AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 2002
REGISTRATION NO. 333-83992
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STEMCELLS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other Jurisdiction 2836 94-3078125
of Incorporation or (Primary Standard Industrial (I.R.S. Employer
Organization) Classification Code Number) Identification No.)
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3155 PORTER DRIVE
PALO ALTO, CA 94304
(650) 475-3100
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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IRIS BREST, ESQ.
STEMCELLS, INC.
3155 PORTER DRIVE
PALO ALTO, CA 94304
(650) 475-3100
(650) 475-3101 (FAX)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
GEOFFREY B. DAVIS, ESQ.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
(617) 951-7000
(617) 951-7050 (fax)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
Common Stock, par value $.01 per share...... 15,000,000 shares $2.52 $37,800,000 $ 3,478(2)
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, based on the average
of the high and low prices as reported on the Nasdaq National Market on
March 4.
(2) Previously paid on March 8, 2002.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 2, 2002
PROSPECTUS
STEMCELLS, INC.
15,000,000 SHARES OF COMMON STOCK
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We may offer from time to time up to 15,000,000 shares of our common stock.
We will offer the common stock in amounts, at prices, and on terms to be
determined at the time of the offering. We will provide the specific terms of
the offering in supplements to this prospectus. This prospectus may not be used
to offer and sell our common stock unless accompanied by a prospectus
supplement.
Our common stock is listed on the Nasdaq National Market under the symbol
"STEM." The last reported sale price for our common stock on the Nasdaq National
Market on July 1, 2002 was $1.59 per share.
We will provide the specific terms of the offering in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest. This prospectus may not be used to offer and sell our common stock
unless accompanied by a prospectus supplement.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2002.
TABLE OF CONTENTS
PAGE
--------
About This Prospectus 1
Executive Office....................... 1
Risk Factors........................... 2
Special Note Regarding Forward-Looking
Information.......................... 8
Use of Proceeds........................ 8
PAGE
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Plan of Distribution................... 9
Legal Matters.......................... 12
Experts................................ 12
Where You Can Find More Information.... 12
Incorporation of Documents by
Reference............................ 12
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission under a "shelf" registration process.
Under this shelf process, we may sell any number of shares of common stock in
one or more offerings up to a total number of shares of 15,000,000. Each time we
offer common stock, we will provide a prospectus supplement that will describe
the specific terms of the offering. The prospectus supplement and any pricing
supplement may also add to, update or change the information contained in this
prospectus. Please carefully read this prospectus, the prospectus supplement and
any pricing supplement, in addition to the information contained in the
documents we refer to under the heading "Where You Can Find More Information."
EXECUTIVE OFFICE
Our principal executive office is located at 3155 Porter Drive, Palo Alto,
California 94304 and our telephone number is (650) 475-3100. We maintain a
website on the Internet at WWW.STEMCELLSINC.COM. Our website, and the
information contained therein, is not a part of this prospectus.
1
RISK FACTORS
THE OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
MAKING AN INVESTMENT DECISION REGARDING STEMCELLS, INC. OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED IF ANY
OF THESE RISKS ACTUALLY OCCUR. CONSEQUENTIALLY, THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE, RESULTING IN THE LOSS OF ALL OR PART OF YOUR INVESTMENT.
OUR TECHNOLOGY IS AT AN EARLY STAGE OF DISCOVERY AND DEVELOPMENT, AND WE MAY
FAIL TO DEVELOP ANY COMMERCIALLY ACCEPTABLE PRODUCTS.
Our stem cell technology is at the early pre-clinical stage for the brain
stem cell and at the discovery phase for the liver and pancreas stem cells and
has not yet led to the development of any product. We may fail to discover the
stem cells we are seeking, to develop any products, to obtain regulatory
approvals, to enter clinical trials, or to commercialize any products. Any
product using stem cell technology may fail to:
- survive and persist in the desired location;
- provide the intended therapeutic benefits;
- properly integrate into existing tissue in the desired manner; or
- achieve therapeutic benefits equal to or better than the standard of
treatment at the time of testing.
In addition, our products may cause undesirable side effects. Results of early
pre-clinical research may not be indicative of the results that will be obtained
in later stages of pre-clinical or clinical research. If regulatory authorities
do not approve our products, or if we fail to maintain regulatory compliance, we
would have limited ability to commercialize our products, and our business and
results of operations would be harmed. Furthermore, because stem cells are a new
form of therapy, the marketplace may not accept any products we may develop.
If we do succeed in developing products, we will face many potential
obstacles such as the need to obtain regulatory approvals, and to develop or
obtain manufacturing, marketing and distribution capabilities. In addition, we
will face substantial additional risks such as product liability.
WE HAVE PAYMENT OBLIGATIONS RESULTING FROM REAL PROPERTY OWNED OR LEASED BY
US IN RHODE ISLAND, WHICH DIVERTS FUNDING FROM OUR STEM CELL RESEARCH AND
DEVELOPMENT.
Prior to our reorganization in 1999 and the consolidation of our business in
California, we carried out our encapsulated cell therapy programs in Lincoln,
Rhode Island, where we also had our administrative offices. Although we have
vacated the Rhode Island facilities, we remain obligated to make lease payments
and payments for operating costs of approximately $1,200,000 per year for our
former science and administrative facility, which we have leased through June
30, 2013, and debt service payments and payments for operating costs of
approximately $1,000,000 per year for our former encapsulated cell therapy pilot
manufacturing facility, which we own. We have currently subleased a portion of
the science and administrative facility, but cannot be sure that we will be able
to do so for the entire duration of our obligation. We are seeking to sublease
the remaining portion of the science and administrative facility. We have
currently subleased the entire pilot manufacturing facility, but may not be able
to sublease or sell the facility in the future once the current sublease
agreements expire. These continuing costs significantly reduce our cash
resources and adversely affect our ability to fund further development of our
stem cell technology.
2
WE MAY NEED BUT FAIL TO OBTAIN PARTNERS TO SUPPORT OUR STEM CELL DEVELOPMENT
EFFORTS AND TO COMMERCIALIZE OUR TECHNOLOGY.
Equity and debt financings alone may not be sufficient to fund the cost of
developing our stem cell technologies, and we may need to rely on our ability to
reach partnering arrangements to provide financial support for our stem cell
discovery and development efforts. In addition, in order to successfully develop
and commercialize our technology, we may need to enter into a wide variety of
arrangements with corporate sponsors, pharmaceutical companies, universities,
research groups and others. While we have engaged, and expect to continue to
engage, in discussions regarding such arrangements, we have not reached any
agreement, and we may fail to obtain any such agreement on terms acceptable to
us. Even if we enter into these arrangements, we may not be able to satisfy our
obligations under them or renew or replace them after their original terms
expire. Furthermore, these arrangements may require us to grant certain rights
to third parties, including exclusive marketing rights to one or more products,
may require us to issue securities to our collaborators or may contain other
terms that are burdensome to us. If any of our collaborators terminates its
relationship with us or fails to perform its obligations in a timely manner, the
development or commercialization of our technology and potential products may be
adversely affected.
WE HAVE A HISTORY OF OPERATING LOSSES AND WE MAY FAIL TO OBTAIN REVENUES OR
BECOME PROFITABLE.
We expect to continue to incur substantial operating losses in the future in
order to conduct our research and development activities, and, if those
activities are successful, to fund clinical trials and other expenses. These
expenses include the cost of acquiring technology, product testing, acquiring
regulatory approvals, establishing production, marketing, sales and distribution
programs and administrative expenses. We have not earned any revenues from sales
of any product. All of our past revenues have been derived from, and any
revenues we may obtain for the foreseeable future are expected to be derived
from, cooperative agreements, research grants, investments and interest on
invested capital. We currently have no cooperative agreements and we have
received only two research grants for our stem cell technology, and we may not
obtain any such agreements or additional grants in the future or receive any
revenues from them.
IF WE ARE UNABLE TO PROTECT OUR PATENTS AND PROPRIETARY RIGHTS, OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATION WILL BE HARMED.
We own or license a number of patents and pending patent applications
covering human nerve stem cell cultures, central nervous system stem cell
cultures, neuroblast cultures, peripheral nervous system stem cell cultures, and
an animal model for liver failure. Patent protection for products such as those
we propose to develop is highly uncertain and involves complex and continually
evolving factual and legal questions. The governmental authorities that consider
patent applications can deny or significantly reduce the patent coverage
requested in an application before or after issuing the patent. Consequently, we
do not know whether any of our pending applications will result in the issuance
of patents, or if any existing or future patents will provide sufficient
protection or significant commercial advantage or if others will circumvent
these patents. We cannot be certain that we were the first to make the
inventions covered by each of our pending patent applications or that we were
the first to file patent applications for such inventions because patent
applications are secret until patents are issued in the United States or until
the applications are published in foreign countries, and because publication of
discoveries in the scientific or patent literature often lags behind actual
discoveries. Patents may not issue from our pending or future patent
applications or, if issued, may not be of commercial benefit to us, or may not
afford us adequate protection from competing products. In addition, third
parties may challenge our patents or governmental authorities may declare them
invalid. In the event that a third party has also filed a patent application
relating to inventions claimed in our patent applications, we may have to
participate in proceedings to determine priority of invention. This could result
in
3
substantial uncertainties and cost for us, even if the eventual outcome is
favorable to us, and the outcome might not be favorable to us. Even if a patent
issues, a court could decide that the patent was issued invalidly. Further,
patents issue for a limited term and our patents may expire before we utilize
them profitably.
Proprietary trade secrets and unpatented know-how are also important to our
research and development activities. We cannot be certain that others will not
independently develop the same or similar technologies on their own or gain
access to our trade secrets or disclose such technology, or that we will be able
to meaningfully protect our trade secrets and unpatented know-how and keep them
secret. We require our employees, consultants, and significant scientific
collaborators and sponsored researchers to execute confidentiality agreements
upon the commencement of an employment or consulting relationship with us. These
agreements may, however, fail to provide meaningful protection or adequate
remedies for us in the event of unauthorized use, transfer or disclosure of such
information or inventions.
IF OTHERS ARE FIRST TO DISCOVER AND PATENT THE STEM CELLS WE ARE SEEKING TO
DISCOVER, WE COULD BE BLOCKED FROM FURTHER WORK ON THOSE STEM CELLS.
Because the first person or entity to discover and obtain a valid patent to
a particular stem or progenitor cell may effectively block all others, it will
be important for us or our collaborators to be the first to discover any stem
cell that we are seeking to discover. Failure to be the first could prevent us
from commercializing all of our research and development affected by that
patent.
IF WE ARE UNABLE TO OBTAIN NECESSARY LICENSES TO THIRD PARTY PATENTS AND
OTHER RIGHTS, WE MAY NOT BE ABLE TO COMMERCIALLY DEVELOP OUR EXPECTED PRODUCTS.
A number of pharmaceutical, biotechnology and other companies, universities
and research institutions have filed patent applications or have received
patents relating to cell therapy, stem cells and other technologies potentially
relevant to or necessary for our expected products. We cannot predict which, if
any, of the applications will issue as patents. If third party patents or patent
applications contain claims infringed by our technology and these claims are
valid, we may be unable to obtain licenses to these patents at a reasonable
cost, if at all, and may also be unable to develop or obtain alternative
technology. If we are unable to obtain such licenses at a reasonable cost, our
business could be significantly harmed.
We have obtained rights from universities and research institutions to
technologies, processes and compounds that we believe may be important to the
development of our products. Licensors may cancel our licenses or convert them
to non-exclusive licenses if we fail to use the relevant technology or otherwise
breach these agreements. Loss of these licenses could expose us to the risks of
third party patents and/or technology. We can give no assurance that any of
these licenses will provide effective protection against our competitors.
WE COMPETE WITH COMPANIES THAT HAVE SIGNIFICANT ADVANTAGES OVER US.
The market for therapeutic products that address degenerative diseases is
large and competition is intense. For example, while we believe that our neural
stem cells may have application to Parkinson's disease, we have no clinical
program directed toward that disease at this time. More than twenty companies
worldwide, including Merck, Roche, Cephalon, Schering AG, Pharmacia Corp., and
Genzyme have at least one clinical trial for Parkinson's disease in progress at
some phase, and some have more than one. At least seven companies already have
products on the market. We expect competition to increase.
In general, we believe that our most significant competitors will be fully
integrated pharmaceutical companies and more established biotechnology
companies, such as Biogen, Inc. and Genzyme, an Elan
4
Corporation. These companies already produce or are developing treatments for
degenerative diseases that are not stem cell-based, and they have significantly
greater capital resources and expertise in research and development,
manufacturing, testing, obtaining regulatory approvals and marketing than we do.
Many of these potential competitors have significant products approved or in
development that could be competitive with our potential products, and also
operate large, well-funded research and development programs. In addition, we
expect to compete with other companies, some of which are smaller and may be
privately owned, including CellFactors, Diacrin, Geron, Layton Bioscience,
NeuralStem Biopharmaceuticals, NeuroNova, and ReNeuron, and with universities
and other research institutions who are developing treatments for degenerative
diseases that are stem cell-based.
Our competitors may succeed in developing technologies and products that are
more effective than the ones we are developing, or that would render our
technology obsolete or non-competitive.
The relative speed with which we and our competitors can develop products,
complete the clinical testing and approval processes, and supply commercial
quantities of a product to market will affect our ability to gather market
acceptance and market share. With respect to clinical testing, competition may
delay progress by limiting the number of clinical investigators and patients
available to test our potential products.
DEVELOPMENT OF OUR TECHNOLOGY IS SUBJECT TO AND RESTRICTED BY EXTENSIVE
GOVERNMENT REGULATION WHICH COULD IMPEDE OUR BUSINESS.
Our research and development efforts, as well as any future clinical trials,
and the manufacturing and marketing of any products we may develop, will be
subject to and restricted by extensive regulation by governmental authorities in
the United States and other countries. The process of obtaining U.S. Food and
Drug Administration and other necessary regulatory approvals is lengthy,
expensive and uncertain. We or our collaborators may fail to obtain the
necessary approvals to commence or continue clinical testing or to manufacture
or market our potential products in reasonable time frames, if at all. In
addition, the U.S. Congress and other legislative bodies may enact regulatory
reforms or restrictions on the development of new therapies that could adversely
affect the regulatory environment in which we operate or the development of any
products we may develop.
We base our research and development on the use of human stem and progenitor
cells obtained from fetal tissue. The federal and state governments and other
jurisdictions impose restrictions on the use of fetal tissue. These restrictions
change from time to time and may become more onerous. Additionally, we may not
be able to identify or develop reliable sources for the cells necessary for our
potential products--that is, sources that follow all state and federal
guidelines for cell procurement. Further, we may not be able to obtain such
cells in the quantity or quality sufficient to satisfy the commercial
requirements of our potential products. As a result, we may be unable to develop
or produce our products in a profitable manner.
Although we do not use embryonic stem cells, government regulation and
threatened regulation of embryonic tissue may lead outstanding researchers to
leave the field of stem cell research, or the country, in order to assure that
their careers will not be impeded by restrictions on their work. Similarly,
these factors may induce the best graduate students to choose other fields less
vulnerable to changes in regulatory oversight, thus exacerbating the risk,
discussed below, that we may not be able to attract and retain the scientific
personnel we need in face of the competition among pharmaceutical, biotechnology
and health care companies, universities and research institutions for what may
become a shrinking class of qualified individuals. In addition, we cannot assure
you that constraints on use of embryonic stem cells will not be extended to use
of fetal stem cells. Moreover, it is possible that concerns regarding research
using embryonic stem cells will impact our ability to attract collaborators and
investors and our stock price.
5
We may apply for status under the Orphan Drug Act for some of our therapies
to gain a seven year period of marketing exclusivity for those therapies. The
U.S. Congress in the past has considered, and in the future again may consider,
legislation that would restrict the extent and duration of the market
exclusivity of an orphan drug. If enacted, such legislation could prevent us
from obtaining some or all of the benefits of the existing statute even if we
were to apply for and be granted orphan drug status with respect to a potential
product.
IF WE LOSE THE SERVICES OF KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN
ADDITIONAL QUALIFIED PERSONNEL, WE MAY HAVE TO DELAY, REDUCE OR ELIMINATE SOME
OR ALL OF OUR RESEARCH AND DEVELOPMENT PROGRAMS.
We are highly dependent on the principal members of our management and
scientific staff and some of our outside consultants, including the members of
our scientific advisory board, our chief executive officer, our vice president
and the directors of our neural stem cell and liver stem cell programs. Although
we have entered into employment agreements with some of these individuals, they
may terminate their agreements at any time. In addition, our operations are
dependent upon our ability to attract and retain additional qualified scientific
and management personnel. We may not be able to attract and retain the personnel
we need on acceptable terms given the competition for experienced personnel
among pharmaceutical, biotechnology and health care companies, universities and
research institutions.
SINCE HEALTH CARE INSURERS AND OTHER ORGANIZATIONS MAY NOT PAY FOR OUR
PRODUCTS OR MAY IMPOSE LIMITS ON REIMBURSEMENTS, OUR ABILITY TO BECOME
PROFITABLE COULD BE REDUCED.
In both domestic and foreign markets, sales of potential products are likely
to depend in part upon the availability and amounts of reimbursement from third
party health care payor organizations, including government agencies, private
health care insurers and other health care payors, such as health maintenance
organizations and self-insured employee plans. There is considerable pressure to
reduce the cost of therapeutic products, and government and other third party
payors are increasingly attempting to contain health care costs by limiting both
coverage and the level of reimbursement for new therapeutic products, and by
refusing, in some cases, to provide any coverage for uses of approved products
for disease indications for which the U.S. Food and Drug Administration has not
granted marketing approval. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. We can give no
assurance that reimbursement will be provided by such payors at all or without
substantial delay, or, if such reimbursement is provided, that the approved
reimbursement amounts will be sufficient to enable us to sell products we
develop on a profitable basis. Changes in reimbursement policy could also
adversely affect the willingness of pharmaceutical companies to collaborate with
us on the development of our stem cell technology.
In certain foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. We also expect that there will
continue to be a number of federal and state proposals to implement government
control over health care costs. Efforts at health care reform are likely to
continue in future legislative sessions. We do not know what legislative
proposals federal or state governments will adopt or what actions federal, state
or private payers for health care goods and services may take in response to
health care reform proposals or legislation. We cannot predict the effect
government control and other health care reforms may have on our business.
WE HAVE LIMITED LIQUIDITY AND CAPITAL RESOURCES AND MAY NOT OBTAIN THE
SIGNIFICANT CAPITAL RESOURCES WE WILL NEED TO SUSTAIN OUR RESEARCH AND
DEVELOPMENT EFFORTS.
We have limited liquidity and capital resources and must obtain substantial
additional capital to support our research and development programs, for
acquisition of technology and intellectual property rights, and, to the extent
we decide to undertake these activities ourselves, for pre-clinical and clinical
6
testing of our anticipated products, pursuit of regulatory approvals,
establishment of production capabilities, establishment of marketing and sales
capabilities and distribution channels, and general administrative expenses. If
we do not obtain the necessary capital resources, we may have to delay, reduce
or eliminate some or all of our research and development programs or license our
technology or any potential products to third parties rather than
commercializing them ourselves.
If we are unable to draw down on our existing equity line or choose not to
do so, we intend to pursue our needed capital resources through equity and debt
financings, corporate alliances, grants and collaborative research arrangements.
We may fail to obtain the necessary capital resources from any such sources when
needed or on terms acceptable to us. Our ability to complete any such
arrangements successfully will depend upon market conditions and, more
specifically, on continued progress in our research and development efforts. We
are prohibited from entering into other stand-by equity based credit facilities
during the term of the common stock purchase agreement that governs our existing
equity line.
IF OUR COMMON STOCK PRICE DROPS SIGNIFICANTLY, WE MAY BE DELISTED FROM THE
NASDAQ NATIONAL MARKET, WHICH COULD ELIMINATE THE TRADING MARKET FOR OUR COMMON
STOCK.
Our common stock is quoted on the Nasdaq National Market. In order to
continue to be included in the Nasdaq National Market, a company must meet
Nasdaq's maintenance criteria. The maintenance criteria most applicable to us
requires a minimum bid price of $1.00 per share and $5,000,000 market value of
publicly held shares. Additionally, we must maintain either $10 million in
stockholders' equity or $4 million in net tangible assets. After November 1,
2002, the net tangible asset maintenance criterion will no longer apply and we
must satisfy the stockholders' equity maintenance criterion. Stockholders'
equity is composed of three fundamental sources: capital stock, additional
paid-in-capital, and retained earnings. Capital stock represents ownership
interest in the corporation. Additional paid-in-capital represents additional
monies paid into the corporation by investors above the par value of shares
issued. Retained earnings represents income (loss) that the corporation has
accumulated as a result of its day-to-day operating activities. Our
stockholders' equity at the end of 2001 was $13,207,807. Failure to meet these
maintenance criteria may result in the delisting of our common stock from the
Nasdaq National Market. If our common stock were delisted, in order to have our
common stock relisted on the Nasdaq National Market we would be required to meet
the criteria for initial listing, which are more stringent than the maintenance
criteria. Accordingly, we cannot assure you that if we were delisted we would be
able to have our common stock relisted on the Nasdaq National Market.
If our common stock were delisted from the Nasdaq National Market, we would
not be able to draw down any additional funds on our existing equity line, and
we also may be required to pay damages to holders of our common stock under
agreements we previously entered into with them in connection with equity
financings. Finally, if our common stock were removed from listing on the Nasdaq
National Market, it might become more difficult for us to raise funds through
the sale of our common stock or securities convertible into our common stock.
THE SALE AND ISSUANCE OF THE 3% AND 6% CUMULATIVE CONVERTIBLE REDEEMABLE
PREFERRED STOCK WILL HAVE AN IMPACT TO EARNINGS AVAILABLE TO COMMON
STOCKHOLDERS.
Of the proceeds from our sale of the 3% and 6% cumulative convertible
redeemable preferred stock, approximately $3.1 million will be allocated to the
common stock warrants and the conversion feature included with the subscription
agreement, and will be reflected as an increase to additional paid-in capital
and a decrease to the 3% and 6% cumulative convertible redeemable preferred
stock. This $3.1 million will be accreted to the preferred stock over the term
of the redemption period. This accretion, along with the preferred stock
dividend, will increase the net loss (reduce the net income) available to common
stockholders.
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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "should," "will," and "would" or similar
words. You should carefully read statements that contain these words because
they discuss our future expectations, contain projections of our future results
of operations or of our financial position or state other "forward-looking"
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or control. The factors listed above in
the section captioned "Risk Factors," as well as any cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
prospectus could have a material adverse effect on our business, results of
operations and financial position.
USE OF PROCEEDS
Unless we inform you otherwise in a prospectus supplement or any pricing
supplement, we expect to use the net proceeds from any and all offerings of the
common stock registered hereunder for general corporate purposes, including
working capital, product development and capital expenditures. A portion of the
net proceeds may also be used for the acquisition of businesses, products and
technologies that are complementary to ours. There are currently no commitments
or agreements with respect to any such material acquisition.
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PLAN OF DISTRIBUTION
We may offer the common stock covered by this prospectus in and outside the
United States by one or more of, or a combination of, the following methods:
- through agents to the public or to investors;
- to underwriters for resale to the public or to investors;
- directly to investors;
- in payment of all or a portion of the purchase price from one or more
acquisitions of companies, businesses or assets complementary to our
existing business; or
- as consideration for rights for us to use third party technologies
pursuant to one or more license, development or other similar agreements.
We will set forth in a prospectus supplement the terms of the offering of
securities, including:
- the name or names of any agents or underwriters;
- the purchase price of the securities being offered and the proceeds we
will receive from the sale;
- any over-allotment options under which underwriters may purchase
additional securities from us;
- any agency fees or underwriting discounts and other items constituting
agents' or underwriters' compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any securities exchanges on which such securities may be listed.
SALE THROUGH AGENTS
We may designate agents to solicit purchases for the period of the agent's
appointment or to sell the common stock on a continuing basis. Unless we inform
you otherwise in the applicable prospectus supplement, any agent will agree to
use its reasonable best efforts to solicit purchases for the period of the
agent's appointment.
SALE THROUGH UNDERWRITERS OR DEALERS
If we use underwriters for a sale of the common stock, the underwriters will
acquire the common stock for their own account. The underwriters may resell the
common stock in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the common stock will be
subject to the conditions set forth in the applicable underwriting agreements.
The underwriters will be obligated to purchase all the offered common stock if
they purchase any of the offered common stock. The underwriters may from time to
time change any public offering price and any discounts or concessions allowed
or reallowed or paid to dealers. We may use underwriters with whom we have a
material relationship. We will describe in the prospectus supplement which names
the underwriter the nature of any such relationship.
If we use dealers in the sale of common stock, we will sell the common stock
to the dealers as principals. They may then resell that common stock to the
public at varying prices determined by the dealers at the time of resale. The
dealers participating in any sale of our common stock may be deemed to be
underwriters within the meaning of the Securities Act with respect to any sale
of that common stock.
9
COMPENSATION OF UNDERWRITERS, DEALERS AND AGENTS
Underwriters, dealers and agents that participate in the distribution of the
common stock may be underwriters as defined in the Securities Act and any
discounts or commissions they receive from us, as well as any profit on their
resale of the common stock, may be treated as underwriting discounts and
commissions under the Securities Act. We will identify in the applicable
prospectus supplement any underwriters, dealers or agents and will describe
their compensation. We may have agreements with the underwriters, dealers or
agents to indemnify them against specified civil liabilities, including
liabilities under the Securities Act. Underwriters, dealers and agents may
engage in transactions with or perform services for us or our subsidiaries in
the ordinary course of their businesses.
DIRECT SALES
We may sell the common stock directly. In that event, no underwriters or
agents would be involved. We may sell the common stock directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any sale of that common stock.
DELAYED DELIVERY CONTRACTS
If we so indicate in a prospectus supplement, we may authorize underwriters,
dealers or agents to solicit offers from selected types of institutions to
purchase common stock from us at the public offering price under delayed
delivery requirements. These contracts would provide for payment and delivery on
a specified date in the future. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others. The
contracts would be subject only to those conditions described in the prospectus
supplement. The applicable prospectus supplement relating to such contracts will
set forth the price to be paid for common stock under the contracts, the
commission payable for solicitation of the contracts and the date or dates in
the future for delivery of the common stock under the contracts.
STABILIZATION ACTIVITIES
During and after an offering through underwriters, the underwriters may
purchase and sell the common stock in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, in which selling concessions allowed
to syndicate members or other broker-dealers for the offered common stock sold
for their account may be reclaimed by the syndicate if the offered common stock
is repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
offered common stock, which may be higher than the price that might otherwise
prevail in the open market. If commenced, these activities may be discontinued
at any time.
PASSIVE MARKET MAKING
Any underwriters who are qualified market makers on the NASDAQ National
Market may engage in passive market making transactions in the common stock on
the Nasdaq National Market in accordance with Rule 103 of Regulation M, during
the business day prior to the pricing of the offering, before the commencement
of offers or sales of the securities. Passive market makers must comply with
applicable volume and price limitations and must be identified as passive market
makers. In general, a passive market maker must display its bid at a price not
in excess of highest independent bid for the security; if all independent bids
are lowered below the passive market maker's bid, however, the passive market
maker's bid then must be lowered when certain purchase limits are exceeded.
10
ACQUISITIONS
We may offer the common stock in payment of all or a portion of the purchase
price from one or more acquisitions of companies, businesses or assets
complementary to our existing business. We expect that the terms of acquisitions
in which the common stock would be issued by us would be determined by
negotiations between us and the owners of the companies, businesses or assets we
intend to acquire. It is anticipated that the common stock issued in any such
acquisition would be valued for purposes of the acquisition at a price
reasonably related to the market value of the common stock either at the time of
the execution of the definitive acquisition agreement or at the time of the
consummation of the acquisition.
LICENSE, DEVELOPMENT OR OTHER SIMILAR AGREEMENTS
We may offer the common stock as consideration for rights for us to use
third party technologies pursuant to one or more license, development or other
similar agreements. We expect that the terms of those agreements would be
determined by negotiations between us and the other party or parties to a
particular agreement. The common stock issued as part of any such agreement
would be valued for purposes of the agreement at a price reasonably related to
the market value of the common stock either at the time of the signing of the
agreement, or such other date as the agreement stipulates.
11
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be passed
upon for us by Ropes & Gray, Boston, Massachusetts.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2001, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all the information included in the
registration statement and the related exhibits and schedules. You will find
additional information about us and our common stock in the registration
statement. The registration statement and the related exhibits and schedules may
be inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the public reference facilities of the SEC's Regional Offices: New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York 10048;
and Chicago Regional Office, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of this material may also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. You can obtain information on the operation of the public
reference facilities by calling 1-800-SEC-0330. The SEC also maintains a site on
the World Wide Web (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, including
us, that file electronically with the SEC. Statements made in this prospectus
about legal documents may not necessarily be complete and you should read the
documents which are filed as exhibits or schedules to the registration statement
or otherwise filed with the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose information important to you by referring
you to those documents. The information incorporated by reference is considered
to be a part of this prospectus, and information that we later file with the SEC
will automatically update and supersede this information. Accordingly, we
incorporate by reference the following documents we filed with the SEC pursuant
to Section 13 of the Securities Exchange Act of 1934:
- our Annual Report on Form 10-K for the year ended December 31, 2001 (filed
March 7, 2002);
- our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002
(filed May 3, 2002);
- the description of our common stock contained in the registration
statement on Form 8-A filed with the SEC pursuant to Section 12 of the
Securities Exchange Act of 1934 and all amendments thereto and reports
filed for the purpose of updating such description; and
- all documents filed by us with the SEC pursuant to the Securities Exchange
Act of 1934 after the date of this prospectus and before the offering of
common stock is completed (other than portions of such documents described
in paragraphs (i), (k) and (l) of Item 402 of Regulation S-K promulgated
by the SEC).
12
These documents are or will be available for inspection or copying at the
locations identified above under the caption "Where You Can Find More
Information." We will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request, a copy of any and all of
the documents that have been incorporated by reference in this prospectus (other
than exhibits to those documents). You should direct requests for documents to:
StemCells, Inc.
3155 Porter Drive
Palo Alto, CA 94304
Attention: Investor Relations
Telephone number: (650) 475-3100
13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the securities being registered. All
amounts shown are estimates except the SEC registration fee.
SEC registration fee........................................ $ 3,478
Printing and engraving expenses............................. $13,000
Legal fees and expenses..................................... $30,000
Accounting fees and expenses................................ $17,500
Miscellaneous............................................... $ 5,000
-------
Total....................................................... $68,978
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, other than
an action by or in the right of the corporation, by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the corporation's request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The power to indemnify applies to actions brought by or in the right
of the corporation as well, but only to the extent of expenses, including
attorneys' fees but excluding judgments, fines and amounts paid in settlement,
actually and reasonably incurred by the person in connection with the defense or
settlement of the action or suit and with the further limitation that in these
actions no indemnification shall be made in the event of any adjudication of
negligence or misconduct in the performance of his duties to the corporation,
unless a court believes that in light of all the circumstances indemnification
should apply.
Section Ten of our Restated Certificate of Incorporation provides that we
shall, to the maximum extent legally permitted, indemnify and upon request
advance expenses to each person who is or was a party or is threatened to be
made a party to any threatened, pending or completed action, suit proceeding, or
claim (civil, criminal, administrative or investigative) by reason of the fact
that he is or was, or has agreed to become, a director or officer of the
Company, or is or was serving, or has agreed to serve, at the request of the
Company, as a director, officer, partner, employee, agent or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprises, provided, however, that the Company is not required to
indemnify or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person. The
indemnification provided for in Section Ten is expressly not exclusive of any
other rights to which those seeking indemnification may be entitled under any
by-law, agreement or vote of directors or stockholders or otherwise, and shall
inure to the benefit of the heirs and legal representatives of such persons.
Section 145(g) of the Delaware General Corporation Law provides that the
Company shall have the power to purchase and maintain insurance on behalf of its
officers, directors, employees and agents, against any liability asserted
against and incurred by such persons in any such capacity.
II-1
We have obtained insurance covering our directors and officers against
certain liabilities.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provisions shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate or limit
the liability of a director for any act or omission occurring prior to the date
when such provision becomes effective.
Pursuant to the Delaware General Corporation Law, Section Nine of the
Company's Restated Certificate of Incorporation eliminates a director's personal
liability for monetary damages for breach of fiduciary duty as a director,
except in circumstances involving a breach of the director's duty of loyalty to
StemCells, Inc. or its shareholders, acts or omissions not in good faith,
intentional misconduct, knowing violations of the law, self-dealing or the
unlawful payment of dividends or repurchase of stock.
II-2
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. The following exhibits are filed as part of this registration
statement:
NUMBER DESCRIPTION
- ------------------------------------------ ------------------------------------------------------------
3.1* Restated Certificate of Incorporation of the Registrant
3.2++ Amended and Restated By-Laws of the Registrant.
3.3 Certificate of Amendment of the Restated Certificate of
Incorporation.
4.1* Specimen Common Stock Certificate.
4.2++++ Form of Warrant Certificate issued to a certain purchaser of
the Registrant's Common Stock in April 1995.
4.3X Warrant to Purchase Common Stock--Mark Angelo.
4.4X Warrant to Purchase Common Stock--Robert Farrell.
4.5X Warrant to Purchase Common Stock--Joseph Donahue.
4.6X Warrant to Purchase Common Stock--Hunter Singer.
4.7X Warrant to Purchase Common Stock--May Davis.
4.8X Common Stock Purchase Warrant.
4.9X Callable Warrant, dated July 31, 2000, issued to Millennium
Partners, L.P.
4.10XXX Registration Rights Agreement dated as of May 10, 2001
between the Company and Sativum Investments Limited.
4.11XXX Warrant, dated May 10, 2001, to Purchase Common Stock issued
to Sativum Investments Limited.
4.12XXX Warrant, dated May 10, 2001, to Purchase Common Stock issued
to Pacific Crest Securities, Inc.
4.13XXX Warrant dated May 10, 2001, to Purchase Common Stock issued
to Granite Financial Group, Inc.
4.14XXX Callable Warrant, dated June 21, 2001, issued to Millennium
Partners, L.P.
4.15XXX Common Stock Purchase Warrant, Class A, dated June 21, 2001,
issued to Millennium Partners, L.P.
4.16[**] Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of 3% Cumulative Convertible Preferred
Stock for StemCells, Inc.
4.17[**] Warrant to Purchase Common Stock--Riverview Group, L.L.C.
4.18XXXX Warrant to Purchase Common Stock--Cantor Fitzgerald & Co.
5.1 Opinion of Ropes & Gray.
10.1* Amendment to Registration Rights dated as of February 14,
1992 among the Registrant and certain of its stockholders.
10.2* Form of at-will Employment Agreement between the Registrant
and most of its employees.
10.3* Form of Agreement for Consulting Services between the
Registrant and members of its Scientific Advisory Board.
II-3
NUMBER DESCRIPTION
- ------------------------------------------ ------------------------------------------------------------
10.4* Form of Nondisclosure Agreement between the Registrant and
its Contractors.
10.5* Master Lease and Warrant Agreement dated April 23, 1991
between the Registrant and PacifiCorp Credit, Inc.
10.6* 1988 Stock Option Plan.
10.7* 1992 Equity Incentive Plan.
10.8* 1992 Stock Option Plan for Non-Employee Directors.
10.9**!!!! 1992 Employee Stock Purchase Plan.
10.12++ Research Agreement dated as of March 16, 1994 between
NeuroSpheres, Ltd. and Registrant.
10.13++ Term Loan Agreement dated as of September 30, 1994 between
The First National Bank of Boston and Registrant.
10.14++ Lease Agreement between the Registrant and Rhode Island
Industrial Facilities Corporation, dated as of August 1,
1992.
10.15++ First Amendment to Lease Agreement between Registrant and
The Rhode Island Industrial Facilities Corporation dated as
of September 15, 1994.
10.17**++++ Development, Marketing and License Agreement, dated as of
March 30, 1995 between Registrant and Astra AB.
10.18++++ Form of Unit Purchase Agreement to be executed by the
purchasers of the Common Stock and Warrants offered in April
1995.
10.19+++ Form of Common Stock Purchase Agreement to be executed among
the Registrant and certain purchasers of the Registrant's
Common Stock.
10.22### Lease Agreement dated as of November 21, 1997 by and between
Hub RI Properties Trust, as Landlord, and CytoTherapeutics,
Inc., as Tenant.
10.24!! CTI individual stockholders option agreement dated as of
July 10, 1996 among the Company and the individuals listed
therein.
10.25!! CTI Valoria option agreement dated of July 10, 1996 between
the Company and the Societe Financiere Valoria SA.
10.26!!! Term Loan Agreement dated as of October 22, 1996 between The
First National Bank of Boston and the Registrant.
10.27*** Agreement and Plan of Merger dated as of August 13, 1997
among StemCells, Inc., the Registrant and CTI Acquisition
Corp.
10.28*** Consulting Agreement dated as of September 25, 1997 between
Dr. Irving Weissman and the Registrant.
10.29### Letter Agreement among each of Dr. Irving Weissman and Dr.
Fred H. Gage and the Registrant.
10.32**** StemCells, Inc. 1996 Stock Option Plan.
10.33**** 1997 StemCells Research Stock Option Plan (the "1997 Plan").
10.34**** Form of Performance-Based Incentive Option Agreement issued
under the 1997 Plan.
10.35### Employment Agreement dated as of September 25, 1997 between
Dr. Richard M. Rose and the Registrant.
II-4
NUMBER DESCRIPTION
- ------------------------------------------ ------------------------------------------------------------
10.38[*] Rights Agreement, dated as of July 27, 1998 between Bank
Boston, N.A. as Rights Agent and the Registrant.
10.40%** Consulting Services Agreement dated as of July 27, 1998, as
amended December 19, 1998 between Dr. John J. Schwartz and
the Registrant.
10.41%** Letter Agreement dated as of December 19, 1998 between John
J. Schwartz and the Registrant.
10.42%** License Agreement dated as of October 27, 1998 between The
Scripps Research Institute and the Registrant.
10.43%** License Agreement dated as of October 27, 1998 between The
Scripps Research Institute and the Registrant.
10.44%** License Agreement dated as of November 20, 1998 between The
Scripps Research Institute and the Registrant.
10.45%%** Purchase Agreement and License Agreement dated as of
December 29, 1999 between Neurotech S.A. and the Registrant.
10.46** License Agreement, dated as of June 1999, between The
Scripps Research Institute and the Registrant.
10.47** License Agreement, dated as of June 1999, between The
Scripps Research Institute and the Registrant.
10.48X Form of Registration Rights Agreement, dated as of July 31,
2000, between StemCells, Inc. and investors.
10.49X Subscription Agreement, dated as of July 31, 2000, between
StemCells, Inc. and Millennium Partners, L.P.
10.50XXX Common Stock Purchase Agreement, dated as of May 10, 2001,
between the Company and Sativum Investments Limited.
10.51XXX Esrow Agreement, dated as of May 10, 2001, among the
Company, Sativum Investments Limited and Epstein, Becker &
Green, P.C.
10.52XX License Agreement, dated as of October 30, 2000, between the
Company and Neuro Spheres Ltd.
10.53XX Letter Agreement, dated January 2, 2001, between the Company
and Martin McGlynn.
10.54XX Lease, dated February 1, 2001, between the Board of Trustees
of Stanford University and the Company.
10.55XXX Registration Rights Agreement, dated as of June 21, 2001, by
and between the Company and Millennium Partners, L.P.
10.56XXX Subscription Agreement, dated as of June 21, 2001, by and
between the Company and Millennium Partners, L.P.
10.57%%% 2001 Equity Incentive Plan.
10.58[**] Subscription Agreement dated as of December 4, 2001 between
StemCells, Inc. and Riverview Group, L.L.C.
10.59[**] Registration Rights Agreement dated as of December 4, 2001
between StemCells, Inc. and Riverview Group, L.L.C.
10.60[**] Agreement dated as of December 4, 2001 between StemCells,
Inc. and Millennium Partners, L.P.
II-5
NUMBER DESCRIPTION
- ------------------------------------------ ------------------------------------------------------------
10.61[**] Agreement dated as of December 4, 2001 among StemCells,
Inc., Millennium Partners, L.P. and Riverview Group, L.L.C.
21.1X Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Ropes & Gray (included in the form of opinion
filed as Exhibit 5.1).
24.1[***] Power of Attorney pursuant to which amendments to this
registration statement may be filed.
99.2XX Side Letter, dated March 17, 2001, between the Company and
Oleh S. Hnatiuk regarding NeuroSpheres License Agreement,
dated October 30, 2000.
- ------------------------
++ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Registration Statement on
Form S-1, File No. 333-85494.
+++ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Registration Statement on
Form S-3, File No. 333-97272.
++++ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Registration Statement on
Form S-1, File No. 333-91228.
* Previously filed with the Commission as Exhibits to, and
incorporated herein by reference to, Registration Statement on
Form S-1, File No. 333-45739.
# Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Annual Report on Form 10-K
for fiscal year ended December 31, 1992 and filed March 30, 1993.
** Confidential treatment requested as to certain portions. The term
"confidential treatment" and the mark "**" as used throughout the
indicated Exhibits mean that material has been omitted and separately
filed with the Commission.
## Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 and filed on May 14,
1994.
+ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 and filed on March 30,
1994.
! Previously filed with the Commission as an Exhibit to and
incorporated by reference to, the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996.
!! Previously filed with the Commission as an Exhibit to and
incorporated by reference to, the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
!!! Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 and filed on
March 31, 1997.
!!!! Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
*** Previously filed with the Commission as Exhibits to, and
incorporated herein by reference to, the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997 and
filed on November 14, 1997.
**** Previously filed with the Commission as Exhibits to, and
incorporated herein by reference to, the Registrant's Registration
Statement on Form S-8, File No. 333-37313.
II-6
### Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1997 and filed on
March 30, 1998.
[*] Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's current report
on Form 8-K filed on August 3, 1998.
[**] Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's current report
on Form 8-K filed on December 7, 2001.
% Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1998 and filed on
March 31, 1999.
%% Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's current report
on Form 8-K on January 14, 2000.
%%% Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference to, the Registrant's definitive proxy statement
filed May 1, 2001.
X Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Registration
Statement on Form S-1, File No. 333-45496.
XX Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000 and filed on
April 2, 2001.
XXX Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference to, the Registrant's Registration Statement filed
on Form S-1 as amended to Form S-3, File No. 333-61726.
XXXX Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference to, the Registrant's Registration Statement filed
on Form S-3, File No. 333-75806.
[***] Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Registration
Statement filed on Form S-3, File No. 333-83992.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which,
II-7
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by section 10(a)(3) of the
Securities Act.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial BONA FIDE
offering thereof.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Palo Alto, State of California, on the
2nd day of July, 2002.
STEMCELLS, INC.
BY: /S/ MARTIN M. MCGLYNN
-----------------------------------------
Martin M. McGlynn
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on July 2, 2002.
SIGNATURE TITLE
--------- -----
Martin M. McGlynn,
President, Chief Executive Officer
/s/ MARTIN M. MCGLYNN (Principal Executive Officer), Director
-------------------------------------------
George Koshy,
Controller and Acting Chief Financial
Officer (Principal Financial Officer and
* Principal Accounting Officer)
-------------------------------------------
Mark J. Levin
* Director
-------------------------------------------
Roger M. Perlmutter, M.D., Ph.D.
* Director
-------------------------------------------
John J. Schwartz, Ph.D.
* Director
-------------------------------------------
Irving Weissman, M.D.
* Director
-------------------------------------------
Ricardo B. Levy, Ph.D.
* Director
-------------------------------------------
*By: /s/ MARTIN M. MCGLYNN
--------------------------------------
Martin M. McGlynn
ATTORNEY-IN-FACT
II-9
EXHIBIT INDEX
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
3.1* Restated Certificate of Incorporation of the Registrant
3.2++ Amended and Restated By-Laws of the Registrant.
3.3 Certificate of Amendment of the Restated Certificate of
Incorporation.
4.1* Specimen Common Stock Certificate.
4.2++++ Form of Warrant Certificate issued to a certain purchaser of
the Registrant's Common Stock in April 1995.
4.3X Warrant to Purchase Common Stock--Mark Angelo.
4.4X Warrant to Purchase Common Stock--Robert Farrell.
4.5X Warrant to Purchase Common Stock--Joseph Donahue.
4.6X Warrant to Purchase Common Stock--Hunter Singer.
4.7X Warrant to Purchase Common Stock--May Davis.
4.8X Common Stock Purchase Warrant.
4.9X Callable Warrant, dated July 31, 2000, issued to Millennium
Partners, L.P.
4.10XXX Registration Rights Agreement dated as of May 10, 2001
between the Company and Sativum Investments Limited.
4.11XXX Warrant, dated May 10, 2001, to Purchase Common Stock issued
to Sativum Investments Limited.
4.12XXX Warrant, dated May 10, 2001, to Purchase Common Stock issued
to Pacific Crest Securities, Inc.
4.13XXX Warrant dated May 10, 2001, to Purchase Common Stock issued
to Granite Financial Group, Inc.
4.14XXX Callable Warrant, dated June 21, 2001, issued to Millennium
Partners, L.P.
4.15XXX Common Stock Purchase Warrant, Class A, dated June 21, 2001,
issued to Millennium Partners, L.P.
4.16[**] Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of 3% Cumulative Convertible Preferred
Stock for StemCells, Inc.
4.17[**] Warrant to Purchase Common Stock--Riverview Group, L.L.C.
4.18XXXX Warrant to Purchase Common Stock--Cantor Fitzgerald & Co.
5.1 Opinion of Ropes & Gray.
10.1* Amendment to Registration Rights dated as of February 14,
1992 among the Registrant and certain of its stockholders.
10.2* Form of at-will Employment Agreement between the Registrant
and most of its employees.
10.3* Form of Agreement for Consulting Services between the
Registrant and members of its Scientific Advisory Board.
10.4* Form of Nondisclosure Agreement between the Registrant and
its Contractors.
10.5* Master Lease and Warrant Agreement dated April 23, 1991
between the Registrant and PacifiCorp Credit, Inc.
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
10.6* 1988 Stock Option Plan.
10.7* 1992 Equity Incentive Plan.
10.8* 1992 Stock Option Plan for Non-Employee Directors.
10.9**!!!! 1992 Employee Stock Purchase Plan.
10.12++ Research Agreement dated as of March 16, 1994 between
NeuroSpheres, Ltd. and Registrant.
10.13++ Term Loan Agreement dated as of September 30, 1994 between
The First National Bank of Boston and Registrant.
10.14++ Lease Agreement between the Registrant and Rhode Island
Industrial Facilities Corporation, dated as of August 1,
1992.
10.15++ First Amendment to Lease Agreement between Registrant and
The Rhode Island Industrial Facilities Corporation dated as
of September 15, 1994.
10.17**++++ Development, Marketing and License Agreement, dated as of
March 30, 1995 between Registrant and Astra AB.
10.18++++ Form of Unit Purchase Agreement to be executed by the
purchasers of the Common Stock and Warrants offered in April
1995.
10.19+++ Form of Common Stock Purchase Agreement to be executed among
the Registrant and certain purchasers of the Registrant's
Common Stock.
10.22### Lease Agreement dated as of November 21, 1997 by and between
Hub RI Properties Trust, as Landlord, and CytoTherapeutics,
Inc., as Tenant.
10.24!! CTI individual stockholders option agreement dated as of
July 10, 1996 among the Company and the individuals listed
therein.
10.25!! CTI Valoria option agreement dated of July 10, 1996 between
the Company and the Societe Financiere Valoria SA.
10.26!!! Term Loan Agreement dated as of October 22, 1996 between The
First National Bank of Boston and the Registrant.
10.27*** Agreement and Plan of Merger dated as of August 13, 1997
among StemCells, Inc., the Registrant and CTI Acquisition
Corp.
10.28*** Consulting Agreement dated as of September 25, 1997 between
Dr. Irving Weissman and the Registrant.
10.29### Letter Agreement among each of Dr. Irving Weissman and Dr.
Fred H. Gage and the Registrant.
10.32**** StemCells, Inc. 1996 Stock Option Plan.
10.33**** 1997 StemCells Research Stock Option Plan (the "1997 Plan").
10.34**** Form of Performance-Based Incentive Option Agreement issued
under the 1997 Plan.
10.35### Employment Agreement dated as of September 25, 1997 between
Dr. Richard M. Rose and the Registrant.
10.38[*] Rights Agreement, dated as of July 27, 1998 between Bank
Boston, N.A. as Rights Agent and the Registrant.
10.40%** Consulting Services Agreement dated as of July 27, 1998, as
amended December 19, 1998 between Dr. John J. Schwartz and
the Registrant.
10.41%** Letter Agreement dated as of December 19, 1998 between John
J. Schwartz and the Registrant.
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
10.42%** License Agreement dated as of October 27, 1998 between The
Scripps Research Institute and the Registrant.
10.43%** License Agreement dated as of October 27, 1998 between The
Scripps Research Institute and the Registrant.
10.44%** License Agreement dated as of November 20, 1998 between The
Scripps Research Institute and the Registrant.
10.45%%** Purchase Agreement and License Agreement dated as of
December 29, 1999 between Neurotech S.A. and the Registrant.
10.46** License Agreement, dated as of June 1999, between The
Scripps Research Institute and the Registrant.
10.47** License Agreement, dated as of June 1999, between The
Scripps Research Institute and the Registrant.
10.48X Form of Registration Rights Agreement, dated as of July 31,
2000, between StemCells, Inc. and investors.
10.49X Subscription Agreement, dated as of July 31, 2000, between
StemCells, Inc. and Millennium Partners, L.P.
10.50XXX Common Stock Purchase Agreement, dated as of May 10, 2001,
between the Company and Sativum Investments Limited.
10.51XXX Esrow Agreement, dated as of May 10, 2001, among the
Company, Sativum Investments Limited and Epstein, Becker &
Green, P.C.
10.52XX License Agreement, dated as of October 30, 2000, between the
Company and Neuro Spheres Ltd.
10.53XX Letter Agreement, dated January 2, 2001, between the Company
and Martin McGlynn.
10.54XX Lease, dated February 1, 2001, between the Board of Trustees
of Stanford University and the Company.
10.55XXX Registration Rights Agreement, dated as of June 21, 2001, by
and between the Company and Millennium Partners, L.P.
10.56XXX Subscription Agreement, dated as of June 21, 2001, by and
between the Company and Millennium Partners, L.P.
10.57%%% 2001 Equity Incentive Plan.
10.58[**] Subscription Agreement dated as of December 4, 2001 between
StemCells, Inc. and Riverview Group, L.L.C.
10.59[**] Registration Rights Agreement dated as of December 4, 2001
between StemCells, Inc. and Riverview Group, L.L.C.
10.60[**] Agreement dated as of December 4, 2001 between StemCells,
Inc. and Millennium Partners, L.P.
10.61[**] Agreement dated as of December 4, 2001 among StemCells,
Inc., Millennium Partners, L.P. and Riverview Group, L.L.C.
21.1X Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Ropes & Gray (included in the form of opinion
filed as Exhibit 5.1).
24.1[***] Power of Attorney pursuant to which amendments to this
registration statement may be filed.
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
99.2XX Side Letter, dated March 17, 2001, between the Company and
Oleh S. Hnatiuk regarding NeuroSpheres License Agreement,
dated October 30, 2000.
- ------------------------
++ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Registration Statement on
Form S-1, File No. 333-85494.
+++ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Registration Statement on
Form S-3, File No. 333-97272.
++++ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Registration Statement on
Form S-1, File No. 333-91228.
* Previously filed with the Commission as Exhibits to, and
incorporated herein by reference to, Registration Statement on
Form S-1, File No. 333-45739.
# Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Annual Report on Form 10-K
for fiscal year ended December 31, 1992 and filed March 30, 1993.
** Confidential treatment requested as to certain portions. The term
"confidential treatment" and the mark "**" as used throughout the
indicated Exhibits mean that material has been omitted and separately
filed with the Commission.
## Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 and filed on May 14,
1994.
+ Previously filed with the Commission as Exhibits to, and incorporated
herein by reference to, the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 and filed on March 30,
1994.
! Previously filed with the Commission as an Exhibit to and
incorporated by reference to, the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996.
!! Previously filed with the Commission as an Exhibit to and
incorporated by reference to, the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
!!! Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 and filed on
March 31, 1997.
!!!! Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
*** Previously filed with the Commission as Exhibits to, and
incorporated herein by reference to, the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997 and
filed on November 14, 1997.
**** Previously filed with the Commission as Exhibits to, and
incorporated herein by reference to, the Registrant's Registration
Statement on Form S-8, File No. 333-37313.
### Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1997 and filed on
March 30, 1998.
[*] Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's current report
on Form 8-K filed on August 3, 1998.
[**] Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's current report
on Form 8-K filed on December 7, 2001.
% Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's annual report
on Form 10-K for the fiscal year ended December 31, 1998 and filed on
March 31, 1999.
%% Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's current report
on Form 8-K on January 14, 2000.
%%% Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference to, the Registrant's definitive proxy statement
filed May 1, 2001.
X Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Registration
Statement on Form S-1, File No. 333-45496.
XX Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000 and filed on
April 2, 2001.
XXX Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference to, the Registrant's Registration Statement filed
on Form S-1 as amended to Form S-3, File No. 333-61726.
XXXX Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference to, the Registrant's Registration Statement filed
on Form S-3, File No. 333-75806.
[***] Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference to, the Registrant's Registration
Statement filed on Form S-3, File No. 333-83992.
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF
THE RESTATED CERTIFICATE OF INCORPORATION OF
STEMCELLS, INC.
Pursuant to Section 242 of the General
Corporate Law of the State of Delaware
****
StemCells, Inc., a Delaware corporation (the "Corporation"), does
hereby certify as follows:
FIRST, the Restated Certificate of Incorporation of StemCells, Inc.
(the "Corporation") is hereby amended so that the first paragraph of Section
Four is deleted in its entirety and restated as follows:
FOUR. The total number of shares of stock that this
Corporation shall have authority to issue is 76,000,000, consisting of
75,000,000 shares of Common Stock, with a par value of $.01 per share
(the "Common Stock"), and 1,000,000 shares of Undesignated Preferred
Stock with a par value of $.01 per share (the "Undesignated Preferred
Stock").
SECOND, the foregoing amendment has been duly adopted in accordance
with Section 242 of the General Corporate Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
duly executed in its corporate name this 10th day of May 2002.
STEMCELLS, INC.
By: /s/ Iris Brest
-------------------------
Name: Iris Brest
Title: Secretary
EXHIBIT 5.1
[Letterhead of Ropes & Gray]
July 2, 2002
StemCells, Inc.
3155 Porter Drive
Palo Alto, CA 94304
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the "1933
Act"), for the registration of 15,000,000 shares of Common Stock, $0.01 par
value (the "Shares"), of StemCells, Inc., a Delaware corporation (the
"Company"). The Shares may be issued from time to time on a delayed or
continuous basis pursuant to Rule 415 under the 1933 Act.
We have acted as counsel for the Company in connection with its
proposed issuance and sale of the Shares. For purposes of this opinion, we have
examined and relied upon such documents, records, certificates and other
instruments as we have deemed necessary.
We express no opinion as to the applicability of, compliance with, or
effect of Federal law or the law of any jurisdiction other than The Commonwealth
of Massachusetts and the corporate laws of the State of Delaware.
Based upon and subject to the foregoing, and assuming that:
o the Registration Statement and any amendments thereto (including
post-effective amendments) will have become effective and comply with all
applicable laws;
o the Registration Statement will be effective and will comply with all
applicable laws at the time the Shares are offered or issued as
contemplated by the Registration Statement;
o a Prospectus Supplement will have been prepared and filed with the
Securities and Exchange Commission describing the Shares offered
thereby and will comply with all applicable laws;
o all Shares will be issued and sold in compliance with applicable federal
and state securities laws and in the manner stated in the Registration
Statement and the appropriate Prospectus Supplement;
o a definitive purchase, underwriting, or similar agreement with respect to
any Shares offered or issued will have been duly authorized and validly
executed and delivered by the Company and the other parties thereto,
when both (A) the Company's Board of Directors has taken all necessary
corporate action to approve the issuance of and the terms of the offering of the
Shares and related matters and (B) certificates representing the Shares have
been duly executed, countersigned, registered, and delivered either (i) in
accordance with the applicable definitive purchase, underwriting, or similar
agreement approved by the Company's Board of Directors or authorized officers of
the Company upon payment of the consideration therefor (not less than the par
value of the Shares) provided for therein or (ii) upon conversion or exercise of
any other security, in accordance with the terms of such security or the
instrument governing such security providing for such conversion or exercise as
approved by the Company's Board of Directors, for the consideration approved by
the Company's Board of Directors (not less than the par value of the Shares),
then the Shares will be validly issued, fully paid, and non-assessable.
We hereby consent to your filing a form of this opinion as an exhibit
to the Registration Statement and to the use of our name therein and in the
related prospectus under the caption "Legal Matters." It is understood that this
opinion is to be used only in connection with the offer and sale of the Shares
while the Registration Statement is in effect.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
registration statement (Form S-3) and related prospectus of StemCells, Inc. for
the registration of 15,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 12, 2002, with
respect to the consolidated financial statements of StemCells, Inc. included in
its Annual Report (Form 10-K) for the year ended December 31, 2001, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
June 26, 2002
