COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (this "Agreement") dated as of
December 14, 1999, by and among IMMUNOMEDICS, INC., a Delaware corporation
(the "Company"), and the PURCHASERS listed on Exhibit A ("Purchasers").
The Company desires to issue and sell to Purchasers, and
Purchasers desire to purchase from the Company, shares (the "Common Shares") of
the Company's common stock, par value $.01 per share (the "Common Stock"), at
$3.00 per share (the "Per Share Price") upon and subject to the terms and
conditions of this Agreement.
Accordingly, in consideration of the premises and the mutual
agreements contained herein, and for other good and valuable consideration,
Purchasers and the Company agree as follows:
1. Purchase of Company Securities.
1.1. Purchase and Sale of the Common Shares. (a) Subject to
the terms and conditions of this Agreement, (i) the Company shall issue and sell
to Purchasers, and Purchasers, severally and not jointly, shall purchase from
the Company, 2,500,000 shares of Common Stock as set forth on Exhibit A
(allocated among the Purchasers as set forth on Exhibit A). Such shares of
Common Stock are hereinafter sometimes referred to as the "Securities." The
aggregate purchase price for the Common Shares shall be $7,500,000 (the
"Aggregate Purchase Price") (allocated among the Purchasers as set forth on
Exhibit A).
2. Closing.
2.1. Closing. The closing of the purchase and sale of the
Common Shares shall take place at a single closing at the offices of Paramount
Capital Asset Management, Inc. ("Paramount"), at 787 Seventh Avenue, 48th Floor,
New York, New York, 10019. Such closing (the "Closing") will take place
contemporaneously with the execution and delivery of this Agreement. The date of
the Closing is referred to as the "Closing Date." At the Closing, the Company
will deliver to Purchasers the Common Shares against payment of the Aggregate
Purchase Price by Purchasers by wire transfer payable to the Company pursuant to
the instructions attached hereto as Exhibit B. The Common Shares shall be
registered in Purchasers' names in such denominations as are set forth on
Exhibit A annexed hereto.
3. Conditions to the Obligations of Purchasers at the Closing.
The obligation of Purchasers to purchase and pay for the Common Shares to be
purchased by Purchasers at the Closing is subject to the satisfaction on or
prior to the Closing Date of the following conditions, which may only be waived
by written consent of Purchasers:
3.1. Opinion of Counsel to the Company. Purchasers shall have
received from Lowenstein Sandler PC, counsel for the Company, its opinion dated
the Closing Date in the form of Exhibit C.
3.2. Representations and Warranties. All of the
representations and warranties of the Company contained in this Agreement shall
be true and correct at and as of the Closing Date.
3.3. Performance of Covenants. All of the covenants and
agreements of the Company contained in this Agreement required to be performed
on or prior to the Closing Date shall have been performed in a manner
satisfactory in all respects to Purchasers.
3.4. Legal Action. No injunction, order, investigation, claim,
action or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the transactions
contemplated thereby, declare unlawful the transactions contemplated by this
Agreement or cause any such transaction to be rescinded.
3.5. Consents. The Company shall have obtained in writing or
made all consents, waivers, approvals, orders, permits, licenses and
authorizations of, and registrations, declarations, notices to and filings and
applications with, any governmental authority or any other Person (including,
without limitation, securityholders and creditors of the Company) required to be
obtained or made in order to enable the Company to observe and comply with all
of its obligations under this Agreement and to consummate and perform the
transactions contemplated hereby. The Board of Directors of the Company shall
have taken all action required to permit the transactions contemplated by this
Agreement.
3.6. Closing Documents. The Company shall have delivered to
Purchasers the following:
(a) a certificate executed on behalf of the Company by the
Chairman and Chief Executive Officer of the Company dated the Closing Date
stating that the conditions set forth in Sections 3.2 through 3.5 have been
satisfied;
(b) a certificate of the Secretary of the Company, dated the
Closing Date, as to the continued and valid existence of the Company, certifying
the attached copy of the By-laws of the Company, the authorization of the
execution, delivery and performance of this Agreement, and the resolutions
adopted by the Board of Directors of the Company authorizing the actions to be
taken by the Company under this Agreement;
(c) a certificate of the Secretary of State of the State of
Delaware, dated a recent date, to the effect that the Company is in good
standing in the State of Delaware and that all annual reports, if any, have been
filed as required and, if readily available that all franchise taxes and fees
have been paid in connection therewith;
(d) a certified copy of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of Delaware,
including any amendments thereto; and
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(e) such certificates, other documents and instruments as
Purchasers and their counsel may reasonably request in connection with, and to
effect, the transactions contemplated by this Agreement.
