to those
described above may result in the event of an exercise of an option after the
termination of a participant's employment by reason of death. In addition,
various state laws may provide for tax consequences that vary significantly from
those described above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL (ITEM 4 OF THE
ENCLOSED PROXY CARD) OF THE AMENDMENT TO THE PLAN TO INCREASE THE MAXIMUM NUMBER
OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 7,500,000
SHARES TO 10,000,000 SHARES.
32
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 2004 Annual Meeting of
Stockholders, for inclusion in SIGA's proxy statement and form of proxy relating
to that meeting, must be received by SIGA at its offices in New York, New York,
addressed to the Secretary, not later than ______ __, 2004. Such proposals must
comply with SIGA's By-Laws and the requirements of Regulation 14A of the
Securities Exchange Act of 1934 (the "Exchange Act").
In addition, Rule 14a-4 of the Exchange Act governs SIGA's use of its
discretionary proxy voting authority with respect to a stockholder proposal that
is not addressed in the proxy statement. With respect to SIGA's 2004 Annual
Meeting of Stockholders, if SIGA is not provided notice of a stockholder
proposal prior to September 27, 2004, SIGA will be allowed to use its
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
SECTION 16 BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires SIGA's officers and directors,
and persons who own more than ten percent of a registered class of SIGA's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than
ten-percent stockholders are required by Securities and Exchange Commission
regulation to furnish SIGA with copies of all Section 16(a) reports that they
file.
Based solely upon review of the copies of such reports furnished to SIGA
and written representations from certain of SIGA's executive officers and
directors that no other such reports were required, SIGA believes that during
the fiscal year ended December 31, 2002, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with on a timely basis, except that Mr. Konatich belatedly
filed in March 2003 a Form 5 due in January 2003.
OTHER MATTERS
At the date of this proxy statement, management was not aware that any
matters not referred to in this proxy statement would be presented for action at
the Annual Meeting. If any other matters should come before the Annual Meeting,
the persons named in the accompanying proxy will have discretionary authority to
vote all proxies in accordance with their best judgment, unless otherwise
restricted by law.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas N. Konatich
Secretary
Dated: November __, 2003
33
APPENDIX A
SIGA TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER __, 2003
The undersigned hereby appoints Thomas N. Konatich and Dennis E. Hruby
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of SIGA Technologies, Inc.
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of SIGA Technologies, Inc. to be held at the offices of Kramer
Levin Naftalis & Frankel LLP, 919 Third Avenue, 37th Floor, New York, New York
10022, on _____, December __, 2003 at 9:00 a.m. (local time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL NO. 1 AND FOR PROPOSAL NO. 2, PROPOSAL NO. 3 AND
PROPOSAL NO. 4, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE NOMINEES LISTED BELOW.
1. To elect eight directors.
|_| FOR all nominees below (except as authority is withheld below)
|_| WITHHOLD AUTHORITY to vote for all nominees below
NOMINEES: Donald G. Drapkin Roger Brent Charles Cantor Thomas E. Constance
Bernard L. Kasten Jr. Eric A. Rose Mehmet C. Oz Michael A. Weiner
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE(S)' NAME(S)
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL NO. 2.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of SIGA Technologies, Inc. for the fiscal year ending
December 31, 2003.
|_| FOR |_| AGAINST |_| ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL NO. 3.
3. To approve the issuance to MacAndrews & Forbes Holdings Inc., TransTech
Pharma, Inc. and certain other investors of the Tranche C Shares, the
Tranche C Warrants and the Warrant Shares, which will result in (i) the
issuance or potential issuance of shares representing 20% or more of the
total number of shares of Common Stock outstanding before such issuance or
(ii) a change of control of SIGA.
|_| FOR |_| AGAINST |_| ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL NO. 4.
4. To approve an amendment to the SIGA Technologies, Inc. Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan")
to increase the maximum number of shares of Common Stock available for
issuance under the Plan from 7,500,000 shares to 10,000,000 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT MAY BE REVOKED
PRIOR TO ITS EXERCISE.
RECEIPT OF NOTICE OF THE ANNUAL MEETING AND PROXY STATEMENT IS HEREBY
ACKNOWLEDGED, AND THE TERMS OF THE NOTICE AND PROXY STATEMENT ARE HEREBY
INCORPORATED BY REFERENCE INTO THIS PROXY. THE UNDERSIGNED HEREBY REVOKES ALL
PROXIES HERETOFORE GIVEN FOR SAID MEETING OR ANY AND ALL ADJOURNMENTS,
POSTPONEMENTS AND CONTINUATIONS THEREOF.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
Address Change? Mark Box |_|
Indicate Changes Below:
___________________________________________________
Dated: ________________, 2003
___________________________________________________
___________________________________________________
SIGNATURE(S)
2
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN
THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF SIGNER IS
A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED
OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
3
APPENDIX B
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August
13, 2003, by and between SIGA Technologies, Inc., a Delaware corporation (the
"Company"), and MacAndrews & Forbes Holdings Inc., a Delaware corporation (the
"Purchaser"). Certain terms used and not otherwise defined in the text of this
Agreement are defined in Section 1 of this Agreement.
W I T N E S S E T H
WHEREAS, the Company desires to issue and to sell to the Purchaser, and
the Purchaser desires to purchase from the Company, the Shares (as hereinafter
defined) and the Warrants (as hereinafter defined), all in accordance with the
terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms defined
in this Section 1 shall have the meanings specified for all purposes of this
Agreement. Except as otherwise expressly provided, all accounting terms used in
this Agreement, whether or not defined in this Section 1, shall be construed in
accordance with GAAP.
"Affiliate" means, with respect to any specified Person, (i) any
other Person 50% or more of whose outstanding voting securities are, directly or
indirectly, owned, controlled or held with the power to vote by such specified
Person or (ii) any other Person, directly or indirectly, controlling, controlled
by or under direct or indirect common control with such specified Person. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person by virtue of ownership of voting securities, by contract
or otherwise.
"Aggregate Purchase Price" means, for each tranche, the Per Share
Purchase Price multiplied by the Shares to be purchased and sold in such
tranche.
"Agreed Allocation" has the meaning assigned to it in Section 3(c)
hereof.
"Agreement" means this Agreement.
"Balance Sheet" has the meaning assigned to it in Section 5.6
hereof.
"Benefit Plans" has the meaning assigned to it in Section 5.19(a)
hereof.
"Board of Directors" means the board of directors of the Company.
"Certifications" has the meaning assigned to it in Section 5.7
hereof.
"Closing" has the meaning assigned to it in Section 4(a) hereof.
"Closing Date" has the meaning assigned to it in Section 4(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning assigned to it in Section 2 hereof.
"Company" has the meaning assigned to it in the introductory
paragraph of this Agreement.
"Company Intellectual Property" has the meaning assigned to it in
Section 5.9(a) hereof.
"Company Recommendation" has the meaning assigned to it in Section
7.3 hereof.
"Company Recommendation Change" has the meaning assigned to it in
Section 7.3 hereof.
"Confidentiality Letter Agreement" has the meaning assigned to it in
Section 7.5(a) hereof.
"Encumbrances" has the meaning assigned to it in Section 5.4 hereof.
"ERISA" has the meaning assigned to it in Section 5.19(a) hereof.
"ERISA Affiliate" has the meaning assigned to it in Section 5.19(a)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FDA" has the meaning assigned to it in Section 5.22 hereof.
"FDCA" has the meaning assigned to it in Section 5.22 hereof.
"Financial Statements" has the meaning assigned to it in Section 5.6
hereof.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Entity" means any national, federal, state, municipal,
local, territorial, foreign or other government or any department, commission,
board, bureau, agency, regulatory authority or instrumentality thereof, or any
court, judicial, administrative or arbitral body or public or private tribunal.
"Intellectual Property" means trademarks, service marks, trade
names, Internet domain names, designs, logos, slogans, and general intangibles
of like nature, together with all goodwill, registrations and applications
related to the foregoing (collectively, "Trademarks"); patents and industrial
designs (including any continuations, divisionals, continuations-in-part,
renewals, reissues, and applications for any of the foregoing); copyrights
(including any registrations and applications for any of the foregoing) and all
content and information contained on any website; Software; "mask works" (as
defined under 17 USC ss. 901) and any registrations and applications for "mask
works;" and technology, trade secrets and other confidential information,
know-how, inventions, proprietary processes, formulae, algorithms, models, and
methodologies (collectively, "Trade Secrets").
"Knowledge of the Company" has the meaning assigned to it in Section
5.9(c) hereof.
"Knowledge of the Company's Subsidiaries" has the meaning assigned
to it in Section 5.9(c) hereof.
"Life Science Product" has the meaning assigned to it in Section
5.22 hereof.
"M & F Representatives" has the meaning assigned to it in Section
7.7(a) hereof.
"Material Adverse Effect" has the meaning assigned to it in Section
5.1 hereof.
"NASD Rule 4350" has the meaning assigned to it in Section 4(c)
hereof.
"Notification Period" has the meaning assigned to it in Section 7.12
hereof.
"Option Notice" has the meaning assigned to it in Section 3(b)
hereof.
5
"Per Share Purchase Price" has the meaning assigned to it in Section
3(a) hereof.
"Permitted Transferee" has the meaning assigned to it in Section
10.5 hereof.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, Governmental Entity or other entity.
"Preferred Stock" has the meaning assigned to it in Section 5.3(a)
hereof.
"Proxy Statement" has the meaning assigned to it in Section 7.2
hereof.
"Purchaser" has the meaning assigned to it in the introductory
paragraph of this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement in the form attached hereto as Exhibit B.
"Required Stockholder Approval" has the meaning assigned to it in
Section 5.5 hereof.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC Documents" has the meaning assigned to it in Section 5.7
hereof.
"Securities" has the meaning assigned to it in Section 2 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" has the meaning assigned to such term in Section 2 hereof.
"Software" means any and all (a) computer programs, including any
and all software implementation of algorithms, models and methodologies, whether
in source code or object code form, (b) computerized databases and compilations,
including any and all data and collections of data, and (c) all documentation,
including user manuals and training materials, relating to any of the foregoing.
"Stockholders' Meeting" has the meaning assigned to it in Section
7.3 hereof.
"Subsidiary" means, with respect to any Person, any corporation,
association trust, limited liability company, partnership, joint venture or
other business association or entity (i) at least 50% of the outstanding voting
securities of which are at the time owned or controlled directly or indirectly
by such Person or (ii) with respect to which the Company possesses, directly or
indirectly, the power to direct or cause the direction of the affairs or
management of such Person.
"Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, severance, stamp, occupation,
premium, windfall profits, customs, duties, franchise, withholding, social
security, unemployment, real property, personal property, sales, use, transfer,
value added, estimated or other tax of any kind whatsoever, including any
interest, penalties or additions thereto.
"Tax Return" means any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tranche A" has the meaning assigned to it in Section 3(a) hereof.
"Tranche A Shares" has the meaning assigned to it in Section 3(a)
hereof.
"Tranche A Warrants" has the meaning assigned to it in Section 3(a)
hereof.
6
"Tranche B" has the meaning assigned to it in Section 3(b) hereof.
"Tranche B Closing" has the meaning assigned to it in Section 4(c)
hereof.
"Tranche B Closing Date" has the meaning assigned to it in Section
4(c) hereof.
"Tranche B Shares" has the meaning assigned to it in Section 3(b)
hereof.
"Tranche B Warrants" has the meaning assigned to it in Section 3(b)
hereof.
"Transaction Documents" has the meaning assigned to it in Section
5.1 hereof.
"Unaudited Balance Sheets" has the meaning assigned to it in Section
5.6 hereof.
"Unaudited Financial Statements" has the meaning assigned to it in
Section 5.6 hereof.
"Warrants" has the meaning assigned to it in Section 2 hereof.
"Warrant Shares" has the meaning assigned to it in Section 2 hereof.
2. Authorization of the Securities. The Company has authorized, subject to
compliance with NASD Rule 4350, (i) the issuance and sale of an aggregate of up
to 6,944,444 shares (the "Shares") of its common stock, par value $0.0001 per
share (the "Common Stock"), (ii) the issuance of warrants (the "Warrants") to
purchase an aggregate of up to 3,472,222 shares of Common Stock and (iii) the
reservation for issuance, and issuance upon exercise of the Warrants, of up to
3,472,222 Warrant Shares (as defined in this Section 2). The Warrants will have
the rights, preferences and privileges set forth in the form of Warrant attached
hereto as Exhibit A. The shares of Common Stock that may be purchased upon
exercise of the Warrants are sometimes referred to herein as the "Warrant
Shares." The Shares, the Warrants, and the Warrant Shares are sometimes referred
to herein collectively as the "Securities."
3. Sale and Purchase of the Securities. Upon the terms and subject to the
conditions contained herein:
(a) The Company shall sell to the Purchaser, and the Purchaser shall
purchase from the Company, in the first tranche ("Tranche A"), (i) 694,444
Shares (the "Tranche A Shares"), at a purchase price of $1.44 per share
(appropriately adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock dividend, stock distribution or
similar event, the "Per Share Purchase Price"), and (ii) for no additional
consideration, Warrants to purchase 347,222 Warrant Shares (the "Tranche A
Warrants").
(b) At the Purchaser's option, exercisable at any time and from time
to time within 60 days of the date hereof (or, if such day is not a business
day, then the next immediately following business day), upon five business days'
written notice (the "Option Notice"), subject to the conditions set forth in
Section 8 hereof, the Company shall sell to the Purchaser, and the Purchaser
shall purchase from the Company, in the second tranche ("Tranche B") (i) up to
6,250,000 Shares (the "Tranche B Shares"), at the Per Share Purchase Price and
(ii) for no additional consideration, a pro rata number of Warrants to purchase
up to 3,125,000 Warrant Shares (the "Tranche B Warrants")
(c) The Company will not make any allocation of such Per Share
Purchase Price between the Shares and the Warrants without the Purchaser's
concurrence thereto in writing (the "Agreed Allocation") and shall prepare and
file all Tax Returns on a basis consistent with the Agreed Allocation and shall
take no position inconsistent with the Agreed Allocation in any proceeding
before any taxing authority or for any other Tax purpose, unless otherwise
required to do so by applicable law.
7
4. Closings.(a) The closings (each, a "Closing") of the sales to, and
purchases by, the Purchaser of the Shares and the Warrants shall occur at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New
York, New York 10036-6522, on the third business day after the satisfaction or
waiver of all of the conditions to such Closing set forth in Section 8 hereof or
at such other time and place as the Company and the Purchaser may agree (each, a
"Closing Date").
(b) On the date hereof, the Company shall deliver to the Purchaser
one or more certificates evidencing the (x) Tranche A Shares and (y) Tranche A
Warrants, each of which shall be in such denominations as shall be specified in
writing by the Purchaser and shall be registered in the name of the Purchaser or
a Permitted Transferee, against delivery to the Company of the Aggregate
Purchase Price for such Tranche A Shares (the Tranche A Warrants to be issued
for no additional consideration), payable by delivery of a certified or official
bank check or by wire transfer of immediately available funds to an account that
the Company is designating in writing to the Purchaser on the date hereof.
(c) At each Closing, if any, constituting all or a portion of the
Tranche B (the "Tranche B Closing"), which shall occur, subject to the terms and
conditions contained herein, no more than five business days following delivery
of an Option Notice (the "Tranche B Closing Date"), the Company shall deliver to
the Purchaser one or more certificates evidencing the applicable number of (x)
Tranche B Shares set forth in the applicable Option Notice and (y) Tranche B
Warrants to purchase the applicable number of Warrant Shares set forth in the
applicable Option Notice, each of which shall be in such denominations as shall
be specified in the Option Notice by the Purchaser and shall be registered in
the name of the Purchaser or a Permitted Transferee, against delivery to the
Company of the Aggregate Purchase Price for such Tranche B Shares (the Tranche B
Warrants to be issued for no additional consideration), payable by delivery of a
certified or official bank check or by wire transfer of immediately available
funds to an account that the Company will designate in writing to the Purchaser
at least two business days prior to the applicable Tranche B Closing Date;
provided, however, that in the event the number of Shares and Warrants to be
issued at a Tranche B Closing would, when aggregated with all other Shares and
Warrants previously issued to the Purchaser, exceed the number of Shares and
Warrants permitted to be issued by the Company without stockholder approval
pursuant to Nasdaq MarketPlace Rule 4350, as amended from time to time ("NASD
Rule 4350"), then, first, such number of Shares and Warrants as may be issued
without the Required Stockholder Approval (as defined herein) shall be issued on
the Tranche B Closing Date, and, second, immediately following receipt of the
Required Stockholder Approval of such issuance, such number of Shares and
Warrants shall be issued such that following such Closing, the aggregate number
of Shares and Warrants issued in Tranche B shall equal the aggregate number of
Securities specified in all Option Notices; provided, further, that the
Purchaser may elect in the Option Notice that the Tranche B Closing shall only
take place, if at all, immediately following receipt of the Required Stockholder
Approval; provided, further, that in the event the Purchaser makes such an
election, it may at any time elect to amend its Option Notice to reduce the
number of Shares and Warrants to be purchased and sold in Tranche B so at to
obviate the need for the Required Stockholder Approval.
5. Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as follows:
5.1 Organization. The Company (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(b) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the nature of the property owned or leased
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing
would not, individually or in the aggregate, reasonably be likely to have a
Material Adverse Effect, (c) has its principal place of business and chief
executive office at 420 Lexington Avenue, Suite 601, New York, New York 10170,
and (d) has the requisite corporate power and authority to own or lease and
operate its assets and carry on its business as presently being conducted. For
purposes of this Agreement, "Material Adverse Effect" shall mean any material
adverse effect on (i) the Securities, (ii) the ability of the Company to perform
its obligations under this Agreement, the Warrants or the Registration Rights
Agreement (collectively, the "Transaction Documents"), or (iii) the financial
condition, properties, assets, liabilities, business or operations of the
Company and its Subsidiaries, taken as a whole.
8
5.2 Authorization; Enforceability. The Company has the requisite
corporate power and authority to enter into this Agreement and the other
Transaction Documents to which it is a party. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents to which it is a party, and the consummation by the Company of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of the Company, subject to compliance
with NASD Rule 4350. This Agreement has been duly and validly executed and
delivered by the Company and, when executed, each other Transaction Document to
which it is a party will be duly and validly executed and delivered by the
Company, and, assuming due and valid execution and delivery by the Purchaser,
constitute or will constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with their respective terms,
subject to laws of general application relating to bankruptcy, insolvency, and
the relief of debtors and other laws of general application affecting
enforcement of creditors' rights generally, rules of law governing specific
performance, injunctive relief and other equitable remedies.
5.3 Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par
value $0.0001 per share ("Preferred Stock"). As of the date hereof, without
giving effect to the consummation of the transactions contemplated herein, there
are outstanding 16,455,238 shares of Common Stock and 72,992 shares of Preferred
Stock and the Company has no other shares of capital stock authorized, issued or
outstanding.
(b) Except as set forth on Schedule 5.3, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company, or arrangements by which the Company is or may become bound to
issue additional shares of capital stock, nor are any such issuances or
arrangements contemplated, (ii) there are no securities or instruments
containing antidilution or similar provisions that will be triggered by the
issuance of the Shares and Warrants in accordance with the terms of this
Agreement or the issuance of the Warrant Shares in accordance with the Warrants,
(iii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof and
(iv) the Company has not reserved any shares of capital stock for issuance
pursuant to any stock option plan or similar arrangement. The capitalization of
the Company, including, without limitation, the authorized capital stock, the
number of shares issued and outstanding, the number of shares issuable and
reserved for issuance pursuant to the Company's stock option plans, the number
of shares issuable and reserved for issuance pursuant to securities (other than
the Shares and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock and the number of shares that have
been reserved for issuance at the Tranche B Closing or upon exercise of the
Warrants is set forth on Schedule 5.3.
5.4 Due Issuance and Authorization of Capital Stock. All of the
outstanding shares of capital stock of the Company have been duly authorized,
validly issued and are fully paid and nonassessable. The Securities have been
duly authorized and upon issuance in accordance with the terms of this Agreement
or the Warrants (as applicable), all such Securities will be duly authorized,
validly issued, fully paid and nonassessable, subject to compliance with NASD
Rule 4350. The sale and delivery of the Shares and the Warrants to the Purchaser
pursuant to the terms hereof, and the issuance of the Warrant Shares to the
Purchaser upon exercise of the Warrants, will vest in the Purchaser legal and
valid title to such Securities, free and clear of any lien, claim, judgment,
charge, mortgage, security interest, pledge, escrow equity or other encumbrance
other than those either (i) created under applicable securities law or (ii) by
the Purchaser or Permitted Transferee (collectively, "Encumbrances").
5.5 Consents. Neither the execution, delivery or performance of this
Agreement or any other Transaction Document by the Company, nor the consummation
by it of the obligations and transactions contemplated hereby or thereby
(including, without limitation, the issuance, the reservation for issuance and
the delivery of the Securities) requires any material consent of, authorization
by, exemption from, filing with or notice to any governmental authority or any
other Person, other than (a) in the event that the number of Shares and Warrants
to be issued at a Tranche B Closing would exceed the number of Shares and
Warrants permitted to be issued without stockholder approval pursuant to NASD
Rule 4350, the affirmative vote of the majority of shares of
9
Common Stock present in person or represented by proxy at the Stockholders'
Meeting (as defined below) and entitled to vote to approve the offering and
issuance of the Shares and Warrants pursuant to NASD Rule 4350 (the "Required
Stockholder Approval"), and (b) the filings under applicable securities laws
required to comply with the Company's registration obligations under the
Registration Rights Agreement.
5.6 Financial Statements. The audited consolidated balance sheet of
the Company as of December 31, 2002 (the "Balance Sheet"), and audited
consolidated statements of income and retained earnings and cash flows of the
Company for the year ended December 31, 2002 (collectively with the Balance
Sheet, the "Financial Statements"), together with an unqualified opinion thereon
from the Company's independent accountants, are contained in the Company's SEC
Documents (as defined below). The Company has caused to be delivered to the
Purchaser (to the extent not already contained in the SEC Documents) unaudited
consolidated balance sheets of the Company as of March 31, 2003 and as of June
30, 2003 (the "Unaudited Balance Sheets") and unaudited consolidated statements
of income and retained earnings and cash flows of the Company for the three
months ended March 31, 2003 and the six months ended June 30, 2003 (collectively
with the Unaudited Balance Sheet, the "Unaudited Financial Statements"). The
Financial Statements and Unaudited Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except (x) as may be otherwise indicated in such financial statements or the
notes thereto, or (y) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company as of the dates thereof and its consolidated results of operations
and cash flows for the periods then ended (subject, in the case of Unaudited
Financial Statements, to immaterial year-end audit adjustments).
5.7 SEC Documents. Since March 31, 2001, the Company has timely
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, the NASD Rules and the rules and regulations of the Frankfurt
Stock Exchange (all of the foregoing filed prior to the date hereof and after
March 31, 2001, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC Documents"). The Company has
delivered or otherwise made available to the Purchaser true and complete copies
of the SEC Documents, except the exhibits and schedules thereto and the
documents incorporated therein. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be, applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The acting chief executive officer and the chief financial officer
of the Company has signed, and the Company has furnished to the SEC, all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of
2002 (the "Certifications"). Such Certifications contain no qualifications or
exceptions to the matters certified therein and have not been modified or
withdrawn, and neither the Company nor any of it officers has received notice
from any Governmental Entity questioning or challenging the accuracy,
completeness, content, form or manner of filing or submission of such
Certifications. Since the adoption of the Sarbanes-Oxley Act, the Company has
complied in all material respects with the laws, rules and regulations
thereunder. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto.
5.8 No Conflicts. The execution, delivery and performance of this
Agreement and each other Transaction Document, and the consummation of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Securities) will
not (a) result in a violation of the certificate of incorporation or by-laws of
the Company, (b) except as set forth on Schedule 5.8, materially conflict with
or result in the material breach of the terms, conditions or provisions of or
constitute a material default (or an event which with notice or lapse of time or
both would become a material default) under, or give rise to any right of
termination, acceleration or cancellation under, any material agreement, lease,
mortgage, license, indenture, instrument or other contract to which the Company
or any of its Subsidiaries is a party, (c) result in a material violation of any
law, rule, regulation, order, judgment or decree (including, without limitation,
U.S. federal and state securities laws and regulations) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, or (d) result in the
creation of
10
any material Encumbrance upon any of their assets. The Company is not in
violation of its certificate of incorporation or by-laws, and the Company is not
in default (and no event has occurred which, with notice or lapse of time or
both, would cause the Company or any of its Subsidiaries to be in material
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party.
5.9 Intellectual Property. The Company and each of its Subsidiaries
owns, is licensed to use, or otherwise possesses the right to use the
Intellectual Property currently used or planned for use in the conduct of the
Company's and each of its Subsidiaries' business (the "Company Intellectual
Property"), free and clear of all Encumbrances.
(a) Schedule 5.9(b) sets forth a list of (i) all registrations
and applications for copyrights, patents, and Trademarks owned or controlled by
the Company and each of its Subsidiaries; (ii) material unregistered Trademarks
currently used or planned for use in the conduct of the Company's and each of
its Subsidiaries' business; (iii) Software (other than readily available
commercial software programs having an acquisition price of less than $5,000)
currently used or planned for use in the conduct of the Company's and each of
its Subsidiaries' business.
(b) Except as set forth on Schedule 5.9(c), the Company or a
Subsidiary is listed in the records of the appropriate United States, state, or
foreign registry as the sole current owner of record for each registration and
application for copyright, patent, and Trademark specified as owned by the
Company or a Subsidiary, and such registrations and applications have been duly
maintained, are subsisting, in full force and effect, have not been cancelled,
expired or abandoned, and to the Knowledge of the Company and the Knowledge of
the Company's Subsidiaries, valid and enforceable. When representations or
warranties in this Agreement are qualified to the "Knowledge of the Company" or
to the "Knowledge of the Company's Subsidiaries," they are given by the Company
or each of its Subsidiaries, as the case may be, only to the extent of the
actual knowledge of the Company or its Subsidiaries, respectively, without any
obligation of inquiry and shall be deemed to be qualified in all respects by
such facts as Thomas N. Konatich, Dennis E. Hruby or Susan K. Burgess know as a
result of their participation in the business of the Company or its
Subsidiaries, respectively, prior to the date such representations or warranties
are made.
(c) Except as set forth on Schedule 5.9(d), neither the
Company nor any of its Subsidiaries has received written notice from any third
party regarding any actual or potential infringement, misappropriation,
dilution, or other violation by the Company or any of its Subsidiaries of any
Intellectual Property of such third party, and to the Knowledge of the Company
and the Knowledge of the Company's Subsidiaries, there is no reasonable basis
for such a claim against the Company or any of its Subsidiaries.
(d) Except as set forth on Schedule 5.9(e), there are no
oppositions, cancellations, invalidity proceedings, re-examination proceedings,
suits, arbitrations, or threatened claims pending or for which notice has been
provided or, to the Knowledge of the Company, threatened, challenging the
Company's or any of its Subsidiaries' ownership of, right to use, or the
validity or enforceability of any Company Intellectual Property.
(e) Except as set forth on Schedule 5.9(f), there are no
settlements, forbearances to sue, consents, judgments, or orders or similar
obligations which (i) restrict the Company's or any of its Subsidiaries' right
to use any Company Intellectual Property, (ii) restrict the Company's or any of
its Subsidiaries' businesses in order to accommodate a third party's
intellectual property rights or (iii) permit third parties to use any
Intellectual Property owned or controlled by the Company or any of its
Subsidiaries.
(f) To the Knowledge of the Company, no third party is
infringing, misappropriating, diluting or otherwise violating any Company
Intellectual Property.
(g) Except as set forth on Schedule 5.9(h), the consummation
of the transactions contemplated by this Agreement will not result in the loss
or impairment by the Company or any of its Subsidiaries of any rights to Company
Intellectual Property, nor will such consummation require the consent of or
payment to any third party in respect of any Company Intellectual Property.
11
(h) The Company and each of its Subsidiaries take reasonable
and prudent measures to protect the confidentiality of Trade Secrets, including
requiring their employees, contractors and agents and other parties having
access thereto to execute written non-disclosure agreements. No Trade Secret has
been disclosed or authorized to be disclosed to any third party other than
pursuant to a written non-disclosure agreement that adequately protects the
Company's and the applicable Subsidiary's proprietary rights in and to such
Trade Secrets. To the Knowledge of the Company and the Knowledge of each of its
Subsidiaries, no party to any non-disclosure agreement relating to its Trade
Secrets is in breach or default thereof.
(i) All Intellectual Property owned by the Company or a
Subsidiary was either developed by employees of the Company or a Subsidiary
within the scope of their employment, or by independent contractors who have
properly assigned all of their rights to the Company or a Subsidiary pursuant to
written agreements. To the Knowledge of the Company, no current or former
stockholder, partner, director, officer, employee, contractor, agent, or
consultant of the Company or a Subsidiary will, after giving effect to the
transactions contemplated herein, own any of the Intellectual Property the
Company or any of its Subsidiaries purports to own.
(j) All Trademarks owned or controlled by the Company or any
of its Subsidiaries have been in continuous use by the Company or its
Subsidiaries, and the Trademarks listed in Schedule 5.9(k) for which the Company
or any of its Subsidiaries has obtained or applied for a registration have been
continuously used in the form appearing in, and in connection with the goods and
services listed in, their respective registration certificates. To the Knowledge
of the Company, there has been no prior use of such Trademarks by any third
party which would confer upon said third party superior rights in such
Trademarks. The Company and its Subsidiaries have adequately policed the
material Trademarks owned or controlled by the Company or any of its
Subsidiaries against third party infringement so as to maintain the validity of
such Trademarks.
5.10 Material Contracts. Each material contract of the Company and
its Subsidiaries is listed on Schedule 5.10 hereof. Each such contract is the
legal, valid and binding obligation of the Company, enforceable against the
Company and/or such Subsidiary, as the case may be, in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and other laws of general application
affecting enforcement of creditors' rights generally, rules of law governing
specific performance, injunctive relief and other equitable remedies. There has
not occurred any breach, violation or default or any event that, with the lapse
of time, the giving of notice or the election of any Person, or any combination
thereof, would constitute a material breach, violation or default by the Company
or a Subsidiary, as the case may be, under any such contract or, to the
Knowledge of the Company, by any other Person to any such contract. Neither the
Company nor any of its Subsidiaries has been notified that any party to any
material contract intends to cancel, terminate, not renew or exercise an option
under any material contract, whether in connection with the transactions
contemplated hereby or otherwise. The Company is not materially restricted by
agreement from carrying on its business anywhere in the world.
5.11 Right of First Refusal; Voting and Registration Rights. Other
than as provided for herein, no party has any right of first refusal, preemptive
right, right of first offer, right of co-sale or other similar right regarding
the Company's securities. There are no provisions of the certificate of
incorporation or the by-laws of the Company or any of its Subsidiaries, no
agreements to which the Company or any of its Subsidiaries is a party and no
agreements by which the Company, any of its Subsidiaries or the Securities are
bound, which (a) may affect or restrict the voting rights of the Purchaser with
respect to the Shares or the Warrant Shares in its capacity as a stockholder of
the Company, (b) restrict the ability of the Purchaser, or any successor thereto
or assignee or transferee thereof, to transfer the Securities, (c) require the
vote of more than a majority of the Company's issued and outstanding Common
Stock, voting together as a single class, to take or prevent any corporate
action, other than those matters requiring a class vote under Delaware law, or
(d) entitle any party to nominate or elect any director of the Company or
require any of the Company's stockholders to vote for any such nominee or other
Person as a director of the Company in each case, except as provided for in or
contemplated by this Agreement. Except as disclosed on Schedule 5.11 or pursuant
to the Registration Rights Agreement, the Company is not under any obligation,
contractual or otherwise, to register for sale any of its securities under the
Securities Act.
5.12 Form S-3 Eligibility. The Company is currently eligible under
the eligibility requirements of General Instruction I to Registration Statement
on Form S-3 to register the resale of its Common Stock on a registration
statement on Form S-3 under the Securities Act. To the Knowledge of the Company,
there
12
exist no facts or circumstances that would reasonably be likely to prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Shares or the Warrant Shares in accordance with the terms of this
Agreement and the Registration Rights Agreement.
5.13 No Integrated Offering. Neither the Company, nor any of its
Affiliates or any other Person acting on the Company's behalf, has directly or
indirectly engaged in any form of general solicitation or general advertising
with respect to the Securities nor have any of such Persons made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would require registration of the Securities under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Company for purposes of the Securities Act
or any applicable stockholder approval provisions, including, without
limitation, NASD Rule 4350(i) or any similar rule.
5.14 Absence of Certain Developments. Since December 31, 2002,
neither the Company nor its Subsidiaries have suffered any change or development
which has had or could reasonably be likely to have a Material Adverse Effect.
Other than the Company's acquisition of certain assets of Plexus Vaccines Inc.
and the transactions consummated and business conducted in connection therewith,
since December 31, 2002, the Company and its Subsidiaries have conducted their
business in the ordinary and usual course consistent with past practices.
5.15 Undisclosed Liabilities. Except as disclosed on Schedule 5.15
or in the SEC Documents, the Company does not have any liabilities (absolute,
accrued, contingent or otherwise) that are, in the aggregate, material to its
business, operations or financial condition, except liabilities incurred since
the date of the Unaudited Financial Statements in the ordinary course of
business and consistent with past practice or liabilities not required under
GAAP to be reflected in the Financial Statement or the Unaudited Financial
Statements.
5.16 Litigation. Except as set forth on Schedule 5.16, there is no
claim, action, proceeding, lawsuit, inquiry, arbitration or investigation before
or by any court, public board, arbitrator, governmental body, agency or
official, self-regulatory organization or body including, without limitation,
the SEC or the National Association of Securities Dealers, pending or, to the
Knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries, or their respective properties or their respective directors
or officers in their capacities as such which would, individually or in the
aggregate, reasonably be likely to have a Material Adverse Effect.
5.17 Compliance with Laws. Neither the Company nor any of its
Subsidiaries has received notification from any Governmental Entity (a)
asserting a material violation of any law, statute, ordinance or regulation or
the terms of any judgment, order, decree, injunction or writ applicable to the
conduct of its business, (b) threatening to revoke any material license,
franchise, permit or government authorization, or (c) restricting or in any way
limiting its operations as currently conducted.
5.18 Taxes.
(a) Filing of Tax Returns and Payment of Taxes. The Company
and each of its Subsidiaries has duly and timely filed (or has had duly and
timely filed on its behalf) with the appropriate taxing authorities all Tax
Returns required to be filed through the date hereof, and all such Tax Returns
are true, correct and complete in all material respects. The Company and each of
its Subsidiaries has paid on a timely basis all material Taxes due and payable.
Neither the Company nor any of its Subsidiaries is currently the beneficiary of
any extension of time within which to file any Tax Return, and no written claim
has been made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction.
(b) Audits, Investigations, Disputes or Claims. No
deficiencies for Taxes of the Company or any of its Subsidiaries have been
claimed, proposed or assessed in writing against the Company or any of its
Subsidiaries by any taxing or other governmental authority that have not been
fully paid or finally settled, and an adequate reserve in accordance with GAAP
has been established in the books of the Company and its Subsidiaries with
respect to any unpaid Taxes. There are no audits, investigations, disputes or
claims relating to the Taxes or Tax Returns of the Company or any of its
Subsidiaries currently being conducted. Neither the Company
13
nor any of its Subsidiaries has executed a waiver with respect to any statute of
limitations relating to the assessment or collection of any Taxes.
(c) Prior Affiliated Groups and Other Entity Liability.
Neither the Company nor any of its Subsidiaries has been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
or of any group that has filed a combined, consolidated or unitary Tax Return
(other than Tax Returns filed by a group the common parent of which was the
Company). Neither the Company nor any of its Subsidiaries has any liability for
the Taxes of any Person (other than the Company or any of its Subsidiaries) (i)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), (ii) as a transferee or successor, (iii) by contract or
(iv) otherwise.
(d) Tax Sharing Agreements. Neither the Company nor any of its
Subsidiaries is a party to any Tax sharing agreements or similar arrangements
(including indemnity arrangements).
(e) No Withholding. The Company and each of its Subsidiaries
has, in all material respects, withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party and has filed
all material Tax Returns required to be filed with respect thereto.
5.19 Employee and Benefit Plans.
(a) Schedule 5.19(a) lists each deferred compensation,
incentive compensation or equity compensation plan; "pension" plan, fund or
program (within the meaning of Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); employment, termination or
severance agreement; and each other material employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by the Company, any of its
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company or any of its Subsidiaries would be
deemed a "single employer" within the meaning of Section 4001(b) of ERISA, or to
which the Company, any of its Subsidiaries or an ERISA Affiliate would
reasonably be expected to have any liability, for the benefit of any current or
former employee or director of the Company or any of its Subsidiaries (the
"Benefit Plans"). No Benefit Plan has terms requiring assumption or any
guarantee by the Purchaser.
(b) Each Benefit Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service that it is so qualified and the trust
maintained thereunder is exempt from taxation under Section 501(a) of the Code
and no event has occurred that could reasonably be expected to cause a loss of
such qualification.
(c) Each Benefit Plan has been operated and administered in
all material respects in accordance with the terms of such Benefit Plan and with
applicable laws, including but not limited to ERISA and the Code.
(d) No Benefit Plan is subject to Title IV or Section 302 of
ERISA and, in the last six years immediately preceding each Closing Date, none
of the Company, any of its subsidiaries nor any ERISA Affiliates has sponsored,
maintained or contributed to any employee benefit plan which was subject to
Title IV of ERISA.
(e) There are no pending, threatened or anticipated material
claims by or on behalf of any Benefit Plan, by any employee or beneficiary
covered under any such Benefit Plan, or otherwise involving any such Benefit
Plan (other than routine claims for benefits).
(f) Except as set forth in Schedule 5.19(f), the consummation
of the transactions contemplated by this Agreement will not, either alone or in
combination with any other event, (i) entitle any current or former employee,
officer, director or consultant of the Company, any of its Subsidiaries or any
ERISA Affiliate to severance pay, unemployment compensation or any other similar
termination payment, or (ii) accelerate the time of payment or vesting, or
increase the amount of, or otherwise enhance, any benefit due to any such
employee, officer,
14
director or consultant. No amounts payable under any of the Benefit Plans or any
other contract, agreement or arrangement with respect to which the Company or
any of its Subsidiaries may have any liability could reasonably be expected to
fail to be deductible for federal income tax purposes by virtue of Section
162(m) or Section 280G of the Code.
(g) Except as set forth in Schedule 5.19(g), no "leased
employee" (within the meaning of Section 414(n) of the Code) performs services
for the Company or any of its Subsidiaries.
(h) The Company has not used the services provided by
professional employer organizations, the services or workers provided by
contract labor suppliers, temporary employees, "leased employees," or
individuals who have provided services as independent contractors in such a way
that could reasonably be expected to result in a material liability to the
Company by (A) entitling any individual to participate in or receive benefits
under any Benefit Plan in which such individual does not currently participate,
(B) resulting in the disqualification of any of any Benefit Plan or the
imposition of penalties or excise taxes with respect to the any Benefit Plan by
the Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation or (C) causing the Company to be liable for any employee
benefit plan (within the meaning of Section 3(3) of ERISA) sponsored, maintained
or contributed to by any professional employer organization or contract labor
supplier.
(i) The Company and its Subsidiaries are in material
compliance with all applicable U.S. federal, state and local and foreign laws,
rules and regulations respecting employment and employment practices, labor,
terms and conditions of employment, wages, hours of work and occupational safety
and health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law. Neither the Company nor
any of its Subsidiaries is bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
commitment or arrangement, collective bargaining or similar agreement with any
labor union, and, to the Knowledge of the Company, no labor union has requested
or has sought to represent any of the employees, representatives or agents of
the Company or any of its Subsidiaries and to the Knowledge of the Company and
the Knowledge of the Company's Subsidiaries, there is no current union
organizing activities among such employees, representatives or agents. There is
no labor strike, dispute, slowdown, stoppage actually pending or, to the
Knowledge of the Company, threatened against or involving the Company or any of
its Subsidiaries.
5.20 Brokers. Other than Sutter Securities Incorporated, which
served as financial advisor to the Company, there is no broker, investment
banker, financial advisor, finder or other Person which has been retained by or
is authorized to act on behalf of the Company who might be entitled to any fee
or commission in connection with the transactions contemplated by this
Agreement.
5.21 Related-Party Transactions. Except as set forth on Schedule
5.21, no employee, officer, director, stockholder or Affiliate of the Company or
any of its Subsidiaries or member of his or her immediate family is currently
indebted to the Company or any of its Subsidiaries, nor is the Company or any of
its Subsidiaries indebted (or committed to make loans or extend or guarantee
credit) to any of such individuals. Except as set forth on Schedule 5.21, none
of such Persons has any direct or indirect ownership interest in any firm or
corporation which is an Affiliate of the Company or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in an amount not to exceed 1%
of the outstanding capital stock of publicly traded companies that may compete
with the Company or with which the Company may have a business relationship.
Except as set forth on Schedule 5.21, no employee, director, officer or
stockholder of the Company and no member of the immediate family of any
employee, officer, director or stockholder of the Company is directly or
indirectly interested in any material contract with the Company.
5.22 Regulatory Compliance. As to each of the product candidates of
the Company currently under research and/or development by the Company, subject
to the jurisdiction of the United States Food and Drug Administration ("FDA")
under the Federal Food, Drug and Cosmetic Act and the regulations thereunder
("FDCA") (each such product, a "Life Science Product"), such Life Science
Product is being researched and developed in compliance in all material respects
with all applicable requirements under the FDCA and similar laws and regulations
applicable to such Life Science Product, including those relating to
investigational use, premarket
15
approval, good manufacturing practices, labeling, advertising, record keeping,
filing of reports and security. The Company has not received any notice or other
communication from the FDA or any other Governmental Entity (i) contesting the
premarket approval of, the uses of or the labeling and promotion of any Life
Science Product or (ii) otherwise alleging any violation by the Company of any
law, regulation or other legal provision applicable to a Life Science Product.
The Company has not, and to the Knowledge of the Company no officer, employee or
agent of the Company has knowingly made an untrue statement of a material fact
or fraudulent statement to the FDA or other federal, state or foreign
Governmental Entity performing similar functions, or knowingly failed to
disclose a material fact required to be disclosed to the FDA or such other
federal, state or foreign Governmental Entity.
6. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
6.1 Organization. The Purchaser (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(b) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the nature of the property owned or leased
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing
would not, individually or in the aggregate, reasonably be likely to have a
material adverse effect on (i) the ability of the Purchaser to perform its
obligations under the Transaction Documents or (ii) the financial condition,
properties, assets, liabilities, business or operations of the Purchaser, (c)
has its principal place of business and chief executive office at 35 East 62nd
Street, New York, New York 10021, and (d) has the requisite corporate power and
authority to own or lease and operate its assets and carry on its business as
presently being conducted.
6.2 Authorization; Enforceability. The Purchaser has the requisite
corporate power and authority to enter into this Agreement and the other
Transaction Documents to which it is a party. The execution, delivery and
performance by the Purchaser of this Agreement and each of the other Transaction
Documents to which it is a party, and the consummation by the Purchaser of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of the Purchaser. This Agreement has been
duly and validly executed and delivered by the Purchaser and, when executed,
each other Transaction Document to which it is a party will be duly and validly
executed and delivered by the Purchaser, and, assuming due and valid execution
and delivery by the Company, constitute or will constitute the valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and other laws of general
application affecting enforcement of creditors' rights generally, rules of law
governing specific performance, injunctive relief and other equitable remedies.
6.3 No Conflicts. The execution, delivery and performance of this
Agreement and each other Transaction Document, and the consummation of the
transactions contemplated hereby and thereby will not (a) result in a violation
of the certificate of incorporation or by-laws of the Purchaser, (b) materially
conflict with or result in the material breach of the terms, conditions or
provisions of or constitute a material default (or an event which with notice or
lapse of time or both would become a material default) under, or give rise to
any right of termination, acceleration or cancellation under, any material
agreement, lease, mortgage, license, indenture, instrument or other contract to
which the Purchaser or any of its Subsidiaries is a party, (c) result in a
material violation of any law, rule, regulation, order, judgment or decree
(including, without limitation, U.S. federal and state securities laws and
regulations) applicable to the Purchaser or any of its Subsidiaries or by which
any property or asset of the Purchaser or any of its Subsidiaries is bound or
affected, or (d) result in the creation of any material lien, claim, judgment,
charge, mortgage, security interest, pledge, escrow equity or other encumbrance
upon any of their assets. The Purchaser is not in violation of its certificate
of incorporation or by-laws, and the Purchaser is not in default (and no event
has occurred which, with notice or lapse of time or both, would cause the
Purchaser or any of its Subsidiaries to be in material default) under, nor has
there occurred any event giving others (with notice or lapse of time or both)
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Purchaser or any of its
Subsidiaries is a party.
6.4 Investment Representations and Warranties. The Purchaser
understands that the Securities have not been, and will not upon issuance be,
registered under the Securities Act, and that the certificates evidencing the
Securities shall bear a legend to that effect, unless prior to issuance, the
Securities shall have been so registered.
16
6.5 Acquisition for Own Account. The Purchaser is acquiring the
Securities for its own account for investment and not with a view toward
distribution in a manner which would violate the Securities Act.
6.6 Ability to Protect Its Own Interests and Bear Economic Risks;
Understanding of Use of Proceeds. By reason of the business and financial
experience of its management, the Purchaser has the capacity to protect its own
interests in connection with the transactions contemplated by this Agreement.
The Purchaser is able to bear the economic risk of an investment in the
Securities, and has an adequate income independent of any income produced from
an investment in the Securities and has sufficient net worth to sustain a loss
of all of its investment in the Securities without economic hardship if such a
loss should occur. The Purchaser understands in all material respects the
purposes for which the proceeds to the Company from the sale of the Shares and
the Warrants will be used, as such purposes are set forth in Section 7.8 hereof.
6.7 Accredited Investor. The Purchaser is an "accredited investor"
as that term is defined in Regulation D promulgated under the Securities Act.
6.8 Access to Information. The Purchaser has been furnished with the
materials relating to the Company's business, operations, financial condition,
assets, liabilities and other matters relevant to the Purchaser's investment in
the Securities, which have been requested by the Purchaser. The Purchaser has
had adequate opportunity to ask questions of, and receive answers from, the
Company's officers, employees, agents, accountants, and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities, and all other matters relevant to its investment in the Securities.
6.9 Brokers. There is no broker, investment banker, financial
advisor, finder or other Person which has been retained by or is authorized to
act on behalf of the Purchaser who is entitled to any fee or commission in
connection with the execution of this Agreement.
7. Covenants of the Company. The Company (and each of its Subsidiaries
unless the context otherwise requires) hereby covenants as follows:
7.1 Conduct in the Ordinary Course. From the date of this Agreement
until the final Tranche B Closing or the termination of this Agreement in
accordance with its terms, except to the extent expressly permitted by this
Agreement or otherwise consented to by an instrument in writing signed by the
Purchaser, the Company shall (i) keep the Company's business, as it is currently
being conducted, and organization intact and shall not take or permit to be
taken or do or suffer to be done anything other than in the ordinary course of
its business as the same is currently being conducted, (ii) use its reasonable
best efforts to keep available the services of its directors, officers,
employees, independent contractors and agents and retain and maintain good
relationships with its clients and maintain its facilities in good condition and
(iii) maintain the goodwill and reputation associated with its business, as it
is currently being conducted.
7.2 Filing of Proxy Statement. In the event that the number of
Shares and Warrants required to be issued at a Tranche B Closing would exceed
the number of Shares and Warrants permitted to be issued without stockholder
approval pursuant to NASD Rule 4350, the Company shall prepare and file with the
SEC within 45 days of the delivery of the Option Notice which triggers the need
for the Required Stockholder Approval a proxy statement meeting the requirements
of Section 14 of the Exchange Act (the "Proxy Statement") to solicit the
Required Stockholder Approval. Before filing such Proxy Statement or any
amendments or supplements thereto, the Company shall furnish to the Purchaser
copies of all such documents proposed to be filed, including documents
incorporated by reference in the Proxy Statement, and, if requested by the
Purchaser, the exhibits incorporated by reference, and the Purchaser shall have
the reasonable opportunity to review and comment on such documents, and the
Company will incorporate into such documents the comments reasonably requested
by the Purchaser. The Company shall use its commercially reasonable efforts to
cause the Proxy Statement to be cleared by the SEC as promptly as reasonably
practicable after such filing, and shall promptly mail the Proxy Statement to
the stockholders of the Company. The Company shall keep the Purchaser apprised
of the status of matters relating to the Proxy Statement and the Stockholders'
Meeting. The Company shall notify the Purchaser promptly upon the receipt of any
notices, comments or other communications from the SEC or its staff, in
connection with the filing of, or amendments or supplements to, the Proxy
Statement, or upon the receipt of any communications with respect to the Proxy
Statement, the Stockholders' Meeting or the transactions contemplated hereby
from the SEC, The Nasdaq
17
SmallCap Market or the Frankfurt Stock Exchange or their staff. The Company
shall provide the Purchaser (and its counsel) with a reasonable opportunity to
review and comment on any amendment or supplement to the Proxy Statement prior
to filing such with the SEC, and will provide the Purchaser with a copy of all
such filings made with the SEC.
7.3 Stockholders' Meeting. In the event that the number of Shares
and Warrants required to be issued at a Tranche B Closing would exceed the
number of Shares and Warrants permitted to be issued without stockholder
approval pursuant to NASD Rule 4350, the Company shall, in accordance with the
laws of the State of Delaware, its certificate of incorporation and its by-laws,
use its commercially reasonable efforts to convene a meeting of holders of the
Common Stock (the "Stockholders' Meeting") within 45 days (or such other time
period that is mutually agreed to by the Company and the Purchaser) after the
date of the Proxy Statement, at which the Company will seek the Required
Stockholder Approval. The Board of Directors shall recommend such approval by
the stockholders of the Company (the "Company Recommendation") and shall not
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in any
manner adverse to the Purchaser, or take any action or make any statement in
connection with the Stockholders' Meeting inconsistent with, such recommendation
(collectively, a "Company Recommendation Change"). Notwithstanding any Company
Recommendation Change, the Company shall cause the Stockholders' Meeting to be
convened and a vote to be taken.
7.4 Exchange Listing. The Company shall use its commercially
reasonable efforts to cause the Shares and the Warrant Shares to be approved for
quotation on The Nasdaq SmallCap Market and the Frankfurt Stock Exchange as
promptly as practicable following the Tranche A Closing.
7.5 Information Rights.
(a) Access to Records. The Company shall afford to the
Purchaser, the Affiliates of the Purchaser and each of their respective
officers, employees, advisors, counsel and other authorized representatives,
during normal business hours, reasonable access, upon reasonable advance notice,
to all of the books, records and properties of the Company and its Subsidiaries
and all officers and employees of the Company and such Subsidiaries, for so long
as the Purchaser beneficially owns a number of Securities amounting to 25% of
the Securities purchased pursuant to this Agreement (50% of such Securities if
no Tranche B Closing occurs); provided, however, that any and all information
provided to the Purchaser pursuant to the terms of this Agreement shall be
governed by the terms of the letter agreement dated June 16, 2003 between the
Company and the Purchaser, as amended hereby (the "Confidentiality Letter
Agreement"), and, in furtherance thereof, the definition of the term "Evaluation
Material" (as used and defined in the Confidentiality Letter Agreement) is
hereby amended to include not only information relating to the Company and its
businesses, operations, assets and financial condition provided to the Purchaser
in connection with the Purchaser's desire to explore a possible investment in
the Company, but also any and all information provided to the Purchaser pursuant
to the terms of this Agreement; provided, further, that information of the type
described in the second sentence of the third paragraph of the Confidentiality
Letter Agreement shall not be "Evaluation Material." Notwithstanding the
foregoing, the parties (and each employee, representative, or other agent of the
parties) may disclose to any and all Persons, without limitation of any kind,
the Tax treatment and any facts that may be relevant to understanding the Tax
structure of the transactions contemplated hereby, provided, however, that
neither party (nor any employee, representative or other agent thereof) may
disclose any other information that is not relevant to understanding the Tax
treatment and Tax structure of the transactions (including the identity of any
party, any information that could lead another to determine the identity of any
party and any non-public business, financial or other information or term), or
any other information to the extent that such disclosure could result in a
violation of any federal or state securities law.
(b) Financial Reports. The Company shall furnish to the
Purchaser, for so long as the Purchaser beneficially owns a number of Securities
amounting to 25% of the Securities purchased pursuant to this Agreement (50% of
such Securities if no Tranche B Closing occurs):
(i) Monthly Reports. As soon as available, but not later
than 15 days after the end of each fiscal month beginning with the
report for the month of August 2003, a consolidated balance sheet of
the Company as of the end of such period and consolidated statements
of income of the Company for such period and for the period
commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in
18
comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, and including comparisons to
the budget or business plan and an analysis of the variances from
the budget or plan, all prepared in accordance with GAAP (except for
the absence of footnotes, and quarter-end and year-end adjustments).
(ii) Quarterly and Annual Reports. On the day after
filed with the SEC, copies of the Company's annual, quarterly and
other reports filed with the SEC pursuant to Section 13 or Section
15(d) of the Exchange Act.
(c) Notice of Litigation, Disputes and Adverse Changes; Other
Information. The Company shall promptly notify the Purchaser of each legal
action, suit, arbitration or other administrative or governmental investigation
or proceeding (whether federal, state, local or foreign) instituted or, to the
Knowledge of the Company, threatened against the Company (or of any occurrence
or dispute which involves a reasonable likelihood of any such action, suit,
arbitration, investigation or proceeding being instituted).
(d) Other Information. The Company shall promptly provide the
Purchaser with such other information relating to the Company as reasonably
requested by the Purchaser.
7.6 Auditors. The Company shall have as its auditors an accounting
firm of national reputation. The parties hereto acknowledge and agree that, for
purposes of this Section 7.6, PricewaterhouseCoopers LLP is an accounting firm
of national reputation.
7.7 Composition of Board of Directors; Indemnification; Directors
and Officers Insurance Policy.
(a) At such time as the Purchaser shall have invested an
aggregate of $5,000,000 or more in Securities, the Company shall use its
reasonable best efforts to appoint to its Board of Directors two individuals
designated by the Purchaser (the "M & F Representatives"). Prior to such time,
the Company shall enter into indemnification agreements with each of the M & F
Representatives on terms no less favorable to the M & F Representatives than the
terms of the indemnification agreements of the existing members of the Board of
Directors.
(b) The Company shall reimburse all directors of the Company
for their reasonable out-of-pocket expenses in connection with attending
meetings of the Company's Board of Directors and all committees thereof and all
reasonable out-of-pocket expenses otherwise incurred in fulfilling their duties
as directors. Unless otherwise required under applicable law, the Company's
certificate of incorporation shall at all times contain provisions for
directors' liability and indemnification as set forth in Articles Seventh and
Eighth of the Company's certificate of incorporation, as currently in effect,
which provisions are set forth on Schedule 7.7.
(c) The Company shall maintain in full force and effect a
policy or policies of insurance, including, without limitation, a directors and
officers liability insurance policy, issued by insurers of recognized
responsibility, insuring it, its directors and officers, its properties and its
business against such losses and risks, and in such amounts, as are customary in
the case of corporations of established reputation engaged in the same or a
similar business.
(d) The Company shall amend its by-laws to allow for the
appointment of the M & F Representatives, subject to the terms and conditions
set forth in paragraph (a) of this Section 7.7.
7.8 Use of Proceeds. The Company shall use the proceeds to the
Company from the sale of the Shares and the Warrants to fund research and
development, to pursue growth opportunities, for the payment of expenses related
to the transactions contemplated hereby and for general corporate purposes.
7.9 Reservation of Common Stock. The Company shall reserve and keep
available out of its authorized but unissued Common Stock the number of shares
required for the issuances of all of the Shares issuable pursuant to this
Agreement and the exercise of the Warrants.
19
7.10 Employee Waiver Letters. Within 30 days of the date hereof the
Company shall cause the executives and employees named on Schedule 7.10(a)
hereto to execute waiver letters with the Company substantially in the form as
set forth in Schedule 7.10(b) hereto.
7.11 Filings. The Company shall promptly provide to the Purchaser
(or its counsel) copies of all filings made by the Company or any Affiliate with
any Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
7.12 Notification of Certain Matters. From the date hereof until the
earlier to occur of (i) if the Purchaser does not provide a timely Option
Notice, the expiration of the Purchaser's option to purchase Securities in
Tranche B and (ii) if the Purchaser does provide a timely Option Notice, the
sale and purchase of all of the Tranche B Shares, upon the terms and subject to
the conditions contained herein (the "Notification Period"), the Company shall
promptly notify the Purchaser of the occurrence or non-occurrence of any fact or
event which has caused or could reasonably likely cause (x) any representation
or warranty made by it in this Agreement or the other Transaction Documents to
be untrue or inaccurate in any material respect at any time or (y) any covenant,
condition or agreement under this Agreement or the other Transaction Documents
not to be complied with or satisfied by it in any material respect; provided,
however, that no such notification shall modify the representations or
warranties of the Company or the conditions to the obligations of the Purchaser
hereunder. During the Notification Period, the Company shall promptly notify the
Purchaser of any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement or the other Transaction
Documents.
8. Conditions to the Parties' Obligations.
8.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereunder
are subject to the fulfillment prior to or on each Closing Date of all of the
following conditions, which may be waived in whole or in part by the Purchaser
to the extent permitted by law:
(a) No Litigation. There shall not have been instituted any
litigation challenging or seeking damages in connection with the transactions
contemplated by this Agreement.
(b) No Statute, Etc. No statute, rule, regulation, executive
or other order, decree, ruling or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits, restrains,
enjoins or restricts the transactions contemplated by the Transaction Documents.
(c) Required Stockholder Approval. If required by NASD Rule
4350, the Company shall have obtained the Required Stockholder Approval.
8.2 Conditions to the Purchaser's Obligations. The obligations of
the Purchaser to consummate the transactions contemplated hereunder are subject
to the fulfillment prior to or on each Closing Date of all of the following
conditions, which may be waived in whole or in part by the Purchaser to the
extent permitted by law:
(a) Covenants; Representations and Warranties. (i) The Company
shall have performed in all material respects each of its obligations hereunder
required to be performed by it at or prior to each Closing Date, and shall have
obtained all consents and approvals required for the consummation of the
transactions contemplated hereby, and (ii) the representations and warranties of
the Company contained in this Agreement and in any certificate or other writing
delivered by the Company pursuant hereto shall be true and correct (without
giving effect to any limitation as to "materiality" set forth therein) at and as
of such Closing Date as if made at and as of each Closing Date, except where the
failure of such representations and warranties to be true and correct (without
giving effect to any limitation as to "materiality" set forth therein) would
not, individually or in the aggregate, have a Material Adverse Effect.
20
(b) Laws; Injunctions. No statute, rule, regulation, executive
or other order, decree, ruling or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental Entity that would, or would
reasonably be likely to, have a Material Adverse Effect.
(c) Certificate of Officer. The Company shall have delivered
to the Purchaser a certificate dated the date of such Closing Date, executed by
its acting chief executive officer, certifying the satisfaction of the
conditions specified in paragraphs (a) and (b) of this Section 8.2.
(d) Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws shall have been obtained for the lawful execution,
delivery and performance of this Agreement and each other Transaction Document,
including, without limitation, the offer and sale of the Securities, subject to
compliance with NASD Rule 4350.
(e) Registration Rights Agreement. The Company shall have
executed and delivered the Registration Rights Agreement and the Company shall
not be in default thereunder.
(f) Warrants. The Company shall have executed and delivered
the Warrants to be issued at such Closing in the form attached hereto as Exhibit
A.
(g) Supporting Documents. At the Tranche A Closing, the
Purchaser shall have received the following:
(i) An opinion from Kramer, Levin, Naftalis & Frankel
LLP, counsel to the Company, dated the date of
such Closing Date, in the form attached hereto as
Exhibit C;
(ii) Copies of resolutions of the Board of Directors of
the Company, certified by the Secretary or other
authorized officer of the Company, authorizing and
approving the execution, delivery and performance
of the Transaction Documents, the transactions
contemplated thereby and thereby and all other
documents and instruments to be delivered pursuant
hereto and thereto; and
(iii) Such additional supporting documentation and other
information with respect to the transactions
contemplated by this Agreement as the Purchaser
may reasonably request.
(h) Consents and Waivers. The Company shall have obtained all
consents or waivers necessary to execute and perform its obligations under this
Agreement and the other Transaction Documents, to issue the Shares, the Warrants
and the Warrant Shares, and to carry out the transactions contemplated hereby
and thereby. All corporate and other action and governmental filings necessary
to effectuate the terms of this Agreement, the other Transaction Documents, the
Shares, the Warrants and the Warrant Shares, and other agreements and
instruments executed and delivered by the Company in connection herewith shall
have been made or taken.
(i) No Material Adverse Effect. There shall have been no
Material Adverse Effect from and after the date of this Agreement.
(j) Waiver of Existing Registration Rights. In connection with
the filing of any registration statement on behalf of the Purchasers, the
existing holders of the Company's securities shall have waived any applicable
registration rights held by them which would otherwise grant them the right to
register such securities on a registration statement filed pursuant to the
Registration Rights Agreement.
8.3 Conditions to the Company's Obligations. The obligations of the
Company to consummate the transactions contemplated hereunder are subject to the
fulfillment prior to or on each Closing Date
21
of all of the following conditions, which may be waived in whole or in part by
the Company to the extent permitted by law:
(a) Covenants; Representations and Warranties. (i) The
Purchaser shall have performed in all material respects each of its obligations
hereunder required to be performed by it at or prior to each Closing Date, and
shall have obtained all consents and approvals required for the consummation of
the transactions contemplated hereby, and (ii) the representations and
warranties of the Purchaser contained in this Agreement and in any certificate
or other writing delivered by the Purchaser pursuant hereto shall be true and
correct (without giving effect to any limitation as to "materiality" set forth
therein) at and as of such Closing Date as if made at and as of each Closing
Date, except where the failure of such representations and warranties to be true
and correct (without giving effect to any limitation as to "materiality" set
forth therein) would not, individually or in the aggregate, have a material
adverse effect on (i) the ability of the Purchaser to perform its obligations
under the Transaction Documents or (ii) the financial condition, properties,
assets, liabilities, business or operations of the Purchaser.
(b) Certificate of Officer. The Purchaser shall have delivered
to the Company a certificate dated as of the date of such Closing Date, executed
by an authorized officer of the Purchaser, certifying the satisfaction of the
conditions specified in paragraph (a) of this Section 8.3.
(c) Registration Rights Agreement. The Purchaser shall have
executed and delivered the Registration Rights Agreement and the Purchaser shall
not be in default thereunder.
9. Restrictive Legend. The Purchaser acknowledges that each certificate
evidencing the Securities shall be stamped or otherwise imprinted with a legend
in substantially the following form, unless prior to exercise of the Warrants,
the Common Stock issuable upon conversion or exercise thereof shall have been
registered under the Securities Act:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT."
10. Miscellaneous.10.1 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed postage prepaid by registered or certified mail or
transmitted by facsimile transmission (with immediate telephonic confirmation
thereafter),
(a) If to the Purchaser:
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
New York, New York 10021
Attention: Barry F. Schwartz, Esq.
Facsimile No.: (212) 572-8435
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: Franklin M. Gittes, Esq. and Alan C. Myers, Esq.
Facsimile No.: (212) 735-2000
(b) If to the Company:
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, New York 10170
22
Attention: Thomas N. Konatich
Facsimile No.: (212) 697-3130
with a copy to (which shall not constitute notice):
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: James A. Grayer, Esq.
Facsimile No.: (212) 715-8000
or at such other address as the Company or the Purchaser may specify by written
notice to the other, and each such notice, request, consent and other
communication shall for all purposes of the Agreement be treated as being
effective or having been given when delivered if delivered personally, upon
receipt of facsimile confirmation if transmitted by facsimile, or, if sent by
mail, at the earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and postage prepaid as aforesaid.
10.2 Termination of Agreement. This Agreement may be terminated as
follows:
(a) by mutual written consent of the Purchaser and the
Company;
(b) by the Purchaser or the Company, if the Purchaser fails to
deliver an Option Notice within 60 days from the date hereof;
(c) by the Purchaser, if the Purchaser timely delivers the
Option Notice and all Tranche B Closings thereunder have not occurred (i) within
five business days of the delivery of such Option Notice, in the event
stockholder approval of the issuance of Securities thereunder is not required,
or (ii) within 50 days of the mailing to the Company's stockholders of the Proxy
Statement, in the event stockholder approval of the issuance of Securities
thereunder is required;
(d) by the Purchaser or the Company, if the stockholders of
the Company fail to give the Required Stockholder Approval at the Stockholders'
Meeting and if the Purchaser has not exercised its rights pursuant to the final
proviso to Section 4(c) hereof within 10 business days thereafter;
(e) by the Purchaser, if the Company has breached any
representation, warranty, covenant or agreement contained in this Agreement such
that the condition set forth in Section 8.2(a) hereof is not capable of being
fulfilled; provided, that if such breach is capable of being cured, the Company
has not cured such breach within 20 business days after notice by the Purchaser
to the Company thereof;
(f) by the Company, if the Purchaser has breached any material
representation, warranty, covenant or agreement contained in this Agreement such
that the condition set forth in Section 8.3(a) hereof is not capable of being
fulfilled; provided, that if such breach is capable of being cured, the
Purchaser has not cured such breach within 20 business days after notice by the
Company to the Purchaser thereof; or
(g) by the Purchaser or the Company, if all Tranche B Closings
have not occurred by January 31, 2004.
10.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.2, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
either party hereto other than the provisions of this Section 10.3 and Sections
7.4 through 7.12; provided, however, that such termination and abandonment shall
not result in the prior sale of any Securities hereunder being rescinded;
provided, further, that a party that has committed fraud or willfully breached
its representations, warranties, covenants or agreements shall be liable for
such fraud or breach.
23
10.4 Survival of Representations, Warranties and Covenants. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive each Closing for 18 months, notwithstanding any
investigation at any time made by or on behalf of the Purchaser, and the sale
and purchase of the Shares and the Warrants and payment therefor. All covenants
shall survive a Closing in accordance with their terms.
10.5 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. The Purchaser's rights under this Agreement may be assigned, in whole
or in part, to any Permitted Transferee, and any Permitted Transferee shall be
deemed to be a Purchaser for all purposes hereunder; provided, that, no such
assignment shall be effective or confer any right on any such assignee unless,
prior to such assignment, the assignee agrees in writing, in form and substance
reasonably satisfactory to the Company, that such assignee will be bound by all
provisions binding on the Purchaser hereunder; provided, further, that any
beneficiary of a pledge described in clause (iv) below shall not be required to
agree in writing to be bound by the terms hereof. A "Permitted Transferee" is
(i) any Affiliate of the Purchaser, including, without limitation, directors,
executives and officers of the Purchaser, (ii) any member of the family of any
Affiliate of the Purchaser, including any such Person's spouse and descendants
and any trust, partnership, corporation, limited liability company or other
entity for the benefit of such spouse and/or descendants to whom or which any of
the Securities have been transferred by any such Person for estate or tax
planning purposes, (iii) any charity or foundation to which the Securities have
been transferred by the Purchaser or any Person or entity described in clause
(i) or (ii) above for estate or tax planning or charitable purposes, or (iv) the
beneficiary of any bona fide pledge by the Purchaser of any of the Securities;
provided, that, such transferee agrees to be bound by the provisions hereof in
accordance with the preceding sentence. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto and
any Permitted Transferee any rights or remedies hereunder.
10.6 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
10.7 Governing Law. The internal laws, and not the laws of conflicts
(other than Section 5-1401 of the General Obligations Law of the State of New
York), of New York shall govern the enforceability and validity of this
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
10.8 Expenses. The Company shall pay all fees and expenses of its
counsel and the reasonable fees and expenses of the Purchaser's counsel up to
$200,000; provided, however, that if the Purchaser does not exercise its option
to purchase any Securities in Tranche B, then the Purchaser shall pay all fees
and expenses of its counsel and up to $200,000 of the aggregate of (x) the
reasonable fees and expenses of the Company's counsel and (y) the reasonable
fees and expenses of Sutter Securities Incorporated.
10.9 Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought in any
federal or state court located in the County and State of New York, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on either party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 10.1 shall
be deemed effective service of process on such party.
10.10 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
10.11 Counterparts; Effectiveness. This Agreement may be executed in
any number of counterparts and by a different party hereto in separate
counterparts, with the same effect as if each party had signed the same
document. All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument. This Agreement shall
become effective when each party hereto shall have
24
received counterparts hereof signed by each of the parties hereto.
10.12 Entire Agreement. The Transaction Documents, the
Confidentiality Letter Agreement and that certain letter from TriNet Employer
Group, Inc. to the Company, dated August 13, 2003, contain the entire agreement
among the parties hereto with respect to the subject matter hereof and supersede
and replace all other prior agreements, written or oral, among the parties
hereto with respect to the subject matter hereof.
10.13 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
10.14 Reasonable Best Efforts. The Company and the Purchaser shall
each cooperate with the other and use (and shall cause their respective
Subsidiaries to use) their respective reasonable best efforts to promptly (i)
take or cause to be taken all necessary actions, and do or cause to be done all
things, necessary, proper or advisable under this Agreement and applicable laws
to consummate and make effective all the transactions contemplated by this
Agreement as soon as practicable, including, without limitation, preparing and
filing promptly and fully all documentation to effect all necessary filings,
notices, petitions, statements, registrations, submissions of information,
applications and other documents and (ii) obtain all approvals required to be
obtained from any governmental body or third party necessary, proper or
advisable to the transactions contemplated by this Agreement.
10.15 Change; Waiver. No change or modification of this Agreement
shall be valid unless the same is in writing and signed by the parties hereto.
No waiver of any provision of this Agreement shall be valid unless in writing
and signed by the party waiving its rights. The failure of either party at any
time to insist upon, or any delay by either party at any time to insist upon,
strict performance of any condition, promise, agreement or understanding set
forth herein shall not be construed as a waiver or relinquishment of the right
to insist upon strict performance of the same condition, promise, agreement or
understanding at a future time.
[Execution Page Follows]
25
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed as of the day and year first above
written.
SIGA TECHNOLOGIES, INC.
By: /s/ Thomas N. Konatich
----------------------
Name: Thomas N. Konatich
Title: Chief Financial Officer
Acting CEO
MACANDREWS & FORBES HOLDINGS
INC.
By: /s/ Howard Gittis
-----------------
Name: Howard Gittis
Title: Vice Chairman
26
APPENDIX C
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
New York, New York 10021
October 8, 2003
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, New York 10170
Attention: Thomas N. Konatich
Dear Mr. Konatich:
Reference is made to the Securities Purchase Agreement (the "Purchase
Agreement"), dated August 13, 2003, by and between SIGA Technologies, Inc. (the
"Company") and MacAndrews & Forbes Holdings Inc. ("M & F"). Capitalized terms
used but not defined herein shall have the meanings set forth in the Purchase
Agreement.
Pursuant to Section 10.5 of the Purchase Agreement, M & F hereby assigns
in part its right to purchase Shares and Warrants to a Permitted Transferee (the
"Assignee") as set forth on Schedule A hereto.
The undersigned Assignee hereby agrees that it will be bound by all
provisions of the Purchase Agreement that are binding on the Purchaser
thereunder. Without limiting the foregoing, the Assignee hereby represents and
warrants to the Company that:
1. Investment Representations and Warranties. The Assignee understands that
the Securities have not been, and will not upon issuance be, registered
under the Securities Act, and that the certificates evidencing the
Securities shall bear a legend to that effect, unless prior to issuance,
the Securities shall have been so registered.
2. Acquisition for Own Account. The Assignee is acquiring the Securities for
its own account for investment and not with a view toward distribution in
a manner which would violate the Securities Act.
3. Ability to Protect Its Own Interests and Bear Economic Risks;
Understanding of Use of Proceeds. By reason of the business and financial
experience of its management, the Assignee has the capacity to protect its
own interests in connection with the transactions contemplated by the
Purchase Agreement. The Assignee is able to bear the economic risk of an
investment in the Securities, and has an adequate income independent of
any income produced from an investment in the Securities and has
sufficient net worth to sustain a loss of all of its investment in the
Securities without economic hardship if such a loss should occur. The
Assignee understands in all material respects the purposes for which the
proceeds to the Company from the sale of the Shares and the Warrants will
be used, as such purposes are set forth in Section 7.8 of the Purchase
Agreement.
4. Accredited Investor. The Assignee is an "accredited investor" as that term
is defined in Regulation D promulgated under the Securities Act.
5. Access to Information. The Assignee has been furnished with the materials
relating to the Company's business, operations, financial condition,
assets, liabilities and other matters relevant to the Assignee's
investment in the Securities, which have been requested by the Assignee.
The Assignee has had adequate opportunity to ask questions of, and receive
answers from, the Company's officers, employees, agents, accountants, and
representatives concerning the
27
Company's business, operations, financial condition, assets, liabilities,
and all other matters relevant to its investment in the Securities.
In connection with the assignment to the Assignee, Section 7.7(a) of the
Purchase Agreement is hereby amended by deleting it in its entirety and
substituting the following in lieu thereof:
"(a) (i) At such time as MacAndrews & Forbes Holdings Inc. ("M & F")
and TransTech Pharma, Inc. ("TTP") shall have invested an aggregate of
$5,000,000 or more in Shares and, with respect to the M & F Representative
(as defined below), for so long as M & F, together with its Affiliates
(other than TTP), beneficially owns at least 1,700,000 Shares (as
appropriately adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock dividend, stock distribution or
similar event), and, with respect to the TTP Representative (as defined
below), for so long as TTP, together with its Affiliates (other than M &
F, its officers or Affiliates), beneficially owns at least 1,700,000
Shares (as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock dividend, stock
distribution or similar event), the Company shall use its reasonable best
efforts to appoint to its Board of Directors one individual designated by
M & F (the "M & F Representative") and one individual designated by TTP
(the "TTP Representative" and together with the M & F Representative, the
"Purchaser Representatives"). Prior to such time, the Company shall enter
into indemnification agreements with each of the Purchaser Representatives
on terms no less favorable to the Purchaser Representatives than the terms
of the indemnification agreements of the existing members of the Board of
Directors.
(ii) The initial Purchaser Representatives shall be those Persons
who are designated by M & F or TTP, as the case may be, following the
fulfillment of the conditions set forth in Section 7.7(a)(i) hereof to
serve until their successors are duly elected; and thereafter the
Purchaser Representatives shall be elected at the same time as other
members of the Company's Board of Directors. If for any reason the M & F
Representative or the TTP Representative shall resign or otherwise be
removed from the Company's Board of Directors, then the Company shall use
its reasonable best efforts to appoint, as his or her replacement, the
individual designated by M & F or TTP, as the case may be."
Further, Section 7.7(d) of the Purchase Agreement is hereby amended by
deleting the phrase "M & F Representatives" and inserting in lieu thereof the
phrase "Purchaser Representatives."
As modified hereby, the Purchase Agreement and its terms and provisions
are hereby ratified and confirmed for all purposes and in all respects.
The internal laws, and not the laws of conflicts (other than Section
5-1401 of the General Obligations Law of the State of New York), of New York
shall govern the enforceability and validity of this letter agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties. Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this letter agreement
or the transactions contemplated hereby may be brought in any federal or state
court located in the County and State of New York, and each of the parties
hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on either party
anywhere in the world, whether within or without the jurisdiction of any such
court.
Nothing expressed or referred to in this letter agreement will be
construed to give any person other than the parties to this letter agreement and
the Company any legal or equitable right, remedy, or claim under or with respect
to this letter agreement or any provision of this letter agreement. This letter
agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this letter agreement and the Company.
28
No change or modification of this letter agreement shall be valid unless
the same is in writing and signed by the parties hereto. No waiver of any
provision of this letter agreement shall be valid unless in writing and signed
by the party waiving its rights. The failure of any party at any time to insist
upon, or any delay by either party at any time to insist upon, strict
performance of any condition, promise, agreement or understanding set forth
herein shall not be construed as a waiver or relinquishment of the right to
insist upon strict performance of the same condition, promise, agreement or
understanding at a future time.
* * * * *
29
Please indicate your agreement with the foregoing by executing and
returning the enclosed copy of this letter agreement.
Sincerely,
MACANDREWS & FORBES HOLDINGS INC.
By: /s/ Howard Gittis
-----------------
Name: Howard Gittis
Title: Vice Chairman
[SIGNATURE PAGE TO ASSIGNMENT LETTER AGREEMENT]
ACCEPTED AND AGREED:
TransTech Pharma, Inc.
By: /s/ Adnan Mjalli
-----------------
Name: Adnan Mjalli
Title: President and CEO
[SIGNATURE PAGE TO ASSIGNMENT LETTER AGREEMENT]
ACCEPTED AND AGREED:
SIGA Technologies, Inc.
By: /s/ Thomas N. Konatich
----------------------
Name: Thomas N. Konatich
Title: Acting Chief Executive Officer
[SIGNATURE PAGE TO ASSIGNMENT LETTER AGREEMENT]
Schedule A
Assignment to Assignee
- -------------------------------------------------------------------------------------------
Name of Assignee Maximum Number of Tranche B Maximum aggregate purchase price
Shares which Assignee is which Assignee is to pay for
assigned right to purchase Tranche B Shares at the Per
Share Purchase Price (Tranche B
Warrants to be issued for no
additional consideration)
- -------------------------------------------------------------------------------------------
TransTech Pharma, Inc. 3,472,222 $4,999,999.68
- -------------------------------------------------------------------------------------------
2
APPENDIX D
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 13, 2003, between SIGA
Technologies, Inc., a Delaware corporation (the "Company"), and MacAndrews &
Forbes Holdings Inc., a Delaware corporation (the "Stockholder").
In consideration of the mutual covenants and agreements herein contained,
the parties to this Agreement hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Affiliate" means, with respect to any specified Person, (i) any
other Person 50% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with the power to vote by such specified
Person or (ii) any other Person directly or indirectly controlling, controlled
by or under direct or indirect common control with such specified Person. For
purposes of this definition, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person by virtue of ownership of voting securities, by contract
or otherwise.
"Agreement" means this Registration Rights Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to this Registration Rights Agreement as the
same may be in effect at the time such reference becomes operative.
"Closing" has the meaning assigned to it in the Purchase Agreement.
"Common Stock" means common stock, par value $0.0001 per share, of
the Company.
"Company" has the meaning assigned to it in the introductory
paragraph to this Agreement.
"Demand Registration" has the meaning assigned to it in Section 2(a)
hereof.
"Demand Registration Statement" has the meaning assigned to it in
Section 2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holder" means the Stockholder and any other Person that holds
Registrable Securities, including their respective transferees, successors and
assigns who acquire Registrable Securities, directly or indirectly, from the
Stockholder or such other Person, respectively. For purposes of this Agreement,
the Company may deem and treat the registered holder of a Registrable Security
as the Holder and absolute owner thereof, and the Company shall not be affected
by any notice to the contrary.
"Holder Shares" has the meaning assigned to it in Section 5 hereof.
"Initially Proposed Shares" has the meaning assigned to it in
Section 5 hereof.
"Inspectors" has the meaning assigned to it in Section 6(a)(xiii)
hereof.
"Majority Holder" has the meaning assigned to it in Section 2(a)
hereof.
"Participating Holder" has the meaning assigned to it in Section
6(a)(i) hereof.
"Permitted Transferee" means (i) any Affiliate of the Holder,
including, without limitation, directors, executives and officers of the Holder,
(ii) any member of the family of any Affiliate of the Holder, including any such
Person's spouse and descendants and any trust, partnership, corporation, limited
liability company or other entity for the benefit of such spouse and/or
descendants to whom or which any of the Registrable Securities have been
transferred by any such Person for estate or tax planning purposes, (iii) any
charity or foundation to which the Securities have been transferred by the
Holder or any Person or entity described in clause (i) or (ii) above for estate
or tax planning or charitable purposes, or (iv) the beneficiary of any bona fide
pledge by the Holder of any of the Registrable Securities.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, governmental agency or authority or other
entity.
"Purchase Agreement" means the Securities Purchase Agreement by and
between the Company and the Stockholder, dated as of the date hereof.
"Registrable Securities" means (a) any shares of Common Stock owned
by a Holder, (b) the Warrant Shares, and (c) any securities issued or issuable
in respect of Common Stock or other capital stock referred to in clauses (a) and
(b) above by way of conversion, exercise or exchange or any stock dividend or
stock split or in connection with a combination of shares, recapitalization,
reclassification, merger or consolidation, and any other securities issued
pursuant to any other pro rata distribution with respect to such Common Stock or
other capital stock. For purposes of this Agreement, a Registrable Security
ceases to be a Registrable Security when (x) it has been effectively registered
under the Securities Act and sold or distributed to the public in accordance
with an effective registration statement covering it (and has not been
reacquired in the manner described in clause (c) above), or (y) it is sold or
distributed to the public pursuant to Rule 144 (or any successor or similar
provision) under the Securities Act.
"Registration Expenses" has the meaning assigned to it in Section
6(e) hereof.
"S-3 Registration" has the meaning assigned to it in Section 4
hereof.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shelf Registration Statement" has the meaning assigned to it in
Section 3(a) hereof.
2
"Shelf Registration Period" means, with respect to each Shelf
Registration Statement, the earliest to occur of (i) the sale of all the
Registrable Securities registered on such Registration Statement, or (ii) four
years from the date of the later of (x) the date of the final issuance of
Warrant Shares upon exercise of the Warrants registered on such Shelf
Registration Statement or (y) the date of the effectiveness of such Shelf
Registration Statement; provided, however, the Shelf Registration Period shall
be extended by the aggregate number of days a Shelf Registration Statement is
postponed pursuant to Section 3(e) hereof.
"Stockholder" has the meaning assigned to it in the introductory
paragraph to this Agreement.
"Subject Shares" has the meaning assigned to it in Section 6(a)
hereof.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon exercise of the Warrants.
"Warrants" means the warrants to acquire Common Stock issued
pursuant to the Purchase Agreement.
2. Demand Registration.
(a) If registration on a Shelf Registration Statement pursuant to
Section 3 hereof is not available to a Holder or Holders at any time, then upon
the request in writing of any Holder or Holders who together hold a majority of
the then outstanding Registrable Securities (the "Majority Holder") to register
under the Securities Act all or a part of the Registrable Securities held by
such Majority Holder (a "Demand Registration"), the Company shall use all
reasonable efforts to cause to be filed as soon as reasonably practicable (but
in no event later than the 60th day after such Majority Holder's request is
made) a registration statement providing for the sale of all such Registrable
Securities to be registered by such Majority Holder, and shall use all
reasonable efforts to cause such registration statement to be declared effective
within 60 days of such filing, including, but not limited to, a sale of such
Registrable Securities in connection with the issuance of any securities
convertible into or exchangeable or exercisable for Registrable Securities or
the sale of Registrable Securities upon conversion, exercise or exchange
thereof; provided, that, the anticipated offering price of each Demand
Registration shall be at least $5,000,000. The Company agrees to use its
reasonable efforts to keep any such registration statement continuously
effective and usable for resale of Registrable Securities for a period of not
less than 180 days, or such shorter period as is necessary to complete the
distribution of the securities covered by such registration statement. Each
registration statement filed pursuant to this Section 2(a) is hereinafter
referred to as a "Demand Registration Statement." The Company may, if permitted
by law, effect any registration pursuant to this Section 2(a) by the filing of a
registration statement on Form S-3. However, if such registration involves an
underwritten public offering and the managing underwriter(s) at any time shall
notify the Company in writing that, in the sole judgment of such managing
underwriter(s), inclusion of some or all of the information required in a more
detailed form specified in such notice is of material importance to the success
of the public offering of such Registrable Securities, the Company shall use all
reasonable efforts to supplement or amend such registration statement to include
such information.
3
(b) Subject to the provisions of Section 2(a), the Majority Holder
shall be entitled to request no more than two Demand Registrations. A
registration shall not count as one of the permitted Demand Registrations unless
(i) the registration statement filed in connection therewith has become
effective, (ii) the Majority Holder requesting such registration is able to
register and sell at least 50% of the Registrable Securities requested by such
Majority Holder to be included in such registration or (iii) in the case of a
Demand Registration that would be the last permitted Demand Registration
requested hereunder, the Majority Holder requesting such registration is able to
register and sell all of the Registrable Securities requested to be included by
such Majority Holder in such registration. Notwithstanding the foregoing, a
registration shall count as one of the permitted Demand Registrations if the
registration statement in connection therewith is filed and subsequently
withdrawn, at the request of the Majority Holder, unless all Registration
Expenses with respect to such withdrawn registration statement are paid by such
Majority Holder.
(c) The Company shall not effect any public or private sale,
distribution or purchase of any of its securities which are the same as or
similar to the Registrable Securities, including a sale pursuant to Regulation D
under the Securities Act, during the 15-day period prior to, and during the
30-day period beginning on, the closing date of each underwritten offering under
any Demand Registration Statement.
(d) The Company may postpone for a reasonable period of time, not to
exceed 45 days, the filing or the effectiveness of any Demand Registration
Statement if (i) the board of directors of the Company in good faith determines
that (A) such registration would have a material adverse effect on any plan or
proposal by the Company with respect to any financing, acquisition,
recapitalization, reorganization or other material transaction, or (B) the
Company is in possession of material non-public information that, if publicly
disclosed, would result in a material disruption of a major corporate
development or transaction then pending or in progress or in other material
adverse consequences to the Company, and (ii) the Company so notifies the
Majority Holder within five days after the Majority Holder requests such
registration. The Company's right to defer the filing of a registration
statement pursuant to the provisions of the preceding sentence may not be
exercised more than twice during any 12-month period.
(e) If at any time the Majority Holder notifies the Company in
writing of the Majority Holder's desire that the Registrable Securities to be
covered by a Demand Registration Statement be sold in an underwritten offering,
such Majority Holder shall have the right to select any nationally recognized
investment banking firm(s) to administer the offering, subject to the approval
of the Company, which approval shall not be unreasonably withheld, and the
Company shall enter into underwriting agreements with the underwriter(s) of such
offering, which agreements shall contain such representations and warranties by
the Company, and such other terms, conditions and indemnities as are at the time
customarily contained in underwriting agreements for similar offerings and the
Company shall take or cause to be taken all such other actions, in addition to
the registration procedures set forth in Section 6 hereof, as are reasonably
requested by the managing underwriter(s) in order to expedite or facilitate the
registration and disposition of the Registrable Securities, including, without
limitation, causing management to participate in "road show" presentations.
4
3. Shelf Registration.
(a) No later than 45 days after each Closing under the Purchase
Agreement, the Company shall file with the SEC a "shelf" Registration Statement
(each, a "Shelf Registration Statement") on Form S-3 (or, if Form S-3 is not
then available, on such form of Registration Statement as is then available to
effect a registration of the Registrable Securities), covering the resale of
such number of shares of Registrable Securities as shall equal the sum of the
number of (x) shares of Common Stock issued at such Closing, (y) the shares of
Common Stock issued or issuable upon exercise of the Warrants issued at such
Closing and (z) any shares of Common Stock issued or issuable with respect to
the shares of Common Stock issued or issuable and referred to in clause (x) or
(y) of this sentence by way of exercise, exchange or any stock dividend or stock
split or in connection with a combination of shares, recapitalization,
reclassification, merger or consolidation, and any other securities issued
pursuant to any other pro rata distribution with respect to such Common Stock or
other capital stock.
(b) The Shelf Registration Statements, to the extent allowable under
the Securities Act (including Rule 416 under the Securities Act), shall state
that such Shelf Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon the exercise of
the Warrants to prevent dilution resulting from certain issuances of Common
Stock, adjustments upon stock dividends, stock subdivisions, spin offs,
reclassifications, reorganizations, consolidations, mergers, stock splits, or
otherwise.
(c) The Company shall use its reasonable best efforts to cause each
Shelf Registration Statement to be effective no later than 90 days after the
date it is first filed with the SEC.
(d) The Company shall keep each Shelf Registration Statement
effective pursuant to Rule 415 under the Securities Act at all times until the
expiration of the applicable Shelf Registration Period (except during the period
of any postponement pursuant to paragraph (e) of this Section 3). In the event
the number of shares available under a Shelf Registration Statement filed
pursuant to this Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon the exercise of the Warrants to prevent
dilution resulting from certain issuances of Common Stock, adjustments upon
stock dividends, stock subdivisions, spin offs, reclassifications,
reorganizations, consolidations, mergers, stock splits, or otherwise, the
Company shall amend such Shelf Registration Statement, or file a new Shelf
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within 10 business days after the necessity
therefor arises. The Company shall use its best efforts to cause such amendment
and/or new Shelf Registration Statement to become effective as soon as
practicable following the filing thereof.
(e) The Company may postpone for a reasonable period of time, not to
exceed 45 days, the filing or the effectiveness of any Shelf Registration
Statement if (i) the board of directors of the Company in good faith determines
that (A) such registration would have a material adverse effect on any plan or
proposal by the Company with respect to any financing, acquisition,
recapitalization, reorganization or other material transaction, or (B) the
Company is in possession of material non-public information that, if publicly
disclosed, would result in a material disruption of a major corporate
development or transaction then pending or in progress or in other material
adverse consequences to the Company, and (ii) the Company so notifies the
Majority Holder within five days after the Majority Holder request such
registration. The Company's right to defer the filing of a
5
registration statement pursuant to the provisions of the preceding sentence may
not be exercised more than twice during any 12-month period.
4. S-3 Registrations. If registration on a Shelf Registration Statement
pursuant to Section 3 hereof is not available to a Holder or Holders at any
time, then if such Holder or Holders request in writing that the Company file a
Registration Statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Registrable Securities held by such
Holders, the Company shall use its reasonable best efforts to register under the
Securities Act on Form S-3 or any successor thereto (an "S-3 Registration"), for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such notice;
provided, however, that (i) no more than two such S-3 Registrations shall be
required in any 12-month period and (ii) the Company shall have no obligation to
register such Registrable Securities pursuant to this Section 4 if the
anticipated aggregate offering price in such S-3 Registration shall not be at
least $500,000. There is no limitation on the number of registrations that the
Company is obligated to effect pursuant to this Section 4.
5. Incidental Registration. Subject to the terms and conditions set forth
in this Section 5 and unless otherwise registered pursuant to any other section
hereof or otherwise, if the Company proposes at any time to register any equity
securities (the "Initially Proposed Shares") under the Securities Act, whether
or not for its own account, the Company will promptly give written notice to the
Holders of its intention to effect such registration (such notice to specify,
among other things, the proposed offering price (if applicable), the kind and
number of securities proposed to be registered and the distribution
arrangements, including identification of the underwriter(s), if any), and the
Holders shall be entitled to include in such registration such number of
Registrable Securities (the "Holder Shares") to be sold for the account of the
Holders (on the same terms and conditions as the Initially Proposed Shares) as
shall be specified in a request in writing delivered to the Company within 15
days after the receipt of the Company's notice.
The Company's obligations to include Holder Shares in a registration
statement pursuant to this Section 5 is subject to each of the following
limitations, conditions and qualifications:
(i) If, at any time after the Company gives written notice to the
Holders of its intention to effect a registration of any of its equity
securities (whether or not for its own account) and prior to the effective
date of any registration statement filed in connection with such
registration, either the Company (in the case of the Company intending to
register securities for its own account) or holders of Company securities
(in the case of the Company intending to register securities on behalf of
holders of securities other than Registrable Securities) shall determine
for any reason not to register any securities which were theretofore the
subject of such registration, the Company shall give written notice of
such determination to the Holders and thereupon it shall be relieved of
its obligation to use any efforts to register any Holder Shares in
connection with such aborted registration (but not from its obligation to
pay the Registration Expenses in connection therewith).
(ii) If the managing underwriter(s) (in the case of an underwritten
offering) of such offering shall notify in writing the Company and each
Holder who shall have requested the inclusion of Registrable Securities in
such underwritten offering that, in the good faith judgment of such
managing underwriter(s), the distribution of all or a specified portion of
the
6
Holder Shares would materially interfere with the registration and sale,
in accordance with the intended method thereof, of the Initially Proposed
Shares, then the number of Holder Shares to be included in such
registration statement shall be reduced to such number, if any, that, in
the good faith judgment of such managing underwriter(s), can be included
without such interference; provided, however, that, if
(1) the Initially Proposed Shares were being registered by the
Company for its own account, then the number of securities to
be included in such registration shall be allocated (x) first,
to the Company, and (y) second, pro rata among all holders of
Company securities (including the Holders) on the basis of the
number of shares requested to be included in such registration
statement by such holders; and
(2) the Initially Proposed Shares were being registered by the
Company for the account of holders of Company securities
(other than the Holders), then the number of securities to be
included in such registration shall be allocated (x) first,
pro rata among the holders of Company securities (other than
Holders) requesting such registration based upon the number of
securities each such holder requested be included in such
registration, and (y) second, pro rata among all holders of
Company securities not included in the foregoing clause (x)
(including Holders) and the Company on the basis of the number
of shares requested to be included in such registration
statement by such holders and the Company.
(iii) If, as a result of the cutback provisions contained in Section
5(ii) hereof, the Holders are not entitled to include all of the Holder
Shares in such registration, such Holders may elect to withdraw their
request to include Holder Shares in such registration.
(iv) If the Company shall so deliver such a request in writing to
the Holders, each Holder shall not effect any public or private sale or
distribution of any Registrable Securities (other than the Holder Shares)
during the 15-day period prior to, and during the 45-day period beginning
on, the closing date of any underwritten public offering of shares of
Common Stock made for the Company's own account.
6. Registration Procedures.
(a) Whenever the Company is required to effect the registration of
any Registrable Securities under the Securities Act pursuant to the terms and
conditions of Section 2, 3, 4 or 5 hereof (such Registrable Securities being
hereinafter referred to as "Subject Shares"), the Company will use all
reasonable efforts to effect the registration and sale of the Subject Shares in
accordance with the intended method of disposition thereof. Without limiting the
generality of the foregoing, the Company will as soon as practicable:
(i) furnish to each Holder of Subject Shares (a "Participating
Holder") and to each managing underwriter, if any, a reasonable time in
advance of their filing with the SEC, any registration statement,
amendment (or post-effective amendment) or supplement thereto, and any
prospectus used in connection therewith, and each Participating
7
Holder shall have, within a reasonable period of time, the opportunity to
object to any information pertaining to such Participating Holder and its
plan of distribution that is contained therein and the Company will make
the corrections reasonably requested by such Participating Holder with
respect to such information prior to filing any such registration
statement or any amendment or supplement thereto; and furnish a copy of
any and all transmittal letters or other correspondence with the SEC or
any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange)
relating to such offering of Registrable Securities;
(ii) prepare and file with the SEC registration statements
with respect to the Subject Shares in form and substance reasonably
satisfactory to the Participating Holders, and use all reasonable efforts
to cause such registration statements to become effective as soon as
possible;
(iii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to each registration statement
and the prospectus used in connection therewith as may be necessary to
keep each such registration statement effective for the applicable period
(or, in the case of a Shelf Registration Statement, the applicable Shelf
Registration Period (except during the period of any postponement pursuant
to Section 3(e) hereof)) and to comply with the provisions of the
Securities Act with respect to the disposition of all Subject Shares and
other securities covered by such registration statements (until such time,
in the case of a Shelf Registration Statement, as all of such Registrable
Securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such Shelf
Registration Statement);
(iv) furnish each Participating Holder and each managing
underwriter, if any, without charge, such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by
reference therein) and the prospectus included in such registration
statement (including each preliminary prospectus and prospectus
supplement) and any other prospectus filed under Rule 424 promulgated
under the Securities Act relating to the Registrable Securities and such
other documents as such Participating Holder or such underwriter may
reasonably request;
(v) after the filing of each registration statement, promptly
notify each Participating Holder and each managing underwriter, if any, of
any stop order issued or, to the knowledge of the Company, threatened to
be issued by the SEC;
(vi) use all reasonable efforts to register or qualify the
Subject Shares covered by such registration statement under the securities
or blue sky laws of such jurisdictions (including any foreign country or
any political subdivision thereof) as the managing underwriter(s), if any,
shall reasonably recommend, and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Participating
Holders to consummate the disposition in such jurisdictions of the Subject
Shares covered by such registration statement, except that the Company
shall not for any such purpose be required to (A) qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, (B) subject itself to taxation in any jurisdiction wherein it
is not
8
so subject, or (C) consent to general service of process in any such
jurisdiction or otherwise take any action that would subject it to the
general jurisdiction of the courts of any jurisdiction in which it is not
so subject;
(vii) promptly inform each Participating Holder and the
managing underwriter(s), if any, (x) in the case of any offering of the
Registrable Securities in respect of which a registration statement is
filed under the Securities Act, of the date on which a registration
statement or any post-effective amendment thereto has been filed and when
the same has become effective and, if applicable, of the date of filing a
Rule 430A prospectus, (y) of any written comments from the SEC with
respect to any filing referred to in clause (x) and of any request by the
SEC, any securities exchange, government agency, self-regulatory body or
other body having jurisdiction for any amendment of or supplement to any
registration statement or preliminary prospectus or prospectus included
therein or any offering memorandum or other offering document relating to
such offering or (z) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws of
any jurisdiction;
(viii) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC;
(ix) provide a transfer agent and registrar for all
Registrable Securities covered by such registration statement not later
than the effective date of such registration statement;
(x) furnish, at the Company's expense, unlegended certificates
representing ownership of the securities being sold in such denominations
as shall be requested and instruct the transfer agent to release any stop
transfer orders with respect to the Subject Shares being sold;
(xi) notify each Participating Holder at any time when a
prospectus relating to the Subject Shares is required to be delivered
under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein (in the case of the prospectus or
any preliminary prospectus, in light of the circumstances under which they
were made) not misleading, and the Company will promptly thereafter
prepare and file with the SEC and furnish a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
Subject Shares, such prospectus will not contain any 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 (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading;
(xii) enter into customary agreements (including, but not
limited to, an underwriting agreement in customary form in the case of an
underwritten offering) and make such representations and warranties to the
sellers, underwriter(s), placement agents and other financial
intermediaries as in form and substance and scope are customarily made by
issuers
9
to such parties and take such other actions as the Holders or such other
parties, if any, reasonably require in order to expedite or facilitate the
disposition of such Subject Shares. A Participating Holder may, at its
option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the
benefit of such other parties also be made to and for the benefit of any
one or more Participating Holders, and that any or all of the conditions
precedent to the obligations of such other parties under such agreement
also be conditions precedent to the obligations of the Participating
Holders;
(xiii) make available for inspection by the Participating
Holders, any underwriter, agent or other financial intermediary
participating in any disposition pursuant to such registration statement,
and any one attorney, accountant or other similar professional advisor
retained by any such Participating Holders or underwriter (collectively,
the "Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Company, as shall be reasonably
necessary to enable them to exercise their due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with
such registration statement;
(xiv) make available senior management personnel of the
Company to participate in, and cause them to cooperate with any
underwriter, agent or other financial intermediary in connection with,
"road show" and other customary marketing activities, including
"one-on-one" meetings with prospective purchasers of the Subject Shares;
(xv) obtain for delivery to the Company, any underwriter,
agent or other financial intermediary or their agents, with copies to the
Participating Holders, a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters
of the type customarily covered by "cold comfort" letters as the
Participating Holders or the managing underwriter, agent or other
financial intermediary reasonably request;
(xvi) obtain for delivery to the Participating Holders and any
underwriter, agent or other financial intermediary or their agents an
opinion or opinions from counsel for the Company in customary form and
reasonably satisfactory to the Participating Holders, underwriters or
agents and their counsel;
(xvii) make available to its security holders consolidated
earnings statements, which need not be audited, satisfying the provisions
of Section 11(a) of the Securities Act, no later than 90 days after the
end of the 12-month period beginning with the first month of the Company's
first quarter commencing after the effective date of such registration
statement, which earnings statements shall cover said 12-month period;
(xviii) make every reasonable effort to prevent the issuance
of any stop order suspending the effectiveness of any such registration
statement or of any order preventing or suspending the effectiveness of
such registration statement at the earliest possible moment;
10
(xix) cause the Subject Shares to be registered with or
approved by such other governmental agencies or authorities (including
foreign governmental agencies and authorities) as may be necessary to
enable the sellers thereof or any underwriter, agent or other financial
intermediary to consummate the disposition of such Subject Shares;
(xx) cooperate with the Holders and the managing
underwriter(s), if any, or any other interested party (including any
interested broker-dealer) in making any filings or submission required to
be made, and the furnishing of all appropriate information in connection
therewith, with the National Association of Securities Dealers, Inc.;
(xxi) cause its subsidiaries to take action necessary to
effect the registration of the Subject Shares contemplated hereby,
including filing any required financial information;
(xxii) effect the listing of the Subject Shares on The Nasdaq
SmallCap Market or such other national securities exchange or
over-the-counter market on which shares of the Common Stock shall then be
listed or shall otherwise be requested by the Holders; and
(xxiii) take all other steps reasonably necessary to effect
the registration of the Subject Shares contemplated hereby.
(b) The Holders shall provide (in writing and signed by the Holders
and stated to be specifically for use in the related registration statement,
preliminary prospectus, prospectus or other document incident thereto) all such
information and materials and take all such action as may be required in order
to permit the Company to comply with all applicable requirements of the SEC and
any applicable state securities laws and to obtain any desired acceleration of
the effective date of any registration statement prepared and filed by the
Company pursuant to this Agreement.
(c) The Holders shall, if requested by the Company or the managing
underwriter(s), if any, in connection with any proposed registration and
distribution pursuant to this Agreement, (i) agree to sell the Subject Shares on
the basis provided in any underwriting arrangements entered into in connection
therewith and (ii) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents customary in similar
offerings; provided, however, that in no event shall a Participating Holder be
required to make any representations or warranties to or agreements with the
Company or the underwriter(s) other than representations, warranties or
agreements regarding such Participating Holder and its ownership of the
securities being registered on its behalf and its intended method of
distribution and any other representation required by law.
(d) Upon receipt of any notice from the Company that the Company has
become aware that the prospectus (including any preliminary prospectus) included
in any registration statement filed pursuant to Section 2, 3, 4 or 5 hereof, as
then in effect, contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, the Holders shall forthwith discontinue
disposition of Subject Shares pursuant to the registration statement covering
the same until the Holders' receipt of copies of a supplemented or amended
prospectus and, if so directed by the Company, deliver to the Company
11
(at the Company's expense) all copies other than permanent file copies then in
the Holder's possession, of the prospectus covering the Subject Shares that was
in effect prior to such amendment or supplement.
(e) The Company shall pay all Registration Expenses. For purposes of
this Agreement, "Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with its obligations under this Agreement
to effect the registration of Registrable Securities pursuant to Section 2, 3, 4
or 5 hereof, and the disposition of such securities, including, without
limitation, all registration, filing, qualification and other fees and expenses
of complying with securities or blue sky laws, transfer agents and registrars'
fees, all word processing, duplicating and printing expenses, the reasonable
fees and disbursements of one counsel retained by the Participating Holders and
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance, but
excluding underwriting discounts and commissions in respect of Registrable
Securities (which underwriting discounts and commissions shall be paid by the
Participating Holders).
(f) In connection with any sale of Subject Shares that are
registered pursuant to this Agreement, the Company and the Holders shall enter
into an agreement providing for indemnification of the Holders by the Company,
and indemnification of the Company by the Holders, on terms customary for such
agreements at that time.
7. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be hand delivered
or mailed postage prepaid by registered or certified mail or transmitted by
facsimile transmission (with immediate telephonic confirmation thereafter),
If to the Company, to:
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, New York 10120
Attention: Thomas N. Konatich
Facsimile No.: (212) 697-3130
with a copy (which shall not constitute notice) to:
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: James A. Grayer, Esq.
Facsimile No.: (212) 715-8000
If to the Stockholder, to:
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
12
New York, New York 10021
Attention: Barry F. Schwartz, Esq.
Facsimile No.: (212) 572-5056
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Franklin M. Gittes, Esq. and
Alan C. Myers, Esq.
Facsimile: (212) 735-2000
If to any other Holder,
to such name at such address as such Holder shall have
indicated in a written notice delivered to the other parties
to this Agreement,
or at such other address as the Company or the Stockholder may specify by
written notice to the other, and each such notice, request, consent and other
communication shall for all purposes of the Agreement be treated as being
effective or having been given when delivered if delivered personally, upon
receipt of facsimile confirmation if transmitted by facsimile, or, if sent by
mail, at the earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and postage prepaid as aforesaid.
8. Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement hereof shall be deemed to be a continuing
waiver in the future thereof or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.
9. Interpretation. When a reference is made in this Agreement to a
section, article, paragraph, clause, annex or exhibit, such reference shall be
to a reference to this Agreement unless otherwise clearly indicated to the
contrary. The descriptive article and section headings herein are intended for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement. The meaning assigned to each term used in this
Agreement shall be equally applicable to both the singular and the plural forms
of such term, and words denoting either gender shall include both genders. Where
a word or phrase is defined herein, each of its other grammatical forms shall
have a corresponding meaning.
10. Amendment. This Agreement may be amended, modified or supplemented by
the parties hereto at any time. This Agreement may not be amended except by a
written instrument executed by the parties hereto.
13
11. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties. The
Holder's rights under this Agreement may be assigned, in whole or in part, to
(a) any Permitted Transferee, and any Permitted Transferee shall be deemed to be
a Holder for all purposes hereunder or (b) any transferee of Registrable
Securities that has acquired (x) the greater of (A) 10% of the Registrable
Securities held by such transferor on the date of such transfer and (B) 68,298
Registrable Securities (appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock dividend, stock
distribution or similar event) or (y) if the transferor shall then hold less
than 68,298 Registrable Securities (appropriately adjusted for any stock split,
combination, reorganization, recapitalization, reclassification, stock dividend,
stock distribution or similar event), all of Registrable Securities held by such
transferor, and any such transferee shall be deemed to be a Holder for all
purposes hereunder; provided, that, no such assignment shall be effective or
confer any right on any such assignee unless, prior to such assignment, the
assignee agrees in writing, in form and substance reasonably satisfactory to the
Company, that such assignee will be bound by all provisions binding on a Holder
hereunder; provided, further, that any beneficiary of a pledge described in
clause (iv) of the definition of "Permitted Transferee" above shall not be
required to agree in writing to be bound by the terms hereof; it being
understood that subsequent Holders are intended third party beneficiaries
hereof.
12. Governing Law. The internal laws, and not the laws of conflicts (other
than Section 5-1401 of the General Obligations Law of the State of New York), of
New York shall govern the enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
be considered one and the same agreement.
14. Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all prior agreements and understandings (written and oral) between
the parties with respect to the subject matter hereof.
15. Available Information. If at any time the Company is required to file
reports in compliance with either Section 13 or Section 15(d) of the Exchange
Act, the Company will comply with all rules and regulations of the SEC
applicable in connection with the use of Rule 144 or Rule 144A promulgated under
the Securities Act and will, upon the request of any Holder, take such other
actions and furnish the Holder with information as the Holder may reasonably
request in order to avail itself of such rule or any other rule or regulation of
the SEC allowing the Holder to sell any Registrable Securities without
registration, and will, at its expense, forthwith upon the request of the
Holder, deliver to such party a certificate, signed by the Company's principal
financial officer, stating (a) the Company's name, address and telephone number
(including area code), (b) the Company's Internal Revenue Service identification
number, (c) the Company's SEC file number, (d) the number of shares of each
class of stock outstanding as shown by the most recent report or statement
published by the Company, and (e) whether the Company has filed the reports
required to be filed under the Exchange Act for a period of at least 90 days
prior to the date of such certificate and in addition has filed the most recent
annual report required to be filed thereunder or as to such matters as would
then be required to establish compliance with Rule 144 or any successor rule or
rules under the Securities
14
Act. If at any time the Company is not required to file reports in compliance
with either Section 13 or Section 15(d) of the Exchange Act, the Company at its
expense will, forthwith upon the written request of the Holder, make available
adequate current public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144.
16. Specific Performance. Irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached; accordingly, the parties hereto
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
17. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
18. Submission to Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the County and State of New York, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on either party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 7 hereof
shall be deemed effective service of process on such party.
19. Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any legal proceeding arising out of
or related to this agreement or the transactions contemplated hereby.
20. Recapitalization, Exchanges, etc., Affecting the Company's Capital
Stock. The provisions of this Agreement shall apply to the full extent set forth
herein with respect to any and all shares of capital stock of the Company or any
successor or permitted assign of the Company (whether by merger, consolidation,
sale of assets or otherwise), or at the election of a Holder, any person who
controls any of the foregoing, which may be issued in respect of, in exchange
for or in substitution of, the Registrable Securities.
[Execution Page Follows]
15
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
SIGA TECHNOLOGIES, INC.
By: /s/ Thomas N. Konatich
----------------------
Name: Thomas N. Konatich
Title: Chief Financial Officer and Acting CEO
MACANDREWS & FORBES HOLDINGS INC.
By: /s/ Howard Gittis
-----------------
Name: Howard Gittis
Title: Vice Chairman
APPENDIX E
[SUTTER SECURITIES LOGO]
SUTTER SECURITIES
July 25, 2003
Special Committee of the Board of Directors
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 601
New York, NY 10170
Attention: Dr. Eric A. Ross
Dear Sirs:
We understand that SIGA Technologies, Inc. ("SIGA") has received an offer
from MacAndrews & Forbes Holdings Inc. ("MacAndrews") to purchase up to
6,944,444 shares of SIGA for a cash price of $1.44 per share (on the terms
described below, the "Proposed Transaction").
MacAndrews would purchase 694,444 shares upon signing of an agreement on
or about August 1, and would have an option to purchase an additional 6,250,000
on or about October 1, 2003. Under NASD rules, a shareholder vote will be
required to authorize the issuance of a portion of the shares. For each share
purchased, MacAndrews would receive 0.5 non-callable seven-year warrants to
acquire a share of SIGA for $2.00 in cash or through a cash-less exercise. After
an investment of at least $5,000,000, MacAndrews would be entitled to nominate
two directors, who would be reimbursed for their reasonable out-of-pocket
expenses. MacAndrews would be entitled to a shelf registration no later than 45
days after each purchase and to two demand registrations for at least
$5,000,000.
You have asked us to render our opinion as to whether the Proposed
Transaction is fair, from a financial point of view, to the public shareholders
of SIGA.
In the course of our analyses for rendering this opinion, we have:
1. reviewed SIGA's Annual Reports on Form 10-K for the years
ended December 31, 2000 through 2002, and its Quarterly
Reports on Form 10-Q for the period ended March 31, 2003;
2. reviewed certain operating and financial information,
including projections, provided to us by management relating
to SIGA's business and prospects;
3. met with certain members of SIGA's senior management to
discuss its operations, historical financial statements and
future prospects;
4. visited SIGA's facilities in Corvallis, Oregon;
5. reviewed the historical market prices and trading volume of
the common shares of SIGA;
6. reviewed publicly available data with respect to recent
private placements of equity by companies which we deemed
generally comparable to SIGA; and
7. conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by SIGA.
With respect to SIGA's projected financial results, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgment of the management of SIGA. We have not assumed any
responsibility for the information or projections provided to us and we have
further relied upon the assurances of the management of SIGA that it is unaware
of any facts that would make the information or projections provided to us
incomplete or misleading. In arriving at our opinion, we have not performed or
obtained any independent appraisal of the assets of SIGA. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.
Based on the foregoing, it is our opinion that the Proposed Transaction is
fair, from a financial point of view, to the public shareholders of SIGA.
Very truly yours,
SUTTER SECURITIES
BY: /s/ G. E. Matthews
------------------
Senior Managing Director
A WHOLLY-OWNED SUBSIDIARY OF SUTTER SECURITIES INCORPORATED
420 LEXINGTON AVENUE o SUITE 2920 o NEW YORK, NY 10170
212-953-3354 o 866-953-3354 o FAX 212-953-3358
www.suttersecurities.com
2
APPENDIX F
SIGA Technologies, Inc.
Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan
The Plan
The SIGA Technologies, Inc. 1996 Incentive and Non-Qualified Stock Option
Plan (the "Plan") was initially adopted in 1996. The Plan subsequently was
amended in 1998, 1999 and 2000 to increase the number of shares of Company
Stock with respect to which awards may be granted under the Plan. The Plan
was amended and restated in its entirety and renamed the SIGA
Technologies, Inc. Amended and Restated 1996 Incentive and Non-Qualified
Stock Option Plan on May 3, 2001, by the Board of Directors, subject to
approval by the stockholders of the Company. The Plan is hereby further
amended and restated, subject to stockholder approval. The terms of the
Plan, as amended and restated, shall apply to all Options granted after
the effective date set forth in Section 24 hereof. The purposes of the
Plan are to attract and retain the best available personnel, to provide an
additional incentive to the employees, consultants and non-employee
directors of SIGA Technologies, Inc., a Delaware corporation (the
"Company"), and to promote the success of the Company's business.
1. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Affiliate" shall mean an entity (whether or not
incorporated), controlling, controlled by or under common
control with the Company.
(b) "Board of Directors" shall mean the Board of Directors of SIGA
Technologies, Inc.
(c) "Cause" shall have the meaning set forth in any employment
agreement between the Participant and the Company in effect as
of the date the event giving rise to cause occurred. In the
absence of such an employment agreement provision, "Cause"
shall mean: (a) the Participant's conviction of any crime
(whether or not involving the Company) constituting a felony
in the jurisdiction involved; (b) conduct of the Participant
related to the Participant's employment for which either
criminal or civil penalties against the Participant or the
Company may be sought; (c) material violation of the Company's
policies, including, without limitation, those relating to
sexual harassment, the disclosure or misuse of confidential
information, or those set forth in Company manuals or
statements of policy; (d) serious neglect or misconduct in the
performance of the Participant's duties for the Company or
willful or repeated failure or refusal to perform such duties;
or (e) any material violation by the Participant of the terms
of any agreement between the Participant and the Company,
including, without limitation, any employment or
non-competition agreement. Any rights the Company may have
hereunder in respect of the events giving rise to Cause shall
be in addition to the rights the Company may have under any
other agreement with a Participant or at law or in equity. Any
determination of whether a Participant's employment is (or is
deemed to have been) terminated for Cause shall be made by the
Committee in its sole discretion, which determination shall be
final and binding on all parties. If, subsequent to a
Participant's termination of employment (whether voluntary or
involuntary) without Cause, it is discovered that the
Participant's employment could have been terminated for Cause,
such Participant's employment shall be deemed to have been
terminated for Cause. A Participant's termination of
employment for Cause shall be effective as of the date of the
occurrence of the event giving rise to Cause, regardless of
when the determination of Cause is made.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
3
(e) "Committee" shall mean the Committee appointed by the Board of
Directors to administer the Plan; provided, however, that the
Committee shall at all times consist of two or more persons,
all of whom are "non-employee directors" within the meaning of
Rule 16b-3 under the Exchange Act and "outside directors"
within the meaning of Section 162(m) of the Code. With respect
to any matters relating to the grant of Options to
non-employee members of the Board of Directors or to
individuals who are not reasonably expected to be "covered
employees" within the meaning of Section 162(m) of the Code at
the time the Option is exercised, the Committee may be the
entire Board of Directors.
(f) "Company" shall mean SIGA Technologies, Inc. or any successor
thereto. References to the Company also shall include the
Company's Affiliates unless the context clearly indicates
otherwise.
(g) "Company Stock" shall mean the common stock of the Company,
par value $0.000l per share.
(h) "Disability" shall mean a disability described in Section
422(c)(6) of the Code. The existence of a Disability shall be
determined by the Committee in its absolute discretion.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(j) "Fair Market Value" shall mean, with respect to a share of
Company Stock on an applicable date:
(i) If the principal market for the Company Stock (the "Market")
is a national securities exchange or the National Association
of Securities Dealers Automated Quotation System ("NASDAQ")
National Market, the last sale price or, if no reported sales
take place on the applicable date, the average of the high bid
and low asked price of Company Stock as reported for such
Market on such date or, if no such quotation is made on such
date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made
within the ten (10) business days preceding the applicable
date; (ii) If the Market is the NASDAQ National List, the
NASDAQ Supplemental List or another market, the average of the
high bid and low asked price for Company Stock on the
applicable date, or, if no such quotations shall have been
made on such date, on the next preceding day on which there
were quotations, provided that such quotations shall have been
made within the ten (10) business days preceding the
applicable date; or, (iii) In the event that neither paragraph
(i) nor (ii) shall apply, the Fair Market Value of a share of
Company Stock on any day shall be determined in good faith by
the Committee in a manner consistently applied.
(k) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of
the Code and that is identified as an Incentive Stock Option
in the applicable Option Agreement.
(l) "Non-Qualified Stock Option" shall mean an Option that is not
an Incentive Stock Option
(m) "Option" shall mean an option to purchase shares of Company
Stock (whether an Incentive Stock Option or a Non-Qualified
Stock Option) that is granted pursuant to the Plan.
(n) "Option Agreement" shall mean an agreement, in such form and
including such terms as the Committee in its sole discretion
shall determine, evidencing an Option.
4
(o) "Participant" shall mean an individual who is eligible to
participate in the Plan pursuant to Section 5 hereof and to
whom an Option is granted pursuant to the Plan, and, upon his
or her death, the individual's successors, heirs, executors
and administrators, as the case may be.
(p) "Plan" shall mean this SIGA Technologies, Inc. Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan,
as it may be amended from time to time. Prior to the effective
date hereof, the Plan was referred to as the SIGA
Technologies, Inc. 1996 Incentive and Non-Qualified Stock
Option Plan and the SIGA Corporation 1996 Stock Option Plan.
(q) "Reload Option" shall mean an Option granted to a Participant
in accordance with Section 6 hereof upon the exercise of an
Option.
(r) References in this Plan to a "termination of employment" or to
a Participant or employee who terminates employment or the
like, mean the Participant's (i) ceasing to be employed by, or
to provide consulting or other services for, the Company or
any corporation (or any of its subsidiaries) which assumes the
Participant's award in a transaction to which Section 424(a)
of the Code applies or (ii) ceasing to be a member of the
Board of Directors. For purposes of the foregoing, if a
Participant (a) at the time of reference, is an employee,
consultant or a member of the Board of Directors, or any two
of the three relationships, or (b) ceases to be an employee,
consultant or a member of the Board of Directors and
immediately is engaged in another of such relationships with
the Company, the Participant shall not be considered to have
terminated employment until he ceases the last of such
relationships with the Company.
2. Stock Subject to the Plan
(a) Plan Limit
Subject to adjustment as provided in Section 9 hereof, the
Committee may grant Options hereunder with respect to shares
of Company Stock that in the aggregate do not exceed 7,500,000
shares. To the extent that any Options terminate, expire or
are cancelled without having been exercised, the shares
covered by such Options shall again be available for grant
under the Plan. Shares of Company Stock issued under the Plan
may be either newly issued shares or treasury shares, at the
discretion of the Committee.
(b) Individual Limit
Subject to adjustment as provided in Section 9 hereof, during
any calendar year, the Committee shall not grant any one
Participant Options hereunder with respect to more than
4,900,000 shares of Company Stock, which limit shall include
any shares represented by an Option granted within the same
year that has been cancelled.
3. Administration of the Plan
The Plan shall be administered by the Committee, provided, however, that
in the absence of the appointment of the Committee or for any other reason
determined by the Board of Directors, the Board of Directors may take any
action under the Plan that would otherwise be the responsibility of the
Committee. The Committee shall from time to time designate the individuals
who shall be granted Options and the amount and type of such Options.
The Committee shall have fill authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the
terms of any Option issued under it, correct any defect or supply any
omission or reconcile any inconsistency in the Plan and any Option
Agreement, adopt such rules and regulations for administering the Plan as
it may deem necessary or appropriate, and delegate such
5
administrative responsibilities as it deems appropriate, provided,
however, that the Committee shall retain the responsibility to designate
the Option recipients and the amount and type of such Options. Decisions
of the Committee shall be final and binding on all parties. The
Committee's determinations under the Plan may, but need not, be uniform
and may be made on a Participant-by-Participant basis (whether or not two
or more Participants are similarly situated).
The Committee may, in its absolute discretion, without amending the Plan,
accelerate the date on which any Option granted under the Plan becomes
vested or otherwise adjust any of the terms of such Option (except that no
such adjustment shall, without the consent of a Participant, reduce the
Participant's rights under any previously granted and outstanding Option
unless the Committee determines that such adjustment is necessary or
appropriate to prevent such Option from constituting "applicable employee
remuneration" within the meaning of Section 162(m) of the Code).
Whether an authorized leave of absence, or absence in military or
government service, shall constitute a termination of employment, and the
impact, if any, of any such leave of absence on Options theretofore
granted under the Plan shall be determined by the Committee in its
absolute discretion, subject to applicable law.
A majority of the Committee shall constitute a quorum at any meeting, and
the acts of a majority of the members present, or acts unanimously
approved in writing by the entire Committee without a meeting, shall be
the acts of the Committee.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and
hold harmless each member of the Committee and each other director or
employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against
any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Committee)
arising out of any action, omission or determination relating to the Plan,
unless, in either case, such action, omission or determination was taken
or made by such member, director or employee in bad faith and without
reasonable belief that it was in the best interests of the Company.
4. Eligibility
The persons who shall be eligible to receive Options pursuant to the Plan
shall be (i) officers and salaried employees of the Company and its
subsidiaries (including employees who are also directors and prospective
salaried employees conditioned on their becoming salaried employees), (ii)
members of the Board of Directors (whether or not they also are employees
of the Company), (iii) such consultants to the Company and its
subsidiaries as the Committee shall select in its discretion, and (iv) any
other key persons, as determined by the Committee in its sole discretion,
provided, however, that Incentive Stock Options only may be granted to
employees of the Company. For purposes of the preceding sentence, an
employee means an individual who is (or is expected to be) classified as
an employee of the Company for purposes of the Company's payroll. A
director shall not be considered an employee of the Company as a result of
the Company's payment of a director's fee.
5. Options
The Committee may grant Options pursuant to the Plan. Each Option shall be
evidenced by an Option Agreement in such form and including such terms as
the Committee shall from time to time approve. Options shall comply with
and be subject to the following terms and conditions:
6
(a) Identification of Options
Each Option granted under the Plan shall be clearly identified in
the applicable Option Agreement as either an Incentive Stock Option
or as a Non-Qualified Stock Option. In the absence of such
identification, an Option shall be deemed to be a Non-Qualified
Stock Option.
(b) Exercise Price
The exercise price-per-share of any Non-Qualified Stock Option
granted under the Plan shall be such price as the Committee shall
determine (which may be equal to, less than or greater than the then
Fair Market Value of a share of Company Stock) on the date on which
such Non-Qualified Stock Option is granted; provided, that such
price may not be less than the minimum price required by law.
Subject to Paragraph (d) of this Section 6, the exercise
price-per-share of any Incentive Stock Option granted under the Plan
shall be not less than 100% of the Fair Market Value of a share of
Company Stock on the date on which such Incentive Stock Option is
granted (except as permitted in connection with the assumption or
issuance of Options in a transaction to which Section 424(a) of the
Code applies) and, to the extent any compensation payable in respect
of an Option is intended to qualify as performance-based
compensation under Section 162(m)(4)(C) of the Code, the exercise
price-per-share of such Option shall be not less than 100% of the
Fair Market Value of a share of Company Stock on the date on which
such Option is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable at such times and under such
conditions as determined by the Committee and set forth in the
applicable Option Agreement, including performance criteria
with respect to the Company and/or the Participant. Except as
provided in Section 7 hereof, an Option shall first be
exercisable as of the date on which it vests, and shall remain
exercisable until the expiration of ten (10) years from the
date such Option was granted; provided, however, that each
Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part. The
partial exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
Upon the partial exercise of an Option, the Option Agreement
evidencing such Option shall be returned to the Participant
exercising such Option together with the delivery of the
certificates described in Section 6(c)(4) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary,
at such time as the Committee reasonably may require. Such
notice shall be accompanied by the Option Agreement evidencing
the Option, shall specify the number of shares of Company
Stock with respect to which the Option is being exercised and
the effective date of the proposed exercise and shall be
signed by the Participant. The Participant may withdraw such
notice at any time prior to the close of business on the
business day immediately preceding the effective date of the
proposed exercise, in which case such Option Agreement shall
be returned to him. Payment for shares of Company Stock
purchased upon the exercise of an Option shall be made on the
effective date of such exercise either:
(i) in cash, by certified check, bank cashier's check or
wire transfer; or
(ii) unless provided otherwise in the applicable Option
Agreement, in shares of Company Stock owned by the
Participant (which, if acquired pursuant to the exercise
of a stock option, were acquired at least six months
prior to the option exercise date) and valued at their
Fair Market Value on the effective date of such
7
exercise, or partly in shares of Company Stock with the
balance in cash, by certified check, bank cashier's
check or wire transfer; or
(iii) unless provided otherwise in the applicable Option
Agreement, pursuant to procedures adopted by the
Committee whereby the Participant, by a properly written
notice, shall direct (A) an immediate market sale or
margin loan respecting all or a part of the shares of
Company Stock to which the Participant is entitled upon
exercise pursuant to an extension of credit by the
Company to the Participant of the exercise price (B) the
delivery of the shares of Company Stock from the Company
directly to the brokerage firm, and (C) the delivery of
the exercise price from the sale or margin loan proceeds
from the brokerage firm directly to the Company.
(iv) at the discretion of the Committee and to the extent
permitted by law, by such other provision as the
Committee may from time to time prescribe.
(v) In addition, the Company may, in its sole discretion and
at the request of the Participant, (A) lend to the
Participant, with full recourse, an amount equal to such
portion of the payment for the shares of Company Stock
pursuant to the Option as the Committee may determine;
or (B) guarantee a loan obtained by the Participant from
a third-party for the purpose of tendering such payment.
Any payment in shares of Company Stock shall be effected
by the delivery of such shares to the Secretary of the
Company, duly endorsed in blank or accompanied by stock
powers duly executed in blank, together with any other
documents and evidences as the Secretary of the Company
shall require from time to time.
(4) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the
Participant or his or her beneficiary (or permitted
transferee), as the case may be, and delivered to the
Participant or his or her beneficiary (or permitted
transferee), as the case may be, as soon as practicable
following the effective date on which the Option is exercised.
(d) Limitations on Grant of Incentive Stock Options
(1) To the extent that the aggregate Fair Market Value (determined
as of the time the option is granted) of the stock with
respect to which Incentive Stock Options granted under this
Plan and all other plans of the Company (and any plans of any
"subsidiary corporation" or "parent corporation" of the
Company within the meaning of Section 424 of the Code) are
first exercisable by any employee during any calendar year
shall exceed the maximum limit (currently, $100,000), if any,
imposed from time to time under Section 422 of the Code, such
options shall be treated as Non-Qualified Stock Options. In
such an event, the determination of which Options shall remain
Incentive Stock Options and which shall be treated as
Non-Qualified Stock Options shall be based on the order in
which such Options were granted, with the excess over the
first $100,000 granted deemed to be Non-Qualified Stock
Options. All other terms and provisions of such Options that
are deemed to be Non-Qualified Stock Options shall remain~
unchanged. Upon the exercise of an Option that, pursuant to
this Section 6(d)(1) is treated in part as an Incentive Stock
Option and in part as a Non-Qualified Stock Option, the
Company shall issue separate stock certificates evidencing the
shares of Company Stock treated as acquired upon exercise of
an Incentive Stock Option and the shares of Company Stock
treated as acquired upon exercise of a Non-Qualified Stock
Option and shall identify each such certificate accordingly in
its stock transfer records.
8
(2) No Incentive Stock Option may be granted to an individual if,
at the time of the proposed grant, such individual owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any of
its "subsidiary corporations" or "parent corporations" (within
the meaning of Section 424 of the Code), unless (i) the
exercise price of such Incentive Stock Option is at least one
hundred ten percent (110%) of the Fair Market Value of a share
of Company Stock at the time such Incentive Stock Option is
granted and (ii) such Incentive Stock Option is not
exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.
(e) Grants of Reload Options
If provided in the applicable Option Agreement, an additional option
(the "Reload Option") shall be granted to any Participant who,
pursuant to Section 6(c)(3)(ii), delivers shares of Company Stock in
partial or full payment of the exercise price of an Option (the
"Original Option"). The Reload Option shall be for a number of
shares of Company Stock equal to the number thus delivered, shall
have an exercise price equal to the Fair Market Value of a share of
Company Stock on the date of exercise of the Original Option, and
shall have an expiration date no later than the expiration date of
the Original Option. A Reload Option only may be granted if the
exercise price-per-share of the Original Option is no less than the
Fair Market Value of a share of Company Stock on its date of grant.
(f) Effect of Termination of Employment
(1) Unless otherwise provided in an applicable Option Agreement,
in the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause,
Disability or death (i) Options granted to such Participant,
to the extent that they were vested at the time of such
termination, shall remain exercisable until the expiration of
90 days after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the
extent that they were not vested at the time of such
termination, shall expire at the close of business on the date
of such termination; provided, however, that no Option shall
be exercisable after the expiration of its term.
(2) Unless otherwise provided in an applicable Option Agreement,
in the event that the employment of a Participant with the
Company shall terminate on account of the death or Disability
of the Participant (i) Options granted to such Participant, to
the extent that they were vested at the time of such
termination, shall remain exercisable (pursuant to Section 16
hereof) until the expiration of one year after such
termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not
vested at the time of such termination, shall expire at the
close of business on the date of such termination; provided.
however, that no Option shall be exercisable after the
expiration of its term.
(3) Unless otherwise provided in an applicable Option Agreement,
in the event of the termination of a Participant's employment
for Cause, all outstanding Options granted to such Participant
shall expire at the commencement of business on the effective
date of such termination (or deemed termination in accordance
with Section 2(c)).
(g) Other Option Grants.
The Committee, in its discretion, may grant Options with terms
different than those set forth herein to the extent such Options are
in substitution for and have terms equivalent to options
9
granted by another company that was merged into or acquired by the
Company or an Affiliate or whose assets or substantially all of
whose assets were acquired by the Company or an Affiliate.
6. Pre-Vesting Exercise
(a) Pre-Vesting Exercise
The Committee, in an Option Agreement, may permit a Participant to
exercise an Option prior to the date on which it vests; provided,
however, the unvested portion of the Company Stock issuable upon
exercise of such Option shall be subject to the nontransferability,
forfeiture and repayment provisions of this Section 7 until such
shares vest.
(b) Restrictions on Transferability
Until a share of Company Stock vests, the Participant may not
transfer or assign the Participant's rights to such share of Company
Stock or to any cash payment related thereto. Until a share of
Company Stock so vests, no attempt to transfer or assign such shares
or the right to any cash payment related thereto, whether by
transfer, pledge, hypothecation or otherwise and whether voluntary
or involuntary, by operation of law or otherwise, shall vest the
transferee or assignee with any interest or right in or with respect
to such share of Company Stock or such cash payment, and the
attempted transfer or assignment shall be of no force and effect.
Each such certificate that is issued pursuant to this Section 7
shall bear the following legend, in addition to any legends or
restrictions imposed pursuant to Section 12 hereof:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the SIGA Technologies, Inc. Amended and Restated 1996
Incentive and Non-Qualified Stock Option Plan and an Agreement
entered into between the registered owner of such shares and SIGA
Technologies, Inc. A copy of the Plan and Agreement is on file in
the office of the Secretary of SIGA Technologies, Inc."
Such legend shall not be removed from the certificates evidencing
such exercised shares of Company Stock until such shares vest, at
which time stock certificates shall be issued pursuant to Section 12
hereof free of such legend.
Each such stock certificate, together with the stock powers relating
to such shares of Company Stock, shall be deposited by the Company
with a custodian designated by the Company (the "Certificate
Custodian"). The Company may designate itself as Certificate
Custodian hereunder. The Company shall cause such Certificate
Custodian to issue to the Participant a receipt evidencing the
certificates that are registered in the name of the Participant and
are held by the Certificate Custodian.
(c) Dividends
Unless the Committee in its absolute discretion otherwise
determines, any securities or other property (including dividends
paid in cash) received by a Participant with respect to a share of
Company Stock issued pursuant to this Section 7, as a result of any
dividend, stock split, reverse stock split, recapitalization,
merger, consolidation, combination, exchange of shares or otherwise,
will not vest until such share of Company Stock vests, and shall be
promptly deposited with the Certificate Custodian designated
pursuant to Section 7(b) hereof until such share vests, at which
time such property shall be delivered to the Participant.
10
Any such cash dividends, prior to the date the share vests, shall be
merely an unfunded, unsecured promise of the Company to pay a sum of
money to the Participant in the future.
(d) Forfeiture and Repayment
Upon termination of a Participant's employment with the Company or
an Affiliate for any reason (including death), all unvested shares
of Company Stock exercised pursuant to any Option hereunder shall be
immediately and irrevocably forfeited. In the event of any such
forfeiture, the Certificate Custodian shall surrender to the Company
as soon as practicable after the effective date of such forfeiture
all certificates for such shares issued to Participant by the
Company. As soon as practicable after such surrender, but in no
event later than 30 days after such surrender, Participant shall be
entitled to a payment by the Company in an amount, in cash equal to
the aggregate of the exercise price-per-share paid for each
exercised but unvested share of Company Stock so forfeited.
7. Right of Recapture
If at any time within one year after the date on which a Participant
exercises an Option, the Committee determines in its discretion that the
Company has been materially harmed by the Participant, whether such harm
(a) results in the Participant's termination or deemed termination of
employment for Cause or (b) results from any activity of the Participant
determined by the Committee to be in competition with any activity of the
Company, or otherwise inimical, contrary or harmful to the interests of
the Company (including, but not limited to, accepting employment with or
serving as a consultant, adviser or in any other capacity to an entity
that is in competition with or acting against the interests of the
Company), then any gain realized by the Participant from such exercise
shall be paid by the Participant to the Company upon notice from the
Company. Such gain shall be determined as of the date of such exercise,
without regard to any subsequent change in the Fair Market Value of a
share of Company Stock. The Company shall have the right to offset such
gain against any amounts otherwise owed to the Participant by the Company
(whether as wages, vacation pay, or pursuant to any benefit plan or other
compensatory arrangement).
8. Adjustment Upon Changes in Company Stock
(a) Shares Available for Grants
Subject to any required action by the stockholders of the Company,
in the event of any change in the number of shares of Company Stock
outstanding by reason of any stock dividend or split, reverse stock
split, recapitalization, merger, consolidation, combination or
exchange of shares or similar corporate change, the maximum number
of shares of Company Stock with respect to which the Committee may
grant Options under Section 3 hereof shall be appropriately adjusted
by the Committee. In the event of any change in the number of shares
of Company Stock outstanding by reason of any other event or
transaction, the Committee may, but need not, make such adjustments
in the number and class of shares of Company Stock with respect to
which Options may be granted under Section 3 hereof as the Committee
may deem appropriate. Any such adjustment pursuant to this Section
9(a) shall be made by the Committee, whose determination shall be
final, binding and conclusive.
(b) Outstanding Options -- Increase or Decrease in Issued Shares Without
Consideration
Subject to any required action by the stockholders of the Company,
in the event of any increase or decrease in the number of issued
shares of Company Stock resulting from a subdivision or
consolidation of shares of Company Stock or the payment of a stock
dividend (but only on the shares of Company Stock), or any other
increase or decrease in the number of such shares effected without
receipt of consideration by the Company, the Committee shall
proportionally adjust the number of shares of Company Stock subject
to each outstanding Option and the exercise price-
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per-share of Company Stock of each such Option. Any such adjustment
pursuant to this Section 9(b) shall be made by the Committee, whose
determination shall be final, binding and conclusive.
(c) Outstanding Options -- Certain Mergers
Subject to any required action by the stockholders of the Company,
in the event that the Company shall be the surviving corporation in
any merger or consolidation (except a merger or consolidation as a
result of which the holders of shares of Company Stock receive
securities of another corporation), each Option outstanding on the
date of such merger or consolidation shall pertain to and apply to
the securities which a holder of the number of shares of Company
Stock subject to such Option would have received in such merger or
consolidation.
(d) Outstanding Options -- Certain Other Transactions
In the event of (1) a dissolution or liquidation of the Company, (2)
a sale of all or substantially all of the Company's assets, (3) a
merger or consolidation involving the Company in which the Company
is not the surviving corporation or (4) a merger or consolidation
involving the Company in which the Company is the surviving
corporation but the holders of shares of Company Stock receive
securities of another corporation and/or other property, including
cash, the Committee shall, in its absolute discretion, have the
power to:
(i) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to
such event (whether or not then vested), and, in full
consideration of such cancellation, pay to the
Participant to whom such Option was granted an amount in
cash, for each share of Company Stock subject to such
Option equal to the excess of (A) the value, as
determined by the Committee in its absolute discretion,
of the property (including cash) received by the holder
of a share of Company Stock as a result of such event
over (B) the exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then
vested) for an option on some or all of the property
which a holder of the number of shares of Company Stock
subject to such Option would have received in such
transaction or on shares of the acquiror or surviving
corporation and, incident thereto, make an equitable
adjustment as determined by the Committee in its
absolute discretion in the exercise price of the Option,
or the number of shares or amount of property subject to
the Option or, if appropriate, provide for a cash
payment to the Participant to whom such Option was
granted in partial consideration for the exchange of the
Option.
(e) Outstanding Options -- Other Changes
In the event of any change in the capitalization of the Company or a
corporate change other than those specifically referred to in
Sections 9(b), (c) or (d) hereof, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares
subject to Options outstanding on the date on which such change
occurs and in the per-share exercise price of each such Option as
the Committee may consider appropriate to prevent dilution or
enlargement of rights. In addition, if and to the extent the
Committee determines it is appropriate, the Committee may elect to
cancel each Option outstanding immediately prior to such event
(whether or not then vested), and, in full consideration of such
cancellation, pay to the Participant to whom such Option was granted
an amount in cash, for each share of Company Stock subject to such
Option, equal to the excess of (A) the Fair Market Value of Company
Stock on the date of such cancellation over (B) the exercise price
of such Option.
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(f) Effect of Loss of Affiliate Status
If an entity ceases to be an Affiliate because the Company sells its
interest in such entity to another party or parties, such event
shall constitute a termination of employment from the Company and
its Affiliates by Participants employed by such entity as of the
date it ceases to be an Affiliate. The Committee may, but need not,
adjust the provisions of the Plan related to the expiration of any
Options not yet vested at termination of employment, as it considers
appropriate in connection with the specific event resulting in loss
of Affiliate status.
(g) No Other Rights
Except as expressly provided in the Plan, no Participant shall have
any rights by reason of any subdivision or consolidation of shares
of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any
dissolution, liquidation, merger or consolidation of the Company or
any other corporation. Except as expressly provided in the Plan, no
issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Company Stock subject to an
Option or the exercise price of any Option.
9. Rights as a Stockholder
No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Option granted
pursuant to this Plan until the date that the Participant becomes the
registered owner of such shares. Except as otherwise expressly provided in
Section 9 hereof, no adjustment to any Option shall be made for dividends
or other rights for which the record date occurs prior to the date such
stock certificate is issued.
10. No Special Employment Rights; No Right to Option
Nothing contained in the Plan or any Option Agreement shall confer upon
any Participant any right with respect to the continuation of his or her
employment by or other relationship with the Company or interfere in any
way with the right of the Company, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Participant
from the rate in existence at the time of the grant of an Option. No
person shall have any claim or right to receive an Option hereunder. The
Committee's granting of an Option to a Participant at any time shall
neither require the Committee to grant an Option to such Participant or
any other Participant or other person at any time nor preclude the
Committee from making subsequent grants to such Participant or any other
Participant or other person.
11. Securities Matters
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933, as amended from time to
time, of any interests in the Plan or any shares of Company Stock to
be issued hereunder or to effect similar compliance under any state
laws. Notwithstanding anything herein to the contrary, the Company
shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan
unless and until the Company is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Company
Stock are traded. The Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Company
Stock pursuant to the terms hereof, that the recipient of such
shares make such covenants, agreements and representations, and that
such certificates bear such legends, as the Committee, in
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its sole discretion, deems necessary or desirable. The Company shall
not permit any shares of Company Stock to be issued pursuant to the
Plan unless such shares of Company Stock are fully paid and
non-assessable, within the meaning of Section 152 of the Delaware
General Corporation Law, except as otherwise permitted by Section
153(c) of the Delaware General Corporation Law.
(b) The exercise of any Option granted hereunder shall be effective only
at such time as counsel to the Company shall have determined that
the issuance and delivery of shares of Company Stock pursuant to
such exercise is in compliance with all applicable laws, regulations
of governmental authority and the requirements of any securities
exchange on which shares of Company Stock are traded. The Committee
may, in its sole discretion, defer the effectiveness of any exercise
of an Option granted hereunder in order to allow the issuance of
shares of Company Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The
Committee shall inform the Participant in writing of its decision to
defer the effectiveness of the exercise of an Option granted
hereunder. During the period that the effectiveness of the exercise
of an Option has been deferred, the Participant may, by written
notice, withdraw such exercise and obtain a refund of any amount
paid with respect thereto.
12. Withholding Taxes
(a) Cash Remittance
Whenever shares of Company Stock are to be issued upon the exercise
of an Option, the Company shall have the right to require the
Participant to remit to the Company, in cash, an amount sufficient
to satisfy the federal, state and local withholding tax
requirements, if any, attributable to such exercise prior to the
delivery of any certificate or certificates for such shares.
(b) Stock Remittance
At the election of the Participant, subject to the approval of the
Committee, when shares of Company Stock are to be issued upon the
exercise of an Option, in lieu of the remittance required by Section
13(a) hereof, the Participant may tender to the Company a number of
shares of Company Stock, the Fair Market Value of which at the
tender date the Committee determines to be sufficient to satisfy the
federal, state and local withholding tax requirements, if any,
attributable to such exercise and not greater than the Participant's
estimated total federal, state and local tax obligations associated
with such exercise.
(c) Stock Withholding
The Company shall have the right, when shares of Company Stock are
to be issued upon the exercise of an Option in lieu of requiring the
remittance required by Section 13(a) hereof, to withhold a number of
such shares, the Fair Market Value of which at the exercise date the
Committee determines to be sufficient to satisfy the federal, state
and local withholding tax requirements, if any, attributable to such
exercise and is not greater than the Participant's estimated total
federal, state and local tax obligations associated with such
exercise.
13. Amendment or Termination of the Plan
The Board of Directors may, at any time, suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however, that
if and to the extent required under Section 422 of the Code (if and to the
extent that the Board of Directors deems it appropriate to comply with
Section 422) and if and to the extent required to treat some or all of the
Options as "performance-based compensation" within the
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meaning of Section 162(m) of the Code (if and to the extent that the Board
of Directors deems it appropriate to meet such requirements), no amendment
shall be effective without the approval of the stockholders of the
Company, that (i) except as provided in Section 9 hereof, increases the
number of shares of Company Stock with respect to which Options may be
issued under the Plan, (ii) modifies the class of individuals eligible to
participate in the Plan or (iii) materially increases the benefits
accruing to individuals pursuant to the Plan. Nothing herein shall
restrict the Committee's ability to exercise its discretionary authority
hereunder pursuant to Section 4 hereof, which discretion may be exercised
without amendment to the Plan. No action under this Section 14 may,
without the consent of a Participant, reduce the Participant's rights
under any previously granted and outstanding Option except to the extent
that the Board of Directors determines that such amendment is necessary or
appropriate to prevent such Options from constituting "applicable employee
remuneration" within the meaning of Section 162(m) of the Code.
14. No Obligation to Exercise
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
15. Transferability of Options
(a) Except as otherwise provided in this Section 16, during the lifetime
of a Participant each Option granted to a Participant shall be
exercisable only by the Participant and no Option shall be
assignable or transferable otherwise than by will or by the laws of
descent and distribution.
(b) Upon the death of a Participant, outstanding Options granted to such
Participant that have not been transferred pursuant to Section 16(a)
hereof may be exercised only by the executors or administrators of
the Participant's estate or by any person or persons who shall have
acquired such right to exercise by will or by the laws of descent
and distribution. No transfer by will or the laws of descent and
distribution of any Option, or the right to exercise any Option,
shall be effective to bind the Company unless the Committee shall
have been furnished with written notice thereof and with a copy of
the will and/or such evidence as the Committee may deem necessary to
establish the validity of the transfer.
(c) Any permissible transfer of an Option only shall be effective after
the Committee shall have been furnished with an agreement by the
transferee to comply with all the terms and conditions of the Option
that are or would have been applicable to the Participant and to be
bound by the acknowledgments made by the Participant in connection
with the grant of the Option.
(d) In the event that at any time any doubt exists as to the right of
any person to exercise or receive a payment under an Option, the
Committee shall be entitled, in its discretion, to delay such
exercise or payment until it is satisfied that such right has been
confirmed (which may, but need not be, by order of a court of
competent jurisdiction), or to permit such exercise or make payment
only upon receipt of a bond or similar indemnification (in such
amount and in such form as is satisfactory to the Committee).
16. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Option will be used for
general corporate purposes.
17. Limitations Imposed by Section 162(m)
Notwithstanding any other provision hereunder, if and to the extent that
the Committee determines the Company's federal tax deduction in respect of
an Option may be limited as a result of Section 162(m) of the
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Code, the Committee may delay the payment in respect of such Option until
a date that is within 30 days after the date that compensation paid to the
Participant no longer is subject to the deduction limitation under Section
162(m) of the Code. In the event that a Participant exercises an Option at
a time when the Participant is a "covered employee," and the Committee
determines to delay the payment in respect of any such Option, the
Committee shall credit cash or, in the case of an amount payable in
Company Stock, the Fair Market Value of the Company Stock, payable to the
Participant to a book account. The Participant shall have no rights in
respect of such book account and the amount credited thereto shall not be
transferable by the Participant other than by will or laws of descent and
distribution.
The Committee may credit additional amounts to such book account as it may
determine in its sole discretion. Any book account created hereunder shall
represent only an unfunded unsecured promise by the Company to pay the
amount credited thereto to the Participant in the future.
18. Mitigation of Excise Tax
If any payment or right accruing to a Participant under this Plan (without
the application of this Section), either alone or together with other
payments or rights accruing to the Participant from the Company or an
affiliate ("Total Payments") would constitute a "parachute payment" (as
defined in Section 280G of the Code and regulations thereunder), the
Committee may in each particular instance determine to (i) reduce such
payment or right to the largest amount or greatest right that will result
in no portion of the amount payable or right accruing under the Plan being
subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code, or (ii) take
such other actions, or make such other arrangements or payments with
respect to any such payment or right as the Committee may determine in the
circumstances. Any such determination shall be made by the Committee in
the exercise of its sole discretion, and such determination shall be
conclusive and binding on the Participant. The Participant shall cooperate
as may be requested by the Committee in connection with the Committee's
determination, including providing the Committee with such information
concerning such Participant as the Committee may deem relevant to its
determination.
19. Participant Obligation to Notify
In the event that the Participant (a) disposes of any shares of Company
Stock acquired upon the exercise of an Incentive Stock Option (i) prior to
the expiration of two years after the date such Incentive Stock Option was
granted or prior to one year after the date the shares were acquired or
(ii) under any other circumstances described in Section 422(a) of the Code
or any successor provision, or (b) makes an election under Section 83(b)
of the Code or any successor provision, with respect to Company Stock
acquired pursuant to Section 7 hereof, the Participant shall notify the
Company of such disposition or election within 10 days thereof
20. Information to Participants
To the extent required by applicable law, the Company shall provide to
each Participant, during the period for which such Participant has one or
more Options outstanding, copies of all annual reports and other
information which are provided to all stockholders of the Company. Except
as otherwise noted in the foregoing sentence, the Company shall have no
obligation or duty to affirmatively disclose to any Participant, and no
Participant shall have any right to be advised of, any material
information regarding the Company or any Affiliate at any time prior to,
upon or otherwise in connection with, the exercise of an Option.
21. Funding
All benefits payable under this Plan shall be paid directly by the
Company. The Company shall not be required to fund or otherwise segregate
assets to be used for payment of benefits under this Plan.
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22. Failure to Comply
In addition to the remedies of the Company elsewhere provided for herein,
a failure by a Participant (or beneficiary or permitted transferee) to
comply with any of the terms and conditions of the Plan or the agreement
executed by such Participant (or beneficiary or permitted transferee)
evidencing an Option, unless such failure is remedied by such Participant
(or beneficiary or permitted transferee) within 10 days after having been
notified of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Option, in whole or in part, as the
Committee, in its absolute discretion, may determine.
23. Effective Date of Plan
The Plan was initially adopted by the Board of Directors in 1996 and was
approved by shareholders of the Company. The Plan was subsequently amended
in 1998, 1999 and 2000 to increase the number of shares with respect to
which Options may be granted under the Plan and each of the amendments was
approved by the shareholders of the Company. An amendment and restatement
to the Plan was approved by the Board of Directors, on May 3, 2001,
subject to approval by the stockholders of the Company, and the Plan as
further amended and restated was approved by the Board of Directors, as of
June 29, 2001, subject to approval by the stockholders of the Company.
Options that were not previously authorized by the stockholders of the
Company under the provisions of the Plan as in effect prior to May 3, 2001
that have not yet been approved by the stockholders may be granted under
the Plan at any time prior to the receipt of such stockholder approval;
provided, however, that each such grant shall be subject to such approval.
Without limitation on the foregoing, no Option may be exercised prior to
the receipt of such approval. If the amended and restated Plan is not so
approved on or before May 3, 2002, then the May 3, 2001 and the June 29,
2001 amendments and restatements of the Plan and all Options granted
pursuant to such amendments and restatements shall forthwith automatically
terminate and be of no force or effect.
24. Term of the Plan
The right to grant Options under the Plan will terminate on January 1,
2006 with respect to the 2,500,000 shares of Company Stock authorized
under the provisions of the Plan in effect prior to this amendment and
restatement, and on May 3, 2011 with respect to the additional 5,000,000
shares of Company Stock authorized pursuant to the May 3, 2001 amendment
and restatement.
25. Applicable Law
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the
State of Delaware, without reference to the principles of conflicts of
law.
26. Severability
If any provision of the Plan shall hereafter be held to be invalid,
unenforceable or illegal in whole or in part, in any jurisdiction under
any circumstances for any reason, (a) such provision shall be reformed to
the minimum extent necessary to cause such provision to be valid,
enforceable and legal while preserving the intent expressed by the Plan or
(b) if such provision cannot be so reformed, such provision shall be
severed from the Plan and, in the discretion of the Committee, an
equitable adjustment shall be made to the Plan (including, without
limitation, addition of necessary further provisions to the Plan) so as to
give effect to the intent as so expressed and the benefits so provided.
Such holding shall not affect or impair the validity, enforceability or
legality of such provision in any other jurisdiction or under any other
circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of any
other provision of the Plan.
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