Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of November
21, 2016, by and among Fate Therapeutics, Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).

RECITALS

A.The Company and each Purchaser is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “Commission”) under the Securities Act.

 

B.Each Purchaser, severally and not jointly, wishes to purchase, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, that
aggregate number of shares of common stock, par value $0.001 per share (the
“Common Stock”), of the Company, and that aggregate number of shares of Class A
Preferred Stock, par value $0.001 per share (the “Preferred Stock”) set forth
below such Purchaser’s name on the signature page of this Agreement (which
aggregate amount for all Purchasers together shall be 7,236,837 shares of Common
Stock and 2,819,549 shares of Preferred Stock, and shall be collectively
referred to herein as the “Shares”).

 

C.Contemporaneously with the execution and delivery of this Agreement, certain
of the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit A (the “Registration Rights
Agreement”), pursuant to which, among other things, the Company will agree to
provide certain registration rights with respect to the Shares and the
Underlying Shares (as defined below) under the Securities Act and the rules and
regulations promulgated thereunder and applicable state securities
laws.  Certain of the parties hereto are affiliated with the Company’s directors
and officers and will not be entering into the Registration Rights Agreement
with the Company.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:

ARTICLE I.
DEFINITIONS

1.1Definitions.  In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 405 under the Securities Act.  With respect to a

 

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Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except Saturday, Sunday, any day which is a federal
legal holiday in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.

“Certificate of Designation” means the Certificate of Designation of Rights,
Preferences and Privileges of the Class A Preferred Stock setting forth the
preferences, rights and limitations of the Preferred Stock to be filed prior to
the Closing by the Company with the Secretary of State of Delaware substantially
in the form attached hereto as Exhibit G.

“Closing” means the closing of the purchase and sale of the Shares pursuant to
this Agreement.

“Closing Date” means, subject to the execution and delivery of the Transaction
Documents by the applicable parties thereto and the satisfaction or waiver of
all of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof, as the
case may be, a date within three (3) calendar days following the date hereof, or
such other date as the parties may mutually agree.

“Common Stock” has the meaning set forth in the Recitals, and also includes any
other class of securities into which the Common Stock may hereafter be
reclassified or changed into.

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

“Company Counsel” means Goodwin Procter LLP, with offices located at 3
Embarcadero Center, San Francisco, CA 94111.

“Company’s Knowledge” means with respect to any statement made to the Company’s
Knowledge, that the statement is based upon the actual knowledge of the officers
of the Company having responsibility for the matter or matters that are the
subject of the statement.

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

 

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“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.

“Irrevocable Transfer Agent Instructions” means, with respect to the Company,
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C, executed
by the Company and delivered to and acknowledged in writing by the Transfer
Agent.

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

“Preferred Stock” means Class A Preferred Stock, par value $0.001 per share
issued pursuant to this Agreement, and any securities into which such Class A
Preferred Stock may hereinafter be reclassified.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

“Purchase Price” means $2.66 per share of Common Stock and $13.30 per share of
Preferred Stock.

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by
certain of the Purchasers of the Registrable Securities (as defined in the
Registration Rights Agreement).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

“SEC Filings” shall mean all reports, schedules, forms, statements and other
documents filed or required to be filed by the Company with the Commission
pursuant to the requirements of the Securities Act or the Exchange Act,
including material filed pursuant to Section 13(a) or 15(c) of the Exchange Act,
in each case, together with all exhibits, supplements, amendments and schedules
thereto, and all documents incorporated by reference therein.

“Short Sales” include, without limitation, (i) all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and (ii) sales and other
transactions through non-U.S. broker dealers or

 

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foreign regulated brokers (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).

“Subscription Amount” means, with respect to each Purchaser, the aggregate
amount to be paid for the Shares purchased hereunder as indicated on such
Purchaser’s signature page to this Agreement next to the heading “Aggregate
Purchase Price (Subscription Amount)” in United States dollars and in
immediately available funds.

“Subsidiary” means any corporation or other business entity with respect to
which the Company owns in excess of 50% of such corporation’s or other entity’s
outstanding voting securities, and shall, where applicable, also include any
direct or indirect subsidiary of the Company formed or acquired after the date
hereof, in each case in which the Company will own in excess of 50% of such
subsidiary’s outstanding voting securities at the Closing.

“Threshold Amount” shall have the meaning set forth in the Certificate of
Designation.

“Trading Day” means a day on which the Common Stock is listed or quoted and
traded on its Trading Market.

“Trading Market” means the trading market on which the Common Stock is primarily
listed on and quoted for trading, which, as of the date of this Agreement and
the Closing Date, shall be The NASDAQ Global Market.

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Registration Rights Agreement, the Certificate of
Designation, the Irrevocable Transfer Agent Instructions and any other documents
or agreements explicitly contemplated hereunder.

“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the current
transfer agent of the Company, with a mailing address of 6201 15th Avenue,
Brooklyn, NY 11219, or any successor transfer agent for the Company.

“Underlying Shares” means the shares of Common Stock issued or issuable upon
conversion of the Preferred Stock.

ARTICLE II.
PURCHASE AND SALE

2.1Closing.  

(a)Amount.  Subject to the terms and conditions set forth in this Agreement, at
the Closing, the Company shall issue and sell to each Purchaser, and each
Purchaser shall, severally and not jointly, purchase from the Company, such
number of Shares set forth on the signature pages hereto for the aggregate
Purchase Price with respect to such Shares.

 

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(b)Underlying Shares. The Company has authorized and has reserved and covenants
to continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a number of its authorized but unissued shares of Common
Stock equal to the aggregate number of shares of Common Stock necessary to
effect the conversion of the Preferred Stock. The Purchasers acknowledge that
the Company shall not be required to issue any shares of Common Stock to a
Purchaser upon conversion by such Purchaser (or its assigns) of any shares of
the Preferred Stock to the extent (and only to the extent) that such conversion
would result in the Purchaser (including its predecessors-in-interest)
beneficially owning shares of Common Stock in excess of the applicable Threshold
Amount unless approved by the Corporation’s stockholders in accordance with the
applicable stockholder approval requirements of Nasdaq Marketplace Rule 5635.

(c)Closing.  The Closing of the purchase and sale of the Shares shall take place
at the offices of Goodwin Procter LLP, 3 Embarcadero Center, San Francisco, CA
94111 on the Closing Date or at such other locations or remotely by facsimile
transmission or other electronic means as the parties may mutually agree.

(d)Form of Payment.  Except as may otherwise be agreed to among the Company and
one or more of the Purchasers, on the Closing Date, each Purchaser shall wire
its Subscription Amount, in United States dollars and in immediately available
funds, to a bank account designated by the Company as set forth on Exhibit F
hereto.  On the Closing Date, the Company shall irrevocably instruct the
Transfer Agent to issue to each Purchaser the Shares in book entry form in such
names as Purchasers may designate in an amount equal to the number of Shares
such Purchaser is purchasing as is set forth on such Purchaser’s signature page
to this Agreement next to the heading “Number of Shares to be Acquired” and the
Company and the Purchasers shall deliver the other items deliverable at Closing
set forth in Section 2.2.

2.2Closing Deliveries.    

(a)On or prior to the Closing, the Company shall issue, deliver or cause to be
delivered to each Purchaser the following (the “Company Deliverables”):

(i)this Agreement, duly executed by the Company;

(ii)a legal opinion of Company Counsel, dated as of the Closing Date and in the
form attached hereto as Exhibit B, executed by such counsel and addressed to the
Purchasers;

(iii)the Registration Rights Agreement, duly executed by the Company;

(iv)duly executed Irrevocable Transfer Agent Instructions instructing the
Transfer Agent to deliver a book entry statement evidencing the number of each
class of Shares purchased by the Purchaser hereunder, registered in the name of
such Purchaser;

(v)a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, (a) certifying the resolutions
adopted by the Board of Directors approving the transactions contemplated by
this Agreement and the other Transaction Documents and the issuance of the
Shares, (b) certifying the current versions of the Amended and Restated
Certificate of

 

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Incorporation, Amended and Restated Bylaws of the Company and Certificate of
Designation and (c) certifying as to the signatures and authority of persons
signing the Transaction Documents and related documents on behalf of the
Company, in the form attached hereto as Exhibit D;

(vi)the Compliance Certificate referred to in Section 5.1(h);

(vii)a certificate evidencing the formation and good standing of the Company
issued by the Secretary of State of Delaware, as of a date within five (5)
Business Days of the Closing Date;

(viii)a certificate evidencing the Company’s qualification as a foreign
corporation and good standing issued by the Secretary of State of California (or
comparable office), as of a date within five (5) Business Days of the Closing
Date;

(ix)a certified copy of the Amended and Restated Certificate of Incorporation,
as certified by the Secretary of State (or comparable office) of Delaware, as of
a date within five (5) Business Days of the Closing Date; and

(x)evidence that the shares of Common Stock and the Underlying Shares issued or
to be issued to the Purchasers have been approved for listing on the Trading
Market, subject only to official notice of issuance.

(b)On or prior to the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following (the “Purchaser Deliverables”):

(i)this Agreement, duly executed by such Purchaser;

(ii)its Subscription Amount, in United States dollars and in immediately
available funds, in the amount set forth as the “Purchase Price” indicated below
such Purchaser’s name on the applicable signature page hereto under the heading
“Aggregate Purchase Price (Subscription Amount)” by wire transfer to the bank
account designated by the Company as set forth on Exhibit F attached hereto; and

(iii)the Registration Rights Agreement, duly executed by each such Purchaser
that is entering into the Registration Rights Agreement.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of the Company.  The Company hereby represents
and warrants to the Purchasers as of the date hereof and the Closing Date
(except for the representations and warranties that speak as of a specific date,
which shall be made as of such date) as follows:

(a)Organization and Qualification.  The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its

 

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properties and assets and to carry on its business.  Neither the Company nor any
Subsidiary is in violation nor default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.  Each of the Company and the Subsidiaries
is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not have or reasonably be expected to result in: (i) a material
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

(b)Authorization; Due Execution.  The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder including, without limitation, the issuance of the
Shares and the Underlying Shares.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals (as defined in
Section 3.1(p) herein).  Each Transaction Document to which it is a party has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

(c)Valid Issuance of Stock. The Shares to be issued at Closing have been duly
and validly authorized and when issued and paid for in accordance with the terms
of the Transaction Documents, will be duly and validly issued, fully paid and
non-assessable free and clear of all Liens and, based in part upon the
representations and warranties of the Purchasers in this Agreement, will be
issued in compliance with all applicable federal and state securities laws. The
Underlying Shares to be issued upon conversion of the Preferred Stock have been
duly authorized by all necessary corporate action and when issued and paid for
in accordance with the terms of this Agreement and as set forth in the
Certificate of Designation, such shares will be validly issued and outstanding,
fully paid and nonassessable, free and clear of all Liens and the holders shall
be entitled to all rights accorded to a holder of Common Stock.

(d)No Conflict. The execution, delivery and performance by the Company of the
Transaction Documents, the issuance and sale of the Shares or the Underlying
Shares and the consummation by it of the transactions contemplated hereby and
thereby to which it is a party do not and will not (i) conflict

 

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with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as would not reasonably be expected to result in a
Material Adverse Effect.

(e)SEC Filings. The Company has timely filed with the Commission all SEC
Filings.  The SEC Filings were prepared in accordance with and, as of the date
on which each such SEC Filing was filed with the Commission, complied in all
material respects with the applicable requirements of the Securities Act and
Exchange Act.  None of such SEC Filings, including, without limitation, any
financial statements, exhibits and schedules included therein and documents
incorporated therein by reference, at the time filed, declared effective or
mailed, as the case may be, contained an 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.  

(f)Material Changes. Since September 30, 2016, except as specifically disclosed
in SEC Filings dated prior to the Closing Date: (i) there have been no events,
occurrences or developments that have had or would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on the
business, operations or financial condition of the Company, (ii) the Company has
not incurred any material liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the manner in which it keeps its accounting books and records in
any material respect, (iv) the Company has not declared or made any dividend or
distribution of cash, shares of capital stock or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock (other than in connection with repurchases of
unvested stock issued to employees of the Company), and (v) the Company has not
issued any equity securities, except pursuant to the Company’s 2013 Stock Option
and Incentive Plan and this Agreement.

(g)No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists with respect to
the business, properties, liabilities, operations (including results thereof) or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, that (i) would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the

 

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Company of its Common Stock and which has not been publicly announced or (ii)
could have a Material Adverse Effect.

(h)Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Shares, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act of 1940,
as amended.

(i)Registration Rights and other Stockholder Agreements. Other than pursuant to
(i) the registration rights agreement by and among the Company and the other
parties named therein dated August 6, 2016 and (ii) the Amended and Restated
Investor Rights Agreement, dated August 8, 2013 by and between the Company and
the stockholders named therein, as amended by the Amendment to Amended and
Restated Investor Rights Agreement dated as of May 4, 2015, no Person has any
right to cause the Company to effect the registration under the Securities Act
covering the transfer of any securities of the Company and there are no other
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

(j)Listing and Maintenance Requirements. The Common Stock is registered pursuant
to Section 12(b) of the Exchange Act, and the Company has taken no action
designed to terminate the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the
previous twelve (12) months, received (i) written notice from the Trading Market
that the Company is not in compliance with the listing or maintenance
requirements of Trading Market that would result in immediate delisting or (ii)
any notification, Staff Delisting Determination, or Public Reprimand Letter (as
such terms are defined in applicable listing rules of the Trading Market) that
requires a public announcement by the Company of any noncompliance or deficiency
with respect to such listing or maintenance requirements. The Company is in
compliance with all listing and maintenance requirements of the Trading Market
on the date hereof.

(k)No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2 hereof, none of the
Company nor, to the Company’s Knowledge, any of its Affiliates or any Person
acting on its behalf has, directly or indirectly, at any time within the past
six (6) months, made any offers or sales of any Company security or solicited
any offers to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the
Shares or (ii) cause the offering of the Shares to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Trading Market.

(l)Neither the Company nor, to the Company’s Knowledge, any director, officer,
agent, employee, Affiliate or Person acting on behalf of the Company is
currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the sale of the Shares, or lend,
contribute or

 

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otherwise make available such proceeds to any subsidiary, joint venture partner
or other Person or entity, towards any sales or operations in Cuba, Iran, Syria,
Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of
financing the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.

(m)  PNeither the Company nor, to the Company’s Knowledge, any agent or other
Person acting on behalf of the Company, has: (i) directly or indirectly, used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by
any Person acting on its behalf of which the Company is aware) which is in
violation of law or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.

(n)Internal Accounting Controls.  The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any differences.

(o)Sarbanes-Oxley; Disclosure Controls. As of the date of the Closing, the
Company is an “emerging growth company,” as defined in Section 2(a) of the
Securities Act. The Company is in compliance in all material respects with all
of the provisions of the Sarbanes-Oxley Act of 2002 that are applicable to the
Company.  The Company has established disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) for
the Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
has been no change in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over
financial reporting.

(p)Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filing with the Commission of a registration statement in
accordance with the Registration Rights Agreement, (ii)

 

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application(s) to each applicable Trading Market for the listing of the Shares
and the Underlying Shares for trading thereon in the time and manner required
thereby and (iii) such filings as are required to be made under applicable state
and federal securities laws (collectively, the “Required Approvals”).

(q)No Required Additional Issuances. The issuance and sale of the Shares and the
Underlying Shares will not obligate the Company to issue shares of Common Stock
or other securities to any Person and will not result in a right of any holder
of securities of the Company to adjust the exercise, conversion, exchange or
reset price under any of such securities.

(r)Application of Takeover Protections; Rights Agreements. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of the
State of Delaware that is or would reasonably be expected to become applicable
to each Purchaser as a result of such Purchaser and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, the Company’s issuance of the Shares, the
Underlying Shares and each Purchaser’s ownership of the Shares and the
Underlying Shares.

(s)Capitalization. As of the date hereof, there are issued and outstanding
34,148,154 shares of Common Stock, and, after giving effect to the issuance and
sale of the Shares hereunder, there will be issued and outstanding 41,384,991
shares of Common Stock, assuming no exercise of outstanding options, warrants or
other rights to purchase securities of the Company.  As of the date hereof, the
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act.  No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents.  Other than
(i) securities issued or issuable pursuant to existing Company equity incentive,
stock option or stock purchase plans or agreements disclosed in the SEC Filings
and (ii) as set forth in the Company’s most recently filed periodic report under
the Exchange Act, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents.  All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  Except for the stockholder approval contemplated in
Section 4.14 hereof, no further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Shares or the Underlying Shares.  

(t)Reservation of Shares of Common Stock.  So long as the Preferred Stock
remains outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, the maximum number of
shares of Common Stock to effect the conversion of the Preferred Stock.

 

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(u)Conversion and Exercise Procedures. The form of Notice of Conversion included
in the Certificate of Designation set forth the totality of the procedures
required of the Purchasers in order to convert the Preferred Stock.  No
additional legal opinion, other information or instructions shall be required of
the Purchasers to convert their Preferred Stock. The Company shall honor
conversions of the Preferred Stock and shall deliver the Underlying Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents, provided, however, that the Company shall not be required
to issue any shares of Common Stock to a Purchaser upon conversion by such
Purchaser (or its assigns) of any shares of the Preferred Stock to the extent
(and only to the extent) that such conversion would result in the Purchaser
(including its predecessors-in-interest) beneficially owning shares of Common
Stock in excess of the applicable Threshold Amount unless approved by the
Corporation’s stockholders in accordance with the applicable stockholder
approval requirements of Nasdaq Marketplace Rule 5635.

(v)Litigation.  Other than as may be disclosed in the Company’s most recently
filed periodic report under the Exchange Act, there is no action, suit, notice
of inquiry, violation, Proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Shares or the Underlying Shares or (ii) would, if
there were an unfavorable decision, have or reasonably be expected to result in
a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  To the knowledge of the Company, there has
not been, and there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company.  The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

(w)Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any of the Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so disclosed or
that otherwise could be reasonably likely to have a Material Adverse Effect.

(x)Certain Fees.  No brokerage or finder’s fees or commissions are or will be
payable by the Purchasers to any broker, financial advisor or consultant,
finder, placement agent (including the Placement Agent), investment banker, bank
or other Person with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.

(y)Regulation M Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the Shares,
(ii) sold, bid for, purchased, or, paid any compensation for soliciting
purchases of, any of the Shares, or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other

 

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securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Placement Agent in connection with the placement of the
Securities.

3.2Representations and Warranties of the Purchasers.  Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:

(a)Organization; Authority.  Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by such Purchaser and
performance by such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or, if such Purchaser is
not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser.  Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

(b)No Conflicts.  The execution, delivery and performance by such Purchaser of
this Agreement and the Registration Rights Agreement, if applicable, and the
consummation by such Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
such Purchaser, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Purchaser is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment  or
decree (including federal and state securities laws) applicable to such
Purchaser, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
ability of such Purchaser to perform its obligations hereunder.

(c)Investment Intent.  Such Purchaser understands that the Shares and the
Underlying Shares (collectively, the “Securities”) are “restricted securities”
and have not been registered under the Securities Act or any applicable state
securities law.  Such Purchaser is acquiring the Securities as principal for its
own account and does not presently have any agreement, plan or understanding,
directly or indirectly, with any Person to distribute or effect any distribution
of any of the Securities (or any securities which are derivatives thereof) to or
through any person or entity; such Purchaser is not a registered broker-dealer
under Section 15 of the Exchange Act or an entity engaged in a business that
would require it to be so registered as a broker-dealer.  Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.

(d)Purchaser Status.  At the time such Purchaser was offered the Securities, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act. Purchaser

 

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hereby represents that neither it nor any of its Rule 506(d) Related Parties is
a “bad actor” within the meaning of Rule 506(d) promulgated under the Securities
Act. For purposes of this Agreement, “Rule 506(d) Related Party” shall mean a
person or entity covered by the “Bad Actor disqualification” provision of Rule
506(d) of the Securities Act.  Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

(e)General Solicitation.  Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general advertisement.

(f)Access to Information.  Such Purchaser acknowledges and affirms that, with
the assistance of its advisors, it has conducted and completed its own
investigation, analysis and evaluation related to the investment in the
Securities.  Such Purchaser has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Securities.  No such investigation, analysis and
evaluation nor any other due diligence investigation conducted by such Purchaser
shall modify, limit or otherwise affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement.

(g)Certain Trading Activities.  Other than with respect to the transactions
contemplated herein, since September 22, 2016, neither the Purchaser nor any
Affiliate of such Purchaser which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Purchaser’s
investments or trading or information concerning such Purchaser’s investments,
including in respect of the Securities, and (z) is subject to such Purchaser’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser
or Trading Affiliate, effected or agreed to effect any purchases or sales of the
securities of the Company (including, without limitation, any Short Sales
involving the Company’s securities). Notwithstanding the foregoing, in the case
of a Purchaser and/or Trading Affiliate that is, individually or collectively, a
multi-managed investment bank or vehicle whereby separate portfolio managers
manage separate portions of such Purchaser’s or Trading Affiliate’s assets and
the portfolio managers have no direct knowledge of the investment decisions made
by the portfolio managers managing other portions of such Purchaser’s or Trading
Affiliate’s assets, the representation set forth above shall apply only with
respect to the portion of assets managed by the portfolio manager that have
knowledge about the financing transaction contemplated by this Agreement.  Other
than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).

(h)Brokers and Finders.  No Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or
upon the Company or any Purchaser for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on
behalf of the Purchaser other than the fees of Leerink Partners (the “Placement
Agent”) to be paid by the Company.

 

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(i)Reliance on Exemptions.  Such Purchaser understands that the Securities being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Securities.

(j)Regulation M.  Such Purchaser is aware that the anti-manipulation rules of
Regulation M may apply to sales of Common Stock and other activities with
respect to the Common Stock by the Purchasers.

(k)Beneficial Ownership.  The purchase by such Purchaser of the Securities
issuable to it at the Closing will not result in such Purchaser (individually or
together with any other Person with whom such Purchaser has identified, or will
have identified, itself as part of a “group” in a public filing made with the
Commission involving the Company’s securities) acquiring, or obtaining the right
to acquire, in excess of 19.999% of the outstanding shares of Common Stock or
the voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred.  Such Purchaser does not presently intend to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when
added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of 19.999% of the outstanding shares of Common
Stock or the voting power of the Company on a post transaction basis that
assumes that the Closing shall have occurred. A Purchaser shall not be deemed to
have acquired, or have the right to acquire, any shares of Common Stock in
excess of the Beneficial Ownership Limitation (as defined in the Certificate of
Designation) prior to the sixty-first (61st) day after the Purchaser’s delivery
of a Notice of Conversion under the Certificate of Designation.  Notwithstanding
the foregoing, the Company shall at all times be required to issue the
applicable number of shares of Common Stock to a given Purchaser upon the valid
conversion by such Purchaser (or its assigns) of shares of Class A Preferred
Stock unless and only to the extent that such conversion and related issuance:
(i) would result in the aggregate issuance to a given Purchaser (including its
predecessors-in-interest) of a number of shares of Common Stock in excess of the
applicable Threshold Amount, and (ii) has not be approved by the Company’s
stockholders in accordance with the stockholder approval requirements of Nasdaq
Marketplace Rule 5635.

(l)Residency.  Such Purchaser’s residence (if an individual) or offices in which
its investment decision with respect to the Securities was made (if an entity)
are located at the address immediately below such Purchaser’s name on its
signature page hereto.

The Company and each of the Purchasers acknowledge and agree that no party to
this Agreement has made or makes any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in this Article III and the Transaction Documents.

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

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4.1Transfer Restrictions.

(a)Compliance with Laws.  Notwithstanding any other provision of this Article
IV, each Purchaser covenants that the Securities may be disposed of only
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state and federal
securities laws.  In connection with any transfer of the Securities other than
(i) pursuant to an effective registration statement, (ii) to the Company or
(iii) pursuant to Rule 144 (provided that the Purchaser provides the Company
with reasonable assurances (in the form of seller and, if applicable, broker
representation letters) that the securities may be sold pursuant to such rule),
the Company may require the Purchaser to provide to the Company an opinion of
counsel selected by the Purchaser and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.

(b)Legends.  Any certificates or book entry notations evidencing the Securities
shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form, until such time as they
are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS AND ARE
SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT, DATED NOVEMBER 21, 2016 AND A REGISTRATION RIGHTS AGREEMENT, DATED
NOVEMBER 21, 2016, IN EACH CASE BY AND AMONG THE COMPANY AND THE STOCKHOLDERS
NAMED THEREIN.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT.

(c)Removal of Legends.  The legend set forth in Section 4.1(b) above shall be
removed and the Company shall issue a certificate (or book entry notation, as
applicable) without such legend or any other legend to the holder of the
applicable Securities upon which it is stamped or issue to such holder by
electronic delivery at the applicable balance account at the Depository Trust
Company (“DTC”), if (i) such Securities are registered for resale under the
Securities Act (provided that, if the Purchaser is selling

 

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pursuant to the effective registration statement registering the Securities for
resale, the Purchaser agrees to only sell such Securities during such time that
such registration statement is effective and not withdrawn or suspended, and
only as permitted by such registration statement), (ii) such Securities are sold
or transferred pursuant to Rule 144, or (iii) such Securities are eligible for
sale under Rule 144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to such
securities and without volume or manner-of-sale restrictions.  Certificates (or
book entry notations) for Securities subject to legend removal hereunder may be
transmitted by the Transfer Agent to the Purchasers by crediting the DTC account
of the Purchaser’s broker or other DTC participant as directed by such
Purchaser.

(d)Irrevocable Transfer Agent Instructions.  The Company shall issue the
Irrevocable Transfer Agent Instructions to its transfer agent, and any
subsequent transfer agent, in accordance with the terms of this Agreement. The
Company represents and warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 4.1(d) (or instructions
that are consistent therewith) is required to be given by the Company to its
transfer agent in connection with this Agreement other than with respect to the
issuance of the Underlying Shares upon a valid conversion of the Preferred
Stock, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents and applicable law.  The Company
acknowledges that a breach by it of its obligations under this Section 4.1(d)
will cause irreparable harm to a Purchaser.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 4.1(d) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 4.1(d), that
a Purchaser shall be entitled, in addition to all other available remedies, to
an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.

 

(e)Acknowledgement.  Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell or
otherwise transfer the Securities or any interest therein without complying with
the requirements of the Securities Act.  While the Registration Statement
remains effective, any Securities sold by Purchaser will be sold in accordance
with the plan of distribution contained in the Registration Statement and in
compliance therewith and with the related prospectus delivery requirements
unless an exemption therefrom is available.  Each Purchaser, severally and not
jointly with the other Purchasers, agrees that if it is notified by the Company
in writing at any time that the Registration Statement registering the resale of
the Securities is not effective or that the prospectus included in such
Registration Statement no longer complies with the requirements of Section 10 of
the Securities Act, the Purchaser will refrain from selling such Securities
until such time as the Purchaser is notified by the Company that such
Registration Statement is effective or such prospectus is compliant with Section
10 of the Securities Act, unless such Purchaser is able to, and does, sell such
Securities pursuant to an available exemption from the registration requirements
of Section 5 of the Securities Act.  Both the Company and its Transfer Agent,
and their respective directors, officers, employees and agents, may rely on this
Section 4.1(e) and each Purchaser hereunder will indemnify and hold harmless
each of such persons from any breaches or violations of this Section 4.1(e).

 

 

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4.2Furnishing of Information.  In order to enable the Purchasers to sell the
Securities under Rule 144, until the Purchaser no longer holds any of the
Securities, the Company shall use its commercially reasonable efforts to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. During such period, if the Company is not
required to file reports pursuant to the Exchange Act and if requested by the
Purchasers, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144.  

4.3Integration.  The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that will be integrated
with the offer or sale of the Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares to the
Purchasers, or that will be integrated with the offer or sale of the Shares for
purposes of the rules and regulations of any trading market such that it would
require stockholder approval prior to the closing of such other transaction
unless stockholder approval is obtained before the closing of such subsequent
transaction.

4.4Securities Laws Disclosure; Publicity.  The Company shall not publicly
disclose the name of any Purchaser or an Affiliate of any Purchaser, or include
the name of any Purchaser or an Affiliate of any Purchaser in any press release
or filing with the Commission (other than the Registration Statement) or any
regulatory agency or trading market, without the prior written consent of such
Purchaser which shall not be unreasonably withheld.  The Purchasers acknowledge
that the Transaction Documents and other information relating to the
transactions contemplated therein and the identity of the Purchasers may be
disclosed, including (i) as required in connection with the Company’s filing of
a Current Report on Form 8-K with the Commission describing the terms of the
Transaction Documents (and including as exhibits to such Current Report on Form
8-K the material Transaction Documents (including ,without limitation, this
Agreement, the Registration Rights Agreement and the Certificate of
Designation)), (ii) as required by federal securities law in connection with (A)
any registration statement contemplated by the Registration Rights Agreement and
(B) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (iii) to the extent such disclosure is required
by law, request of the Staff of the Commission or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior written notice of
such disclosure permitted under this subclause (iii).  Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are required to be publicly
disclosed by the Company as described in this Section 4.4, such Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).

4.5Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, in either case solely by

 

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virtue of receiving Shares under the Transaction Documents or under any other
written agreement between the Company and the Purchasers.

4.6Non-Public Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents,
including this Agreement, or as expressly required by any applicable securities
law, the Company covenants and agrees that neither it, nor any other Person
acting on its behalf, will provide any Purchaser or its agents or counsel with
any information regarding the Company that the Company believes constitutes
material non-public information without the express written consent of such
Purchaser, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.  Except with
respect to any Purchaser who is or may have one or more representatives serving
as a director  or observer on the Company’s Board of Directors, the Company
confirms that, following the filing of the Current Report on Form 8-K as
contemplated by Section 4.4 of this Agreement, no Purchaser will be deemed to be
in possession of material non-public information concerning the Company (to the
extent that such information was provided by the Company prior to the filing of
such Form 8-K).

4.7Use of Proceeds.  The Company shall use the net proceeds from the sale of the
Shares hereunder for working capital and general corporate purposes.  In no
event shall the Company use such proceeds for: (a) the satisfaction of any
portion of the Company’s debt obligations, (b) the redemption of any Common
Stock, (c) the settlement of any outstanding litigation or (d) in violation of
the FCPA or OFAC regulations.

4.8Indemnification of Purchasers.  Subject to the provisions of this
Section 4.8, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, managers, partners, employees,
investment advisers and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, shareholders, agents, members, managers, partners,
employees, investment advisors (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any material breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
Party in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). Promptly after receipt by any Purchaser Party (the “Indemnified

 

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Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, Proceeding or
investigation in respect of which indemnity may be sought pursuant to this
Section 4.8, such Indemnified Person shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and
shall assume the payment of all fees and expenses; provided, however, that the
failure of any Indemnified Person so to notify the Company shall not relieve the
Company of its obligations hereunder except to the extent that the Company is
actually and materially prejudiced by such failure to notify. In any such
Proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; (ii) the Company shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Person in such Proceeding;
or (iii) in the reasonable judgment of counsel to such Indemnified Person,
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not be
liable for any settlement of any Proceeding effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, delayed or conditioned, the Company
shall not effect any settlement of any pending or threatened Proceeding in
respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such Proceeding.  The indemnity agreements
contained herein shall not be an exclusive remedy but shall be in addition to
any cause of action or similar right in law or in equity of any Purchaser Party
against the Company or others, and (y) any liabilities the Company may be
subject to pursuant to law.

4.9Trading Market Listing.  The Company will use its best efforts to effect and
maintain the listing of the Common Stock on the Trading Market.  The Company
will use its commercially reasonable efforts to effect and maintain the listing
of the Common Stock on the NASDAQ Stock Market for so long as any Securities are
owned by the Purchasers.  

4.10Form D; Blue Sky.  The Company agrees to timely file a Form D with respect
to the Shares as required under Regulation D and to provide a copy thereof,
promptly upon the written request of any Purchaser.  The Company, on or before
the Closing Date, shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Shares for sale to the Purchasers under applicable securities or “Blue Sky” laws
of the states of the United States (or to obtain an exemption from such
qualification) and shall provide evidence of such actions promptly upon the
written request of any Purchaser.  

 

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4.11Common Stock Reserve. From the date hereof to the date on which the
Purchasers has exercised its rights in full under the Certificate of
Designations, the Company shall reserve for issuance to the Purchasers a number
of shares of Common Stock at least equal to the number of Underlying Shares.

4.12Short Sales and Confidentiality After The Date Hereof.  Such Purchaser shall
not, and shall cause its Trading Affiliates not to, engage, directly or
indirectly, in any transactions in the Company’s securities (including, without
limitation, any Short Sales involving the Company’s securities) during the
period from the date hereof until the earlier of such time as (i) the
transactions contemplated by this Agreement are first publicly announced as
required by and described in Section 4.4 or (ii) this Agreement is terminated in
full pursuant to Section 6.17.  Each Purchaser, severally and not jointly with
the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in Section 4.4, such Purchaser will maintain the confidentiality of
the existence and terms of this transaction and the information included in the
Transaction Documents.  Notwithstanding the foregoing, in the event that a
Purchaser is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio manager that have knowledge about the financing
transaction contemplated by this Agreement.

4.13Proxy Statement.

(a)          In connection with its 2017 annual meeting of stockholders, the
Company shall prepare and file with the Commission a definitive proxy statement
(the “Proxy Statement”).

 (b)          The Proxy Statement shall include a proposal to permit the
Preferred Stock to become convertible into shares of Common Stock as set forth
in, and to the extent permitted by the Certificate of Designation, and the
issuance of the Underlying Shares upon such conversion, which issuance of
shares, when aggregated with the Common Stock, may exceed 20% of the outstanding
Common Stock prior to the date of this Agreement (the “Proposal”). The Proxy
Statement shall include the recommendation of the Board to its stockholders that
they vote in favor of adoption of the foregoing proposal.

(c)          The Company shall give counsel to the Purchasers a reasonable
opportunity to review and comment on the Proxy Statement each time before that
document (or any amendment or supplement thereto) is filed with the Commission,
and reasonable and good faith consideration shall be given to any comments made
by counsel. The Company shall (i) promptly provide such counsel with any
comments or other communications, whether written or oral, that the Company may
receive from the Commission or its staff with respect to the Proxy Statement
promptly after receipt of those comments or other communications and (ii)
provide such counsel with a reasonable opportunity to participate in the
response to those comments and to provide comments on that response (to which
reasonable and good faith consideration shall be given), including by
participating in any discussions or meetings with the Commission. Thereafter,
the Company shall promptly respond to such comments and file any amendments
thereto.

 

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(d)If the stockholders do not approve such Proposal at the 2017 annual meeting
of stockholders, then in connection with each subsequent annual meeting of
stockholders until the Proposal is approved by the Company’s stockholders, the
Company shall prepare and file with the Commission a definitive proxy statement
which includes the Proposal, and give Purchasers’ counsel opportunity to review
and comment on such definitive proxy statement as set forth in subsection (c)
above.

 

ARTICLE V.

CONDITIONS PRECEDENT TO CLOSING

 

5.1Conditions Precedent to the Obligations of the Purchasers to Purchase
Shares.  The obligation of each Purchaser to acquire Shares at the Closing is
subject to the fulfillment to such Purchaser’s satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
such Purchaser (as to itself only):

(a)Representations and Warranties.  The representations and warranties of the
Company contained herein shall be true and correct in all material respects
(except for those representations and warranties which are qualified as to
materiality, in which case such representations and warranties shall be true and
correct in all respects) as of the date when made and as of the Closing Date, as
though made on and as of such date, except for such representations and
warranties that speak as of a specific date.  

(b)Performance.  The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing.

(c)No Injunction.  No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

(d)Consents.  The Company shall have obtained in a timely fashion any and all
consents, Permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Shares (including all Required
Approvals), all of which shall be and remain so long as necessary in full force
and effect.

(e)Listing. The NASDAQ Global Market shall have approved the listing of
additional shares application for the Securities.

(f)No Suspensions of Trading in Common Stock.  The Common Stock shall not have
been suspended, as of the Closing Date, by the Commission or the Trading Market
from trading on the Trading Market nor shall suspension by the Commission or the
Trading Market have been threatened, as of the Closing Date, either (A) in
writing by the Commission or the Trading Market or (B) by falling below the
minimum listing maintenance requirements of the Trading Market.

 

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(g)Company Deliverables.  The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).

(h)Compliance Certificate.  The Company shall have delivered to each Purchaser a
certificate, dated as of the Closing Date and signed by its Chief Executive
Officer or its Chief Financial Officer, dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in Sections 5.1(a) and (b) in the
form attached hereto as Exhibit E.

(i)Termination.  This Agreement shall not have been terminated in accordance
with Section 6.16 herein.

(j)Reservation of Shares of Common Stock. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Stock, a number of
shares of Common Stock equal to the number of Underlying Shares issuable upon
conversion of the Preferred Stock.

5.2Conditions Precedent to the Obligations of the Company to Sell Shares.  The
Company's obligation to sell and issue the Shares at the Closing to the
Purchasers is subject to the fulfillment to the satisfaction of the Company on
or prior to the Closing Date of the following conditions, any of which may be
waived by the Company:

(a)Representations and Warranties.  The representations and warranties made by
the Purchasers in Section 3.2 hereof shall be true and correct in all material
respects (except for those representations and warranties which are qualified as
to materiality, in which case such representations and warranties shall be true
and correct in all respects) as of the date when made, and as of the Closing
Date as though made on and as of such date, except for representations and
warranties that speak as of a specific date.

(b)Performance.  Such Purchaser shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by such
Purchaser at or prior to the Closing Date.

(c)No Injunction.  No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

(d)Consents.  The Company shall have obtained in a timely fashion any and all
consents, Permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Shares, all of which shall be and
remain so long as necessary in full force and effect.

(e)Purchasers Deliverables.  Such Purchaser shall have delivered its Purchaser
Deliverables in accordance with Section 2.2(b).

 

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(f)Listing.  The NASDAQ Global Market shall have approved the listing of
additional shares application for the Shares.

(g)Termination.  This Agreement shall not have been terminated as to such
Purchaser in accordance with Section 6.16 herein.

ARTICLE VI.
MISCELLANEOUS

6.1Fees and Expenses.  The Company and the Purchasers shall each pay the fees
and expenses of their respective advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement; provided however, the Company agrees to reimburse Redmile Group, LLC
for the legal fees and expenses of its outside counsel incurred in connection
with the transactions contemplated hereby in an amount not to exceed
$50,000.  The Company shall pay all Transfer Agent fees, stamp taxes and other
taxes and duties levied in connection with the sale and issuance of the Shares
to the Purchasers.

6.2Entire Agreement.  With the exception of any written confidentiality
agreement by and between the Company and Purchaser, the Transaction Documents,
together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements (including that certain Nondisclosure Agreement
entered into between Franklin Advisers, Inc. and the Company dated July 7, 2016,
that certain Nondisclosure Agreement entered into between Redmile Group, LLC and
the Company dated October 18, 2016 and that certain Confidentiality Agreement
entered into between BVF Partners L.P. and the Company dated October 21, 2016),
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.  At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.

6.3Notices.  Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section 6.3 prior to 5:00 P.M., New York City time, on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 6.3 on a day that is not a Trading Day or later than
5:00 P.M., New York City time, on any Trading Day, (c) the Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service with next day delivery specified, or (d) upon actual receipt by the
party to whom such notice is required to be given.  The address for such notices
and communications shall be as follows:

If to the Company:Fate Therapeutics, Inc.

3535 General Atomics Court, Suite 200

San Diego, CA 92121

 

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Tel: (858) 875-1800

Attention: Cindy R. Tahl

[Email]

 

 

With a copy to:Goodwin Procter LLP

3 Embarcadero Center

San Francisco, CA 94111

Telephone No.: [redacted]

Attention: Maggie Wong and Mitzi Chang

[E-mail]

 

If to a Purchaser:To the address set forth under such Purchaser’s name on the
signature page hereof, or such other address as may be designated in writing
hereafter, in

the same manner, by such Person.

 

With a copy to:Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

Telephone No.: [redacted]

Attention: Keith Billotti

[E-mail]

 

6.4Amendments; Waivers.  No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by the Company, Redmile Group, LLC and the holders of a majority in
interest of the Shares still held by the Purchasers, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought.  No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

6.5Construction.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.  This
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement or any of the
Transaction Documents.

6.6Successors and Assigns.  The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted
assigns.  This Agreement, or any rights or obligations hereunder, may not be
assigned by the Company without the prior written consent of each
Purchaser.  Any Purchaser may assign its rights hereunder in whole or in part to
any Person to whom such Purchaser assigns or transfers any Shares in compliance
with the Transaction Documents and applicable law,

 

--------------------------------------------------------------------------------

 

provided such transferee shall agree in writing to be bound, with respect to the
transferred Shares, by the terms and conditions of this Agreement that apply to
“Purchaser”.

6.7No Third-Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except each Purchaser Party is an intended third party beneficiary of
Section 4.8.

6.8Governing Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof.  Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts.  Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum.  Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  

6.9Survival.  Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing
and the delivery of the Securities.

6.10Execution.  This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.  In the event that any signature is delivered by
facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile signature page were an original thereof.

6.11Severability.  If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable

 

--------------------------------------------------------------------------------

 

provision that is a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.

6.12Replacement of Shares.  If any certificate or instrument evidencing any
Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation thereof, or
in lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company and the Transfer
Agent of such loss, theft or destruction and the execution by the holder thereof
of a customary lost certificate affidavit of that fact and an agreement to
indemnify and hold harmless the Company and the Transfer Agent for any losses in
connection therewith or, if required by the Transfer Agent, a bond in such form
and amount as is required by the Transfer Agent.  The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Shares.  If a
replacement certificate or instrument evidencing any Shares is requested due to
a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

6.13Remedies.  In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to seek specific performance under the
Transaction Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.

6.14Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in any Transaction Document to a number of shares or
a price per share shall be deemed to be amended to appropriately account for
such event.

6.15Independent Nature of Purchasers’ Obligations and Rights.  The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document.  The decision of each Purchaser to purchase Shares
pursuant to the Transaction Documents has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or any subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser and any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statement or opinions.  Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an

 

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association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Shares or enforcing its rights
under the Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any Proceeding for such purpose.  Each Purchaser has been
represented by its own separate legal counsel in its review and negotiation of
the Transaction Documents.  The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by any Purchaser.  

6.16Cooperation of the Parties.  Each of the Company and the Purchasers agree
that they will use their commercially reasonable efforts to close the
transaction contemplated hereby by the Closing Date.  The Company and the
Purchasers further agree that they shall each provide reasonable cooperation to
the other party for all necessary filings made by the Company and/or the
Purchaser incident to the transactions contemplated hereby, whether before or
after the Closing Date.

6.17Termination.  This Agreement may be terminated and the sale and purchase of
the Shares abandoned at any time prior to the Closing by either the Company or
any Purchaser (with respect to itself only) upon written notice to the other, if
the Closing has not been consummated on or prior to 5:00 P.M., New York City
time, on the thirtieth (30th) day after the date of this Agreement; provided,
however, that the right to terminate this Agreement under this Section 6.17
shall not be available to any Person whose failure to comply with its
obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or before such time.  Nothing in this Section
6.17 shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.  In the event of a termination pursuant to this
Section 6.17, the Company shall promptly notify all non-terminating
Purchasers.  

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

FATE THERAPEUTICS, INC.

 

By: /s/ J. Scott Wolchko____________________________
Name: J. Scott Wolchko

Title: President and Chief Executive Officer

 

 

--------------------------------------------------------------------------------

 

 

NAME OF PURCHASER:

 

 

Redmile Capital Fund, LP

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of the General Partner and the Investment Manager

 

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock                      223,663

 

 

 

Aggregate Purchase Price (Subscription Amount): $2,974,717.90

 

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

Redmile Capital Offshore Fund, Ltd.

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of the Investment Manager

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock                      302,862

 

 

 

Aggregate Purchase Price (Subscription Amount): $ 4,028,064.60

 

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

 

Redmile Capital Offshore Fund II, Ltd.

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of the Investment Manager

 

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock                  1,712,110

 

 

 

Aggregate Purchase Price (Subscription Amount): $ 22,771,063.00

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

Redmile Special Opportunities Fund, Ltd.

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of the Investment Manager

 

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock                        55,747

 

 

 

Aggregate Purchase Price (Subscription Amount): $ 741,435.10

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

Redmile Capital Offshore Fund (ERISA), Ltd.

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of the Investment Manager

 

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock33,441

 

 

Aggregate Purchase Price (Subscription Amount): $ 444,765.30

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

Redmile Biopharma Investments I, L.P.

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of the General Partner and/or Management Company

 

 

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock342,422

 

 

Aggregate Purchase Price (Subscription Amount): $ 4,554,212.60

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

P Redmile, Ltd.

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of Redmile Group, LLC, Investment Adviser to P Redmile, Ltd.

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock30,121

 

 

Aggregate Purchase Price (Subscription Amount): $ 400,609.30

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

 

 

 

LMA SPC for and o/b/o MAP 20 Segregated Portfolio

 

 

By:

 

 

 

/s/ Jeremy Green__________________________

Jeremy Green

Title

Managing Member of Redmile Group, LLC, Investment Adviser to LMA SPC for and
o/b/o MAP 20 Segregated Portfolio

 

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock ____________________

 

 

Shares of Class A Preferred Stock119,183

 

 

Aggregate Purchase Price (Subscription Amount): $ 1,585,133.90

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

Biotechnology Value Fund, LP

 

 

By: /s/ Mark Lampert_______

Name: Mark Lampert_______

Title:  CEO, Portfolio Manager

 

Address:

One Sansome Street, 30th Floor

San Francisco, CA 94104

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 1,715,611

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 4,563,525.26

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

Biotechnology Value Fund II, LP

 

 

By: /s/ Mark Lampert_______

Name: Mark Lampert_______

Title:  CEO, Portfolio Manager

 

Address:

One Sansome Street, 30th Floor

San Francisco, CA 94104

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 1,105,088

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 2,939,534.08

 

 

 

--------------------------------------------------------------------------------

 

 

NAME OF PURCHASER:

 

Biotechnology Value Trading Fund OS L.P

 

By: /s/ Mark Lampert_______

Name: Mark Lampert_______

Title:  CEO, Portfolio Manager

 

Address:

One Sansome Street, 30th Floor

San Francisco, CA 94104

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 331,022

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 880,518.52

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

Investment 10, L.L.C.

 

 

By: /s/ Mark Lampert_______

Name: Mark Lampert_______

Title:  CEO, Portfolio Manager

 

Address:

One Sansome Street, 30th Floor

San Francisco, CA 94104

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 177,801

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 472,950.66

 

 

 

 

--------------------------------------------------------------------------------

 

NAME OF PURCHASER:

 

MSI BVF SPV, L.L.C. 

 

By: /s/ Mark Lampert_______

Name: Mark Lampert_______

Title:  CEO, Portfolio Manager

 

Address:

One Sansome Street, 30th Floor

San Francisco, CA 94104

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 429,876

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 1,143,470.16

 

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

 

Franklin Templeton Investment Funds – Franklin Biotechnology Discovery Fund

By:  Franklin Advisers, Inc., as investment manager

 

 

By: /s/ Evan McCulloch

Name: Evan McCulloch

Title:  Vice President__

 

Address:

c/o Franklin Advisers, Inc., One Franklin Parkway, San Mateo, California 94403

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 462,302

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 1,229,723.320

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

 

Franklin Strategic Series – Franklin Biotechnology Discovery Fund

By:  Franklin Advisers, Inc., as investment manager

 

 

By: /s/ Evan McCulloch

Name: Evan McCulloch

Title:  Vice President__

 

Address:

c/o Franklin Advisers, Inc., One Franklin Parkway, San Mateo, California 94403

 

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 289,577

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 770,274.82

 

 

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

 

EcoR1 Capital Fund Qualified, LP

 

 

By: /s/ Oleg Nodelman_______________

Name: Oleg Nodelman_______________

Title: Manager, EcoR1 Capital LLC, as GP

 

Address:

409 Illinois Street, San Francisco, CA 94158

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 1,400,376

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 3,725,000.16

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

 

EcoR1 Capital Fund, LP

 

 

By: /s/ Oleg Nodelman_______________

Name: Oleg Nodelman_______________

Title: Manager, EcoR1 Capital LLC, as GP

 

Address:

409 Illinois Street, San Francisco, CA 94158

 

Number of Shares to be Acquired

 

 

Shares of Common Stock 479,323

 

 

 

Shares of Class A Preferred Stock____________________

 

 

Aggregate Purchase Price (Subscription Amount): $ 1,274,999.18

 

 

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

SARAH GORDON WILD

 

 

By: /s/ Sarah Gordon Wild

Name: Sarah Gordon Wild

 

Address: [address]

  [address]

 

 

Number of Shares to be Acquired

 

Shares of Common Stock 375,939

 

 

Shares of Class A Preferred Stock____________________

 

Aggregate Purchase Price (Subscription Amount): $ 999,997.74

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

 

THE INVESTMENT 2002 TRUST DATED 11/11/02

 

By: /s/ William H. Rastetter

Name: William H. Rastetter

Title:  Trustee___________

 

Address: [address]

  [address]

 

 

Number of Shares to be Acquired

 

Shares of Common Stock 375,939

 

 

Shares of Class A Preferred Stock____________________

 

Aggregate Purchase Price (Subscription Amount): $ 999,997.74

 

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

TIMOTHY P. COUGHLIN

 

By: /s/ Timothy P. Coughlin

Name: Timothy P. Coughlin

 

Address: [address]

  [address]

 

 

Number of Shares to be Acquired

 

Shares of Common Stock 56,390

 

 

Shares of Class A Preferred Stock____________________

 

Aggregate Purchase Price (Subscription Amount): $ 149,997.40

 

 

--------------------------------------------------------------------------------

 

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

NAME OF PURCHASER:

 

Chris M. Storgard and Melinda Storgard as trustees of the Storgard Family Trust,
June 28, 2012

 

 

By: /s/ Chris Mark Anderson Storgard

Name: Chris Mark Anderson Storgard

 

Address: [address]

  [address]

 

 

Number of Shares to be Acquired

 

Shares of Common Stock 37,593

 

 

Shares of Class A Preferred Stock____________________

 

Aggregate Purchase Price (Subscription Amount): $ 99,997.38

 

 

 

--------------------------------------------------------------------------------

 

EXHIBITS:

 

A: Form of Registration Rights Agreement

B: Form of Opinion of Company Counsel

C: Form of Irrevocable Transfer Agent Instructions

D:Form of Secretary’s Certificate

E:Form of Officer’s Certificate

F:Wire Instructions

G:Form of Certificate of Designation

 

 

 

 

 

--------------------------------------------------------------------------------

 

Exhibit A

Form of Registration Rights Agreement

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

Exhibit B

Form of Opinion of Company Counsel

 

 

--------------------------------------------------------------------------------

 

EXHIBIT C

Form of Irrevocable Transfer Agent Instructions

As of November [_], 2016

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Attn:  Tiffany Thompson

Ladies and Gentlemen:

Reference is made to that certain Securities Purchase Agreement, dated as of
November 21, 2016 (the “Agreement”), by and among Fate Therapeutics, Inc., a
Delaware corporation (the “Company”), and the purchasers named on the signature
pages thereto (collectively, and including permitted transferees, the
“Holders”), pursuant to which the Company is issuing to the Holders an aggregate
of 7,236,837 shares of Common Stock of the Company, par value $0.001 per share
(the “Common Stock”), and an aggregate of 2,819,549 shares of Class A Preferred
Stock, par value $0.001 per share (the “Preferred Stock”) and in the future may
issue an aggregate of 14,097,745 shares of Common Stock, which is subject to
adjustment, upon conversion of the Preferred Stock (the “Underlying Shares” and
together with the Common Stock and the Preferred Stock, the “Securities”).

You are hereby irrevocably instructed to issue, register and deliver the shares
of Common stock and Preferred Stock in the denominations and the names as are
specified in Exhibit 1 attached hereto. The Common Stock and the Preferred Stock
shall be issued in book entry form with the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS AND ARE
SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT, DATED NOVEMBER 21, 2016 AND A REGISTRATION RIGHTS AGREEMENT, DATED
NOVEMBER 21, 2016, IN EACH CASE BY AND AMONG THE COMPANY AND THE STOCKHOLDERS
NAMED THEREIN.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT.

Upon the Company’s receipt of a Holder’s duly completed and executed Notice of
Conversion as set forth in Annex A to the Company’s Certificate of Designation
of Preferences Rights and Limitations of Class A Convertible Stock dated
November [_], 2016, the Company shall issue to American Stock Transfer & Trust
Company, LLC (the “Transfer Agent”) a legal opinion signed by its counsel
authorizing the issuance of the certain number of shares of the Company’s Class
A Preferred Stock set forth in the Notice of Conversion to be converted into the
Company’s Common Stock and setting forth the transfer restrictions and legends,
if any, to be attached to the Underlying Shares (the “Legal Opinion”).  If the
converting Holder has

 

--------------------------------------------------------------------------------

 

been issued a physical stock certificate for its Class A Preferred Stock (the
“Stock Certificate”), such Holder shall mail the physical copy of such Stock
Certificate to the Transfer Agent along with an instruction letter specifying
(i) the number of shares of Class A Preferred Stock to be converted into
Underlying Shares and (ii) whether they would like their  remaining Class A
Preferred Stock (if any) kept in book entry or certificated form (the
“Instruction Letter”). Once the Company has received such Notice of Conversion
from the Holder, and the Transfer Agent has received the Legal Opinion from the
Company’s legal counsel and the Stock Certificate (if any) and the Instruction
Letter from the Holder, the Transfer Agent shall process such Underlying Shares
consistent with the conversion mechanics and timing outlined in Section 6(e) of
the Certificate of Designation.

You acknowledge and agree that so long as you have received (a) written
confirmation from the Company’s legal counsel that either (1) a registration
statement covering resales of the Securities has been declared effective by the
Securities and Exchange Commission (the “Commission”) under the Securities Act
of 1933, as amended (the “Securities Act”), or (2) the Securities have been sold
in conformity with Rule 144 under the Securities Act (“Rule 144”) or are
eligible for sale under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such securities and without volume or manner-of-sale restrictions and (b) if
applicable, a copy of such registration statement, then, unless otherwise
required by law, within three (3) Trading Days of your receipt of written
confirmation of (1) or (2) above, you shall remove any restrictive legend or
stop transfer order and/or transfer the Securities registered in the names of
Purchasers to the applicable transferee and such Securities shall not bear any
legend restricting transfer of the Securities thereby and should not be subject
to any stop-transfer restriction; provided, however, that if such Securities are
not registered for resale under the Securities Act or able to be sold under Rule
144 without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such securities and without
volume or manner-of-sale restrictions, then such Securities shall remain
legended.

     A form of written confirmation from the Company’s outside legal counsel
that a registration statement covering resales of the Securities has been
declared effective by the Commission under the Securities Act is attached hereto
as Annex I.

     Please be advised that the Holders are relying upon this letter as an
inducement to enter into the Agreement and, accordingly, each Holder is a third
party beneficiary to these instructions.

 

--------------------------------------------------------------------------------

 

     Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions.  

 

 

[Signature Page Follows.]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

Very truly yours,

Fate therapeutics, inc.

 

By:  __________________________________Name: ________________________________

Title:  ________________________________

 

 

Acknowledged and Agreed:

 

American Stock Transfer & Trust Company, LLC

 

By: __________________________________
Name: ________________________________
Title:  ________________________________

 

Date:  _________________, ______

 

 

--------------------------------------------------------------------------------

 

EXHIBIT 1

 

Name of Purchaser

Number of Shares of Common Stock

Number of Shares of Preferred Stock

Address of Record

Tax ID number

Redmile Biopharma Investments I, L.P.

 

342,422

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

Redmile Capital Offshore Fund II, Ltd.

 

1,712,110

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

Redmile Capital Fund, LP

 

223,663

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

Redmile Capital Offshore Fund, Ltd.

 

302,862

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

Redmile Special Opportunities Fund, Ltd.

 

55,747

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

Redmile Capital Offshore Fund (ERISA), Ltd.

 

33,441

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

 

--------------------------------------------------------------------------------

 

P Redmile Ltd.

 

30,121

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129

Attention: Josh Garcia
[email]

redacted

Map 20 Segregated Portfolio, a segregated portfolio of LMA SPC

 

119,183

c/o Redmile Group, LLC
One Letterman Drive, Building D, Suite D3-300
San Francisco, CA 94129
Attention: Josh Garcia
[email]

redacted

Biotechnology Value Trading Fund OS, L.P

331,022

 

The Depository Trust Company
570 Washington Blvd - 5th floor
Jersey City, NJ 07310
Attn: BNY Mellon/Branch Deposit Department for the account of Biotechnology
Value Trading Fund OS LP

redacted

Biotechnology Value Fund, LP

1,715,611

 

The Depository Trust Company
570 Washington Blvd - 5th floor
Jersey City, NJ 07310
Attn: BNY Mellon/Branch Deposit Department for the account of Biotechnology
Value Fund LP

redacted

Biotechnology Value Fund II, LP

1,105,088

 

The Depository Trust Company
570 Washington Blvd - 5th floor
Jersey City, NJ 07310
Attn: BNY Mellon/Branch Deposit Department for the account of Biotechnology
Value Fund II, LP

redacted

MSI BVF SPV LLC

429,876

 

BNP Paribas Prime Brokerage
Attn: Jose Nevarez
787 Seventh Avenue, 8th Floor
New York, NY  10019
[telephone number]
[email]

redacted

Investment 10, LLC

177,801

 

The Depository Trust Company
570 Washington Blvd - 5th floor
Jersey City, NJ 07310
Attn: BNY Mellon/Branch Deposit Department for the account of Investment 10 LLC

redacted

EcoR1 Capital Fund Qualified, LP

1,400,376

 

409 Illinois Street, San Francisco, CA 94158

redacted

EcoR1 Capital Fund, LP

479,323

 

409 Illinois Street, San Francisco, CA 94158

redacted

 

--------------------------------------------------------------------------------

 

Franklin Templeton Investment Funds – Franklin Biotechnology Discovery Fund

 

462,302

 

One Franklin Parkway, San Mateo, California 94403, Attn:  Christopher Lee
[telephone number] and Christopher Chen [telephone number];

redacted

Franklin Strategic Series – Franklin Biotechnology Discovery Fund

 

289,577

 

One Franklin Parkway, San Mateo, California 94403, Attn:  Christopher Lee
[telephone number] and Christopher Chen [telephone number];

redacted

Sarah Gordon Wild

375,939

 

Attn: Sarah Wild
[address]

[address]

 

redacted

THE INVESTMENT 2002 TRUST DATED 11/11/02

375,939

 

Attn: Bill Rastetter
[address]

[address]

 

redacted

Timothy P. Coughlin

56,390

 

[address]

[address]

 

redacted

Storgard Family Trust, June 28, 2012

37,593

 

[address]

[address]

 

redacted

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

Annex I

FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

 

 

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Attn:  Tiffany Thompson

 

 

 

 

 

Re: Fate Therapeutics, Inc.

 

Ladies and Gentlemen:

        

We are counsel to Fate Therapeutics, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with that certain
Securities Purchase Agreement, dated as of November 21, 2016, entered into by
and among the Company and the purchasers named therein (collectively, the
“Purchasers”) pursuant to which the Company issued to the Purchasers shares of
the Company’s common stock, $0.001 par value per share (the “Common Stock”), and
shares of Class A Preferred Stock, par value $0.001 per share (the “Preferred
Stock”) set forth below such Purchaser’s name on the signature page of this
Agreement (which aggregate amount for all Purchasers together shall be [__]
shares of Common Stock and [__] shares of Preferred Stock, and shall be
collectively referred to herein as the “Shares”).  Pursuant to that certain
Registration Rights Agreement of even date (the “Registration Rights
Agreement”), the Company agreed to register the resale of certain of the shares
of the Common Stock and the Common Stock issued or issuable upon conversion of
the Preferred Stock (the “Underlying Shares” and together with the Common Stock,
the “Registrable Securities”), under the Securities Act of 1933, as amended (the
“Securities Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on                     , ____, the Company filed
a Registration Statement on Form S-3 (File No. 333-        ) (the “Registration
Statement”) with the Securities and Exchange Commission (the “Commission”)
relating to the Registrable Securities which names each of the Purchasers party
to the Registration Rights Agreement as a selling stockholder thereunder.

       

In connection with the foregoing, we advise you that a member of the
Commission’s staff has advised us by telephone that the Commission has entered
an order declaring the Registration Statement effective under the Securities Act
at ____ [a.m.][p.m.] on __________, ____, and we have no knowledge, after
telephonic inquiry of a member of the staff, that any stop order suspending its
effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the Commission and the Registrable Securities
are available for resale under the Securities Act pursuant to the Registration
Statement.

     

This letter shall serve as our standing notice to you that the Common Stock may
be freely transferred by the Purchasers pursuant to the Registration Statement.
You need not require further letters from us to effect any future legend-free
issuance or reissuance of shares of Common Stock to the Purchasers or the
transferees of the Purchasers, as the case may be, as contemplated by the
Company’s Irrevocable Transfer Agent Instructions dated November 21, 2016,
provided at the time of such reissuance,

 

--------------------------------------------------------------------------------

 

the Company has not otherwise notified you that the Registration Statement is
unavailable for the resale of the Registrable Securities. This letter shall
serve as our standing instructions with regard to this matter.

 

 

 

 

 

 

 

Very truly yours,

 

 

 

 

 

 

 

Goodwin Procter LLP

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT D

Form of Secretary’s Certificate

 

The undersigned hereby certifies that she is the duly elected, qualified and
acting Secretary of Fate Therapeutics, Inc. a Delaware corporation (the
“Company”), and that as such she is authorized to execute and deliver this
certificate in the name and on behalf of the Company and in connection with the
Securities Purchase Agreement, dated as of November 21, 2016, by and among the
Company and the investors party thereto (the “Securities Purchase Agreement”),
and further certifies in her official capacity, in the name and on behalf of the
Company, the items set forth below.  Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities Purchase
Agreement.

1.

Attached hereto as Exhibit A is a true, correct and complete copy of the
resolutions duly adopted by the Board of Directors of the Company by unanimous
written consent on November ___, 2016.  Such resolutions have not in any way
been amended, modified, revoked or rescinded, have been in full force and effect
since their adoption to and including the date hereof and are now in full force
and effect.

2.

Attached hereto as Exhibit B is a true, correct and complete copy of the Amended
and Restated Certificate of Incorporation of the Company, together with any and
all amendments thereto currently in effect, and no action has been taken to
further amend, modify or repeal such Certificate of Incorporation, the same
being in full force and effect in the attached form as of the date hereof.

3.

Attached hereto as Exhibit C is a true, correct and complete copy of the Amended
and Restated Bylaws of the Company and any and all amendments thereto currently
in effect, and no action has been taken to further amend, modify or repeal such
Bylaws, the same being in full force and effect in the attached form as of the
date hereof.

4.

Each person listed below has been duly elected or appointed to the position(s)
indicated opposite his name and is duly authorized to sign the Securities
Purchase Agreement and each of the Transaction Documents on behalf of the
Company, and the signature appearing opposite such person’s name below is such
person’s genuine signature.

Name

Position

Signature

 

J. Scott Wolchko

President and Chief Executive Officer

_________________________

 

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of this ___ day
of November, 2016.

 

 

 

Cindy R. Tahl

Secretary

 

 

I, J. Scott Wolchko, President and Chief Executive Officer, hereby certify that
Cindy R. Tahl is the duly elected, qualified and acting Secretary of the Company
and that the signature set forth above is her true signature.

 

 

J. Scott Wolchko

President and Chief Executive Officer

 

--------------------------------------------------------------------------------

 

EXHIBIT A

Resolutions

 

--------------------------------------------------------------------------------

 

EXHIBIT B

Certificate of Incorporation

 

--------------------------------------------------------------------------------

 

EXHIBIT C

Bylaws

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT E

Form of Officer’s Certificate

 

The undersigned, the Chief Executive Officer of Fate Therapeutics, Inc., a
Delaware corporation (the “Company”), pursuant to Section 5.1(h) of the
Securities Purchase Agreement, dated as of November 21, 2016, by and among the
Company and the investors signatory thereto (the “Securities Purchase
Agreement”), hereby represents, warrants and certifies as follows (capitalized
terms used but not otherwise defined herein shall have the meaning set forth in
the Securities Purchase Agreement):

 

 

1.

The representations and warranties of the Company contained in the Securities
Purchase Agreement are true and correct in all material respects (except for
those representations and warranties which are qualified as to materiality, in
which case, such representations and warranties shall be true and correct in all
respects) as of the date when made and as of the date hereof, as though made on
and as of such date, except for such representations and warranties that speak
as of a specific date.

 

 

2.

The Company has performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by it at or prior to the date
hereof.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

IN WITNESS WHEREOF, the undersigned has executed this Officer’s Certificate this
___ day of November, 2016.

 

 

 

___________________________

J. Scott Wolchko

President and Chief Executive Officer

 

--------------------------------------------------------------------------------

 

EXHIBIT F

Wire Instructions

 

 

 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT G

FORM OF CERTIFICATE OF DESIGNATION

FATE THERAPEUTICS, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS

OF

CLASS A CONVERTIBLE PREFERRED STOCK

PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW

FATE THERAPEUTICS, INC., Delaware corporation (the “Corporation”), in accordance
with the provisions of Section 103 of the Delaware General Corporation Law (the
“DGCL”) does hereby certify that, in accordance with Sections 141(c) and 151 of
the DGCL, the following resolution was duly adopted by the Board of Directors of
the Corporation on November 21, 2016:

RESOLVED, pursuant to authority expressly set forth in the Amended and Restated
Certificate of Incorporation of the Corporation (the “Certificate of
Incorporation”), the issuance of a series of Preferred Stock designated as the
Class A Convertible Preferred Stock, par value $0.001 per share, of the
Corporation is hereby authorized and the designation, number of shares, powers,
preferences, rights, qualifications, limitations and restrictions thereof (in
addition to any provisions set forth in the Certificate of Incorporation that
are applicable to the Preferred Stock of all classes and series) are hereby
fixed, and the Certificate of Designation of Preferences, Rights and Limitations
of Class A Convertible Preferred Stock is hereby approved as follows:

CLASS A CONVERTIBLE PREFERRED STOCK

Section 1. Definitions. For the purposes hereof, the following terms shall have
the following meanings:

“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act of 1933. With respect to a Holder, any investment fund
or managed account that is managed on a discretionary basis by the same
investment manager as such Holder will be deemed to be an Affiliate of such
Holder.

“Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

“Commission” means the U.S. Securities and Exchange Commission.

“Common Stock” means the Corporation’s common stock, par value $0.001 per share,
and stock of any other class of securities into which such securities may
hereafter be reclassified into.

 

--------------------------------------------------------------------------------

 

 “Conversion Price” for the Class A Preferred Stock shall be $2.66, subject to
adjustment as provided herein.

“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Class A Preferred Stock in accordance with the
terms hereof.

“DGCL” shall mean the Delaware General Corporation Law.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Holder” means any holder of Class A Preferred Stock.

“Issuance Date” means the first date on which any shares of Class A Preferred
Stock are issued by the Corporation.

“Person” means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

“Stated Value” means $13.30 per share, subject to increase as set forth in
Section 3 below.

“Threshold Amount” means 19.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock pursuant to an applicable Notice of Conversion.

“Trading Day” means a day on which the Common Stock is traded for any period on
a principal securities exchange or if the Common Stock is not traded on a
principal securities exchange, on a day that the Common Stock is traded on
another securities market on which the Common Stock is then being traded.

Section 2. Designation, Amount and Par Value; Assignment.

(a) The series of preferred stock designated by this Certificate of Designation
shall be designated as the Corporation’s Class A Convertible Preferred Stock
(the “Class A Preferred Stock”) and the number of shares so designated shall be
2,819,549.  The Class A Preferred Stock shall have a par value  of $0.001 per
share.

(b) The Corporation shall register shares of the Class A Preferred Stock, upon
records to be maintained by the Corporation for that purpose (the “Class A
Preferred Stock Register”), in the name of the Holders thereof from time to
time. The Corporation may deem and treat the registered Holder of shares of
Class A Preferred Stock as the absolute owner thereof for the purpose of any
conversion thereof and for all other purposes. Shares of Class A Preferred Stock
may be issued solely in book-entry form or, if requested by any Holder, such
Holder’s shares may be issued in certificated form.  The Corporation shall
register the transfer of any shares of Class A Preferred Stock in the Class A
Preferred Stock Register, upon surrender of the certificates (if applicable)
evidencing such shares to be transferred, duly endorsed by the Holder thereof,
to the Corporation at its address specified herein. Upon any such registration
or transfer, a new certificate (or book-entry notation, if applicable)
evidencing the shares of Class A Preferred Stock so transferred shall be issued
to the transferee and a new certificate (or book-entry notation, if applicable)
evidencing the

 

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remaining portion of the shares not so transferred, if any, shall be issued to
the transferring Holder, in each case, within three Business Days. The
provisions of this Certificate of Designation are intended to be for the benefit
of all Holders from time to time and shall be enforceable by any such Holder.

Section 3. Dividends. Holders shall be entitled to receive, and the Corporation
shall pay, dividends on shares of Class A Preferred Stock equal (on an
as-if-converted-to-Common-Stock basis) to and in the same form as dividends
(other than dividends in the form of Common Stock, which shall be made in
accordance with Section 7(a)) actually paid on shares of the Common Stock when,
as and if such dividends (other than dividends in the form of Common Stock,
which shall be made in accordance with Section 7(a)) are paid on shares of the
Common Stock. Other than as set forth in the previous sentence, no other
dividends shall be paid on shares of Class A Preferred Stock; and the
Corporation shall pay no dividends (other than dividends in the form of Common
Stock) on shares of the Common Stock unless it simultaneously complies with the
previous sentence. All declared but unpaid dividends on shares of Class A
Preferred Stock shall increase the Stated Value of such shares, but when such
dividends are actually paid any such increase in the Stated Value shall be
rescinded.

Section 4. Voting Rights. Except as otherwise provided herein or as otherwise
required by the DGCL, the Class A Preferred Stock shall have no voting rights.
However, as long as any shares of Class A Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of a majority
of the then outstanding shares of the Class A Preferred Stock, (i) alter or
change adversely the powers, preferences or rights given to the Class A
Preferred Stock or alter or amend this Certificate of Designation, amend or
repeal any provision of, or add any provision to, the Certificate of
Incorporation or bylaws of the Corporation, or file any articles of amendment,
certificate of designations, preferences, limitations and relative rights of any
series of preferred stock, if such action would adversely alter or change the
preferences, rights, privileges or powers of, or restrictions provided for the
benefit of the Class A Preferred Stock in a manner materially different than the
effect on the Common Stock, regardless of whether any of the foregoing actions
shall be by means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise, (ii) issue further shares of Class A Preferred Stock
or increase or decrease (other than by conversion) the number of authorized
shares of Class A Preferred Stock, or (iii) enter into any agreement with
respect to any of the foregoing.

Section 5. Liquidation.  Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a “Liquidation”), the assets of
the Corporation available for distribution to its stockholders shall be
distributed pari passu among the holders of the shares of Common Stock and Class
A Preferred Stock, pro rata based on the number of shares held by each such
holder, treating for this purpose all such securities as if they had been
converted to Common Stock pursuant to the terms of the Certificate of
Incorporation (without regard to the Beneficial Ownership Limitation)
immediately prior to such Liquidation. The Corporation shall mail written notice
of any such Liquidation not less than 45 days prior to the payment date stated
therein, to each Holder of shares of Class A Preferred Stock.

Section 6. Conversion.

(a) Conversions at Option of Holder. Each share of Class A Preferred Stock shall
be convertible, at any time and from time to time from and after the Issuance
Date, at the option of the Holder thereof, into a number of shares of Common
Stock equal to the product of the Conversion Ratio and the number of shares of
Class A Preferred Stock to be converted. Holders shall effect conversions by
providing the Corporation with the form of conversion notice attached hereto as
Annex A (a “Notice of Conversion”), duly completed and executed. Other than a
conversion following a Fundamental Transaction or following a

 

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notice provided for under Section 7(d)(ii) hereof, the Notice of Conversion must
specify at least a number of shares of Class A Preferred Stock to be converted
equal to the lesser of (x) 100 shares (such number subject to appropriate
adjustment following the occurrence of an event specified in Section 7(a)
hereof) and (y) the number of shares of Class A Preferred Stock then held by the
Holder. Provided the Corporation’s transfer agent is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, the
Notice of Conversion may specify, at the Holder’s election, whether the
applicable Conversion Shares shall be credited to the DTC participant account
nominated by the Holder through DTC’s Deposit Withdrawal Agent Commission system
(a “DWAC Delivery”). The “Conversion Date”, or the date on which a conversion
shall be deemed effective, shall be defined as the Trading Day that the Notice
of Conversion, completed and executed, is sent by facsimile or other electronic
transmission to, and received during regular business hours by, the Corporation;
provided that the original certificate(s) (if any) representing such shares of
Class A Preferred Stock being converted, duly endorsed, and the accompanying
Notice of Conversion, are received by the Corporation within two (2) Trading
Days thereafter. In all other cases, the Conversion Date shall be defined as the
Trading Day on which the original shares of Class A Preferred Stock being
converted, duly endorsed, and the accompanying Notice of Conversion, are
received by the Corporation. The calculations set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical error.

(b)Conversion Ratio. The “Conversion Ratio” for each share of Class A Preferred
Stock shall be equal to the Stated Value divided by the Conversion Price.

(c) Beneficial Ownership Limitation. Notwithstanding anything herein to the
contrary, the Corporation shall not effect any conversion of the Class A
Preferred Stock, and a Holder shall not have the right to convert any portion of
the Class A Preferred Stock, to the extent that, after giving effect to an
attempted conversion set forth on an applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any other Person whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) or Section 16 of the Exchange Act and the applicable
regulations of the Commission, including any “group” of which the Holder is a
member (the foregoing, “Attribution Parties”)) would beneficially own a number
of shares of Common Stock in excess of the Beneficial Ownership Limitation (as
defined below). For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its Attribution Parties shall
include the number of shares of Common Stock issuable upon conversion of the
Class A Preferred Stock subject to the Notice of Conversion with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (A) conversion of the remaining,
unconverted shares of Class A Preferred Stock beneficially owned by such Holder
or any of its Attribution Parties, and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Corporation
(including any warrants) beneficially owned by such Holder or any of its
Attribution Parties that are subject to a limitation on conversion or exercise
similar to the limitation contained herein. For purposes of this Section 6(c),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the applicable regulations of the Commission. In addition, for
purposes hereof, “group” has the meaning set forth in Section 13(d) of the
Exchange Act and the applicable regulations of the Commission. For purposes of
this Section 6(c), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as
stated in the most recent of the following: (A) the Corporation’s most recent
periodic or annual filing with the Commission, as the case may be, (B) a more
recent public announcement by the Corporation that is filed with the Commission,
or (C) a more recent notice by the Corporation or the Corporation’s transfer
agent to the Holder setting forth the number of shares of Common Stock then
outstanding. Upon the written request of a Holder (which may be by email), the
Corporation shall, within three (3) Trading Days thereof, confirm in writing to
such Holder (which may

 

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be via email) the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to any actual conversion or exercise of securities of the
Corporation, including shares of Class A Preferred Stock, by such Holder or its
Attribution Parties since the date as of which such number of outstanding shares
of Common Stock was last publicly reported or confirmed to the Holder. The
“Beneficial Ownership Limitation” shall initially be 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock pursuant to such Notice of Conversion (to the
extent permitted pursuant to this Section 6(c)). The Corporation shall be
entitled to rely on representations made to it by the Holder in any Notice of
Conversion regarding its Beneficial Ownership Limitation.  Notwithstanding the
foregoing, by written notice to the Corporation, which will not be effective
until the sixty-first (61st) day after such notice is delivered to the
Corporation, the Holder may reset the Beneficial Ownership Limitation percentage
to a higher or lower percentage, not to exceed 19.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock pursuant to such Notice of Conversion.  Upon such a
change by a Holder of the Beneficial Ownership Limitation, the Beneficial
Ownership Limitation may not be further amended by such Holder without first
providing the minimum 61-day notice required by this Section
6(c).  Notwithstanding the foregoing, at any time following notice of a
Fundamental Transaction, the Holder may waive and/or change the Beneficial
Ownership Limitation effective immediately upon written notice to the
Corporation and may reinstitute a Beneficial Ownership Limitation at any time
thereafter effective immediately upon written notice to the Corporation.

(d) Nasdaq Conversion Limits; Solicitation of Stockholder Approval.
Notwithstanding Section 6(a) and 6(c) of this Certificate of Designation, the
Corporation shall not be required to issue any shares of Common Stock to a given
Holder upon conversion by such Holder (or its assigns) of any shares of Class A
Preferred Stock to the extent (and only to the extent) that such conversion
would result in a given Holder (including its predecessors-in-interest)
beneficially owning a number of shares of Common Stock in excess of the
applicable Threshold Amount that has not been approved by the Corporation’s
stockholders in accordance with the stockholder approval requirements of Nasdaq
Marketplace Rule 5635 (a “Blocked Conversion”).  The Corporation shall solicit
the approval required under Nasdaq Marketplace Rule 5635 of its stockholders for
the issuance of the full amount of shares of Common Stock otherwise issuable
upon the conversion of all shares of Class A Preferred Stock authorized and
designated under this Certificate of Designations in the absence of the
Beneficial Ownership Limitation and without regard to the Blocked Conversion
(the “Requisite Approval”) at its first annual meeting of stockholders after the
Issuance Date and at each annual meeting of the Corporation’s stockholders
thereafter to the extent the Requisite Approval has not then been obtained.

(e) Mechanics of Conversion

(i) Delivery of Certificate or Electronic Issuance Upon Conversion. Not later
than three Trading Days after the applicable Conversion Date, or if the Holder
requests the issuance of physical certificate(s), two (2) Trading Days after
receipt by the Corporation of the original certificate(s) representing such
shares of Class A Preferred Stock being converted, duly endorsed, and the
accompanying Notice of Conversion (the “Share Delivery Date”), the Corporation
shall (a) deliver, or cause to be delivered, to the converting Holder a physical
certificate or certificates representing the number of Conversion Shares being
acquired upon the conversion of shares of Class A Preferred Stock, or (b) in the
case of a DWAC Delivery (if so requested by the Holder), electronically transfer
such Conversion Shares by crediting the DTC participant account nominated by the
Holder through DTC’s DWAC system.  If in the case of any Notice of Conversion
such certificate or certificates are not delivered to or as directed by or, in
the case of a DWAC Delivery, such shares are not electronically

 

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delivered to or as directed by, the applicable Holder by the Share Delivery
Date, the applicable Holder shall be entitled to elect to rescind such
Conversion Notice by written notice to the Corporation at any time on or before
its receipt of such certificate or certificates for Conversion Shares or
electronic receipt of such shares, as applicable, in which event the Corporation
shall promptly return to such Holder any original Class A Preferred Stock
certificate delivered to the Corporation and such Holder shall promptly return
to the Corporation any Common Stock certificates or otherwise direct the return
of any shares of Common Stock delivered to the Holder through the DWAC system,
representing the shares of Class A Preferred Stock unsuccessfully tendered for
conversion to the Corporation.

(ii) Obligation Absolute. Subject to Sections 6(c) and 6(d) hereof and subject
to Holder’s right to rescind a Conversion Notice pursuant to Section 6(e)(i)
above, the Corporation’s obligation to issue and deliver the Conversion Shares
upon conversion of Class A Preferred Stock in accordance with the terms hereof
are absolute and unconditional, irrespective of any action or inaction by a
Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce
the same, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any other Person of any
obligation to the Corporation or any violation or alleged violation of law by
such Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Corporation to such Holder in
connection with the issuance of such Conversion Shares. Subject to Sections 6(c)
and 6(d) hereof and subject to Holder’s right to rescind a Conversion Notice
pursuant to Section 6(e)(i) above, in the event a Holder shall elect to convert
any or all of its Class A Preferred Stock, the Corporation may not refuse
conversion based on any claim that such Holder or anyone associated or
affiliated with such Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and/or enjoining conversion of all or part of the Class A Preferred
Stock of such Holder shall have been sought and obtained by the Corporation, and
the Corporation posts a surety bond for the benefit of such Holder in the amount
of 150% of the value of the Conversion Shares into which would be converted the
Class A Preferred Stock which is subject to such injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the
underlying dispute and the proceeds of which shall be payable to such Holder to
the extent it obtains judgment. In the absence of such injunction, the
Corporation shall, subject to Sections 6(c) and 6(d) hereof and subject to
Holder’s right to rescind a Conversion Notice pursuant to Section 6(e)(i) above,
issue Conversion Shares upon a properly noticed conversion. Nothing herein shall
limit a Holder’s right to pursue actual damages for the Corporation’s failure to
deliver Conversion Shares within the period specified herein and such Holder
shall have the right to pursue all remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief; provided that Holder shall not receive duplicate damages for
the Corporation’s failure to deliver Conversion Shares within the period
specified herein. The exercise of any such rights shall not prohibit a Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.

 (iii) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. If the Corporation fails to deliver to a Holder the applicable
certificate or certificates or to effect a DWAC Delivery, as applicable, by the
Share Delivery Date pursuant to Section 6(e)(i) (other than a failure caused by
incorrect or incomplete information provided by Holder to the Corporation), and
if after such Share Delivery Date such Holder is required to or otherwise
purchases (in an open market transaction or otherwise), shares of Common Stock
to deliver in satisfaction of a sale by such Holder of the Conversion Shares
which such Holder was entitled to receive upon the conversion relating to such
Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to
such Holder (in addition to any other

 

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remedies available to or elected by such Holder) the amount by which (x) such
Holder’s total purchase price (including any brokerage commissions) for the
shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of such Holder, either reissue (if
surrendered) the shares of Class A Preferred Stock equal to the number of shares
of Class A Preferred Stock submitted for conversion or deliver to such Holder
the number of shares of Common Stock that would have been issued if the
Corporation had timely complied with its delivery requirements under Section
6(e)(i). For example, if a Holder purchases shares of Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Class A Preferred Stock with respect to which the actual
sale price (including any brokerage commissions) giving rise to such purchase
obligation was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Corporation shall be required to pay such Holder $1,000. The
Holder shall provide the Corporation written notice, within three (3) Trading
Days after the occurrence of a Buy-In, indicating the amounts payable to such
Holder in respect of such Buy-In together with applicable confirmations and
other evidence reasonably requested by the Corporation. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Corporation’s failure
to timely deliver certificates representing shares of Common Stock upon
conversion of the shares of Class A Preferred Stock as required pursuant to the
terms hereof; provided, however, that the Holder shall not be entitled to both
(i) require the reissuance of the shares of Class A Preferred Stock submitted
for conversion for which such conversion was not timely honored and (ii) receive
the number of shares of Common Stock that would have been issued if the
Corporation had timely complied with its delivery requirements under Section
6(e)(i).

(iv) Reservation of Shares Issuable Upon Conversion. The Corporation covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Class A Preferred Stock, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holders of the Class A
Preferred Stock, not less than such aggregate number of shares of the Common
Stock as shall be issuable (taking into account the adjustments of Section 7)
upon the conversion of all outstanding shares of Class A Preferred Stock. The
Corporation covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid,
non-assessable and free and clear of all liens and other encumbrances.

(v) Fractional Shares. No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of the Class A
Preferred Stock. As to any fraction of a share which a Holder would otherwise be
entitled to receive upon such conversion, the Corporation shall pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price.

(vi) Transfer Taxes. The issuance of certificates (or book entry notations) for
shares of the Common Stock upon conversion of the Class A Preferred Stock shall
be made without charge to any Holder for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such certificates (or
such book entry notation), provided that the Corporation shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate (or such book entry notation) upon
conversion in a name other than that of the registered Holder(s) of such shares
of Class A Preferred Stock and the Corporation shall not be

 

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required to issue or deliver such certificates (or such book entry notation)
unless or until the Person or Persons requesting the issuance thereof shall have
paid to the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.

(f) Status as Stockholder. Upon each Conversion Date: (i) the shares of Class A
Preferred Stock being converted shall be deemed converted into shares of Common
Stock; and (ii) the Holder’s rights as a holder of such converted shares of
Class A Preferred Stock shall cease and terminate, excepting only the right to
receive certificates (or book entry notations) for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Corporation to comply with the terms
of this Certificate of Designation. In all cases, the holder shall retain all of
its rights and remedies for the Corporation’s failure to convert Class A
Preferred Stock.

Section 7. Certain Adjustments.

(a) Stock Dividends and Stock Splits. If the Corporation, at any time while any
shares of Class A Preferred Stock are outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of Common
Stock with respect to the then outstanding shares of Common Stock;
(ii) subdivides outstanding shares of Common Stock into a larger number of
shares; or (iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding any treasury shares of the
Corporation) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event (excluding any treasury shares of the Corporation).
Any adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.

(b) Fundamental Transaction. If, at any time while any shares of Class A
Preferred Stock are outstanding, (i) the Corporation, directly or indirectly, in
one or more related transactions effects any merger or consolidation of the
Corporation with or into another Person, (ii) the Corporation, directly or
indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any direct or indirect purchase offer,
tender offer or exchange offer (whether by the Corporation or another Person) is
completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has
been accepted by the holders of 35% or more of the outstanding Common Stock,
(iv) the Corporation, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property, (v) the Corporation, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination and
excluding shares acquired upon conversion of any currently outstanding
convertible securities in accordance with the terms thereof as in effect on the
date hereof) (each, a “Fundamental Transaction”), then (X) if the Requisite
Approval has previously been obtained, each share of Class A Preferred Stock
outstanding immediately prior to such Fundamental Transaction shall, without any
further

 

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action of the Holders thereof, automatically convert into shares of Common Stock
at the applicable Conversion Ratio, upon the effective date and time
(“Fundamental Transaction Effective Time”) of such Fundamental Transaction, and
(Y)  if the Requisite Approval has not previously been obtained, then as of the
Fundamental Transaction Effective Time, each outstanding share of Class A
Preferred Stock shall be canceled without any further action on the part of the
Corporation or the Holder thereof, and in consideration for such cancellation,
each Holder shall automatically receive , for each Conversion Share that would
have been issuable had such cancelled shares of Class A Preferred Stock been
converted immediately prior to the occurrence of such Fundamental Transaction,
the same kind and amount of securities, cash and other property receivable upon
the effectiveness of such Fundamental Transaction (the “Exchange Property”) as
it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock (the “Alternate Consideration”).  The
amount of Exchange Property receivable upon any Fundamental Transaction shall be
determined based upon the Conversion Ratio in effect on such Fundamental
Transaction Effective Time.

If holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holders shall be
given the same choice as to the Alternate Consideration it receives upon any
conversion of their shares of Class A Preferred Stock following such Fundamental
Transaction should such shares of Class A Preferred Stock remain outstanding
after such Fundamental Transaction. To the extent necessary to effectuate the
foregoing provisions should any shares of Class A Preferred Stock remain
outstanding after a Fundamental Transaction, any successor to the Corporation or
surviving entity in such Fundamental Transaction shall file a new Certificate of
Designation with the same terms and conditions and issue to the Holders new
preferred stock consistent with the foregoing provisions and evidencing the
Holders’ right to convert such preferred stock into Alternate Consideration. The
terms of any agreement to which the Corporation is a party and pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 7(b)
and ensuring that the outstanding shares of Class A Preferred Stock (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.

The Corporation (or any successor) shall, within 20 days of the Effective Time
of any Fundamental Transaction, provide written notice to the Holders of the
occurrence of such event and of the kind and amount of the cash, securities or
other property that constitute the Exchange Property.  Failure to deliver such
notice shall not affect the operation of this Section 7.

The Corporation shall not enter into any agreement for a transaction
constituting a Fundamental Transaction that would interfere with or prevent (as
applicable) conversion of the Class A Preferred Stock into the Exchange Property
in a manner that is consistent with and gives effect to this Section 7.

(c) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 7, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the number of shares of Common Stock
issued and outstanding (excluding any treasury shares of the Corporation).

(d) Notice to the Holders.

(i) Adjustment to Conversion Price. Whenever the Conversion Price is adjusted
pursuant to any provision of this Section 7, the Corporation shall promptly
deliver to each Holder a notice setting

 

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forth the Conversion Ratio after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

(ii) Other Notices. If (A) the Corporation shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the Corporation
shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock, (C) the Corporation shall authorize the granting to all holders of
the Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Corporation is a party, any sale or transfer of all or substantially all of the
assets of the Corporation, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property, or (E) the
Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then, in each case,
the Corporation shall cause to be filed at each office or agency maintained for
the purpose of conversion of the shares of Class A Preferred Stock, and shall
cause to be delivered to each Holder at its last address as it shall appear upon
the stock books of the Corporation, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice.

Section 8. Miscellaneous.

(a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, via
email, or sent by a nationally recognized overnight courier service, addressed
to the Corporation, at 3535 General Atomics Court, Suite 200, San Diego,
California 92121, Attention: Cindy R. Tahl, General Counsel, email:
cindy.tahl@fatetherapeutics.com, with a copy (which shall not constitute notice)
to: Goodwin Procter LLP, Three Embarcadero Center, 24th Floor, San Francisco,
California 94111, Attention: Maggie Wong and Mitzi Chang, email:
mwong@goodwinlaw.com, mchang@goodwinlaw.com, fax: (858) 726-7517; or such other
facsimile number, email address, or mailing address as the Corporation may
specify for such purposes by notice to the Holders delivered in accordance with
this Section. Any and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and delivered
personally, by facsimile, email, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number, email address
or mailing address of such Holder appearing on the books of the Corporation, or
if no such facsimile number, email address, or mailing address appears on the
books of the Corporation, at the principal place of business of such Holder. Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of: (i) the date of transmission, if such notice or
communication is delivered via facsimile or email prior to 5:30 p.m. (New York
City time) on any date, (ii) the date immediately following the date of
transmission, if such notice or communication is delivered via facsimile or
email between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii)
the second

 

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Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.

(b) Lost or Mutilated Class A Preferred Stock Certificate. If a Holder’s Class A
Preferred Stock certificate, if applicable, shall be mutilated, lost, stolen or
destroyed, the Corporation shall execute and deliver, if requested by the
Holder, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed
certificate, a new certificate for the shares of Class A Preferred Stock so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the ownership thereof,
reasonably satisfactory to the Corporation and, in each case, customary and
reasonable indemnity, if requested. Applicants for a new certificate under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Corporation
may prescribe.

(c) Waiver. Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a waiver by any
other Holders. The failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or more
occasions shall not be considered a waiver or deprive that party (or any other
Holder) of the right thereafter to insist upon strict adherence to that term or
any other term of this Certificate of Designation. Any waiver by the Corporation
or a Holder must be in writing. Notwithstanding any provision in this
Certificate of Designation to the contrary, any provision contained herein and
any right of the Holders of Class A Preferred Stock granted hereunder may be
waived as to all shares of Class A Preferred Stock (and the Holders thereof)
upon the written consent of the Holders of a majority of the shares of Class A
Preferred Stock then outstanding, unless a higher percentage is required by the
DGCL, in which case the written consent of the Holders of not less than such
higher percentage shall be required.

 (d)  Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under applicable law.

(e) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

(f) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to
limit or affect any of the provisions hereof.

(g) Status of Converted Class A Preferred Stock. If any shares of Class A
Preferred Stock shall be converted by the Corporation, such shares shall resume
the status of authorized but unissued shares of preferred stock and shall no
longer be designated as Class A Preferred Stock.

(h)Redemption by the Corporation.  The Class A Preferred Stock shall not be
redeemable by the Corporation.  

(i)Transfer Agent, Registrar and Conversion Agent.  The duly appointed transfer
agent, registrar, conversion and dividend paying agent for shares of Class A
Preferred Stock shall be American Stock

 

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Transfer & Trust Company, LLC (the “Transfer Agent”).  The Corporation may, in
its sole discretion, remove the Transfer Agent in accordance with the agreement
between the Corporation and the Transfer Agent; provided that the Corporation
shall appoint a successor transfer agent who shall accept such appointment prior
to the effectiveness of such removal.  Upon any such removal or appointment, the
Corporation shall send notice thereof by first-class mail, postage prepaid, to
the Holders of shares of Class A Preferred Stock.

(j)Form.  To the extent issued in certificated form, the Class A Preferred Stock
shall be issued in the form of one or more definitive shares in fully registered
form in substantially the form attached hereto as Exhibit A (each, a “Class A
Preferred Stock Certificate”), which is hereby incorporated in and expressly
made a part of this Certificate of Designation.  Each Class A Preferred Stock
Certificate shall reflect the number of shares of Class A Preferred Stock
represented thereby, and may have notations, legends or endorsements required by
law, stock exchange rules, agreements to which the Corporation is subject, if
any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Corporation). Each Class A Preferred Stock Certificate
shall be registered in the name or names of the Person or Persons specified by
the depositary in a written instrument to the registrar.

The President and either the Treasurer or the Secretary of the Corporation shall
sign each Class A Preferred Stock Certificate for the Corporation, in accordance
with the Corporation’s bylaws and applicable law, by manual or facsimile
signature. If an officer whose signature is on a Class A Preferred Stock
Certificate no longer holds that office at the time the Transfer Agent
countersigned the Class A Preferred Stock Certificate, the Class A Preferred
Stock Certificate shall be valid nevertheless. A Class A Preferred Stock
Certificate shall not be valid until an authorized signatory of the Transfer
Agent manually countersigns Class A Preferred Stock Certificate. Each Class A
Preferred Stock Certificate shall be dated the date of its countersignature.

 

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IN WITNESS WHEREOF, Fate Therapeutics, Inc. has caused this Certificate of
Designation of Preferences, Rights and Limitations of Class A Convertible
Preferred Stock to be executed by its duly authorized officer this __ day of
November, 2016.

 

 

 

 

J. Scott Wolchko

President and Chief Executive Officer

 

 

 

 

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ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER
IN ORDER TO CONVERT SHARES OF CLASS A PREFERRED STOCK)

The undersigned Holder hereby irrevocably elects to convert the number of shares
of Class A Preferred Stock indicated below, represented by stock certificate
No(s). _____ or book entry notation (the “Preferred Stock Certificates”), into
shares of common stock, par value $0.001 per share (the “Common Stock”), of Fate
Therapeutics, Inc., a Delaware corporation (the “Corporation”), as of the date
written below. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Capitalized terms utilized but not defined herein shall have
the meaning ascribed to such terms in that certain Certificate of Designation of
Preferences, Rights and Limitations of Class A Convertible Preferred Stock (the
“Certificate of Designation”) filed by the Corporation with the Delaware
Secretary of State on November [__], 2016.

As of the date hereof, the number of shares of Common Stock beneficially owned
by the undersigned Holder (together with such Holder’s Affiliates, and any other
Person whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) or Section 16 of the Exchange Act and the
applicable regulations of the Commission, including any “group” of which the
Holder is a member (the foregoing, “Attribution Parties”)), including the number
of shares of Common Stock issuable upon conversion of the Class A Preferred
Stock subject to this Notice of Conversion, but excluding the number of shares
of Common Stock which are issuable upon (A) conversion of the remaining,
unconverted Class A Preferred Stock beneficially owned by such Holder or any of
its Attribution Parties, and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation (including any
warrants) beneficially owned by such Holder or any of its Attribution Parties
that are subject to a limitation on conversion or exercise similar to the
limitation contained in Section 6(c) of the Certificate of Designation, is
[__]%. For purposes hereof, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the applicable regulations
of the Commission. In addition, for purposes hereof, “group” has the meaning set
forth in Section 13(d) of the Exchange Act and the applicable regulations of the
Commission.

Conversion calculations:

Date to Effect Conversion:

 

 

 

 

Number of shares of Class A Preferred Stock owned prior to Conversion:

 

 

 

 

Number of shares of Class A Preferred Stock to be Converted:

 

 

 

 

 

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Number of shares of Common Stock to be Issued:

 

 

 

 

Address for delivery of physical certificates:

 

 

Or

 

 

 

 

for DWAC Delivery:

 

 

 

 

DWAC Instructions:

 

 

 

 

Broker no:

 

 

 

 

Account no:

 

 

 

HOLDER

 

 

By:

 

 

 

 

 

 

Name:_______________________________

 

 

 

 

Title:________________________________

 

 

 

 

Date:________________________________