3.7. Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated by this Agreement
to be consummated at such Closing and all documents incident thereto shall be
satisfactory in form and substance to Purchasers.
3.8. Closing Financial Statements; Absence of Changes. (a) The
Company shall have provided to Purchasers (i) the unaudited balance sheets of
the Company as of September 30, 1999, and the related unaudited statements of
operations, and cash flows for the three-month period then ended (the "Financial
Statements"), all of which will be correct and complete and will present fairly
the financial position of the Company and the results of its operations and cash
flows as of the time and for the periods then ended, provided adjusting and
closing entries ordinarily made at the close of any such period in connection
with audit, and footnote information, are omitted, and (ii) the unqualified
certification, in form and substance satisfactory to Purchasers, of the Chief
Financial Officer of the Company, acting on behalf of the Company, to the effect
that the Financial Statements have been prepared in accordance with the books
and records of the Company and generally accepted accounting principles applied
on a basis consistent with prior years (except as otherwise specified in such
certification), and present fairly the financial position of the Company and the
results of its operations cash flows as of the time and for the periods then
ended, provided adjusting and closing entries ordinarily made at the close of
any such period in connection with audit, and footnote information, are omitted.
(b) Except as set forth on the schedules to this Agreement or
as previously publicly disclosed, and except for net losses consistent in scope
with net losses incurred by the Company during the nine months ended September
30, 1999, there shall have been no material adverse change in the business,
financial condition, operating results, employee or customer relations or
prospects of the Company, from September 30, 1999 to the Closing Date.
3.9. Schedules. The Company shall have provided to Purchasers
all schedules required pursuant to this Agreement, which schedules shall be
satisfactory to Purchasers in their sole discretion.
3.10. Material Agreements. The Company shall have provided to
the Purchasers a copy of agreements entered by and among the Company and all
holders of its Series F Convertible Preferred Stock pursuant to which such
holders have agreed that the Company may redeem all outstanding shares of Series
F Preferred Stock at any time on or before December 31, 1999, at a price equal
to 109% of the stated value of such Series F Convertible Preferred Stock (which
is $10,000).
4. Conditions to the Obligations of the Company at the
Closings. The obligation of the Company to issue and sell the Common Shares to
the Purchasers at the Closing is subject to the satisfaction on or prior to the
Closing Date of the following conditions, any of which may be waived by the
Company:
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4.1. Representations and Warranties. The representations and
warranties of Purchasers contained in this Agreement shall be true and correct
at and as of the Closing Date.
4.2. Legal Action. No injunction, order, investigation, claim,
action or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause any such transaction to be rescinded.
4.3 Performance of Covenants. All of the covenants and
agreements of the Purchasers contained in this Agreement required to be
performed on or prior to the Closing Date shall have been performed in a manner
satisfactory in all respects to the Company.
5. Representations and Warranties of the Company. The
representations and warranties of the Company contained herein are subject to
and qualified by the disclosures made in the Company's most recent Annual Report
on Form 10-K and Quarterly Report on Form 10-Q, as filed with the SEC. The
Company hereby represents and warrants to each Purchaser as of the Closing Date
as follows:
5.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is eligible to be treated as a C corporation under the
Internal Revenue Code of 1986, as amended (the "Code"). The Company has all
requisite corporate power and authority, and holds all licenses, permits and
other required authorizations from governmental authorities, necessary to
conduct its business as now being conducted and to own or lease the properties
and assets now owned or held under license or lease. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction wherein the character of its properties or the nature of the
activities conducted by it makes such qualification or licensing necessary,
except where the failure to so qualify would not have a material adverse effect
on the Company.
5.2. Charter Documents. The Company has heretofore delivered
to Purchasers true, correct and complete copies of the Certificate of
Incorporation and By-Laws (or comparable organizational documents) of the
Company as in full force and effect on the date hereof.
5.3. Capitalization. As of December 10, 1999, the Company's
authorized capitalization consists of 70,000,000 shares of Common Stock, of
which 43,655,709 shares are issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.01 per share, of which 595.5 shares are designated
as Series F Convertible Preferred Stock and are issued and outstanding.
15,022,288 shares of Common Stock are reserved for issuance upon the conversion
or exercise of convertible securities, options, warrants or other rights to
purchase Common Stock outstanding as of the Closing Date. All outstanding
securities of the Company are validly issued, fully paid and nonassessable.
Except for the rights of the Series F Convertible Preferred Stock, no
stockholder of the Company is entitled to any preemptive rights with respect to
the purchase or sale of any securities by the Company. There are no outstanding
options, warrants or other rights, commitments or arrangements, written or oral,
to purchase or otherwise acquire any authorized but unissued shares of capital
stock of the Company or any security directly or indirectly convertible into or
exchangeable for any capital stock of the Company or under which any such
option, warrant or convertible security may be issued in the future except
otherwise as set forth on Schedule 5.3. There are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell, rights of
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first offer, negotiation or refusal or proxies or similar arrangements relating
to any securities of the Company to which the Company is a party, and to the
best knowledge of the Company after due inquiry there are no other such trusts,
agreement, rights, proxies or similar arrangements, except as set forth on
Schedule 5.3. Except as otherwise set forth on Schedule 5.3 or as contemplated
by this Agreement, none of the shares of capital stock of the Company is
reserved for any purpose, and the Company is neither subject to any obligation
(contingent or otherwise), nor has any option to repurchase or otherwise acquire
or retire any shares of its capital stock.
5.4 Due Authorization, Valid Issuance, Etc. The Common Shares
to be purchased on the Closing Date have been duly authorized and, when issued
in accordance with this Agreement upon the Closing Date, will be validly issued,
fully paid and non-assessable and will be free and clear of all liens imposed by
or through the Company, subject only to restrictions set forth herein, as
applicable, or applicable federal and state securities laws. The issuance, sale
and clear delivery of such Common Shares will not be subject to any preemptive
right of stockholders of the Company or to any right of first refusal or other
right in favor of any person or entity except for provisions which have been
waived in writing (and as to which the Purchasers have received a copy of) or
satisfied and as set forth on Schedule 5.4. The Company's executive officers and
directors have studied and fully understand the nature of the securities being
sold hereunder, and recognize that they have a potential dilutive effect. Except
as set forth on Schedule 5.4, no anti-dilution adjustments with respect to the
outstanding securities of the Company will be triggered by the issuance of the
securities contemplated hereby.
5.5. Subsidiaries. Except as otherwise disclosed in the
Company's Annual Report on Form 10-K for the year ended June 30, 1999, the
Company has no wholly or partially owned Subsidiaries (as defined in Section
9.9) and does not control, directly or indirectly, any other corporation,
business trust, firm, partnership, association, joint venture, entity or
organization. Except as otherwise disclosed in the Company's Annual Report on
Form 10-K for the year ended June 30, 1999, the Company does not own any shares
of stock, partnership interest, joint venture interest or any other security,
equity or interest in any other corporation or other Person.
5.6. Authorization; No Breach. The Company has the full
corporate power and authority to execute, deliver and enter into this Agreement
and to perform its obligations hereunder, and the execution, delivery and
performance of this Agreement and all other transactions contemplated hereby
have been duly authorized by the Company. This Agreement constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms except as such enforceability may be limited by (a) bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (b) the availability of remedies under general equitable principles. Except
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as set forth on Schedule 5.6, the execution and delivery by the Company of this
Agreement, the offering, sale and issuance of the Common Shares, and the
performance and fulfillment by the Company of its obligations hereunder, do not
and will not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, or event which, with notice or
lapse of time or both, would constitute a breach of or default under, (iii)
result in the creation of any lien, security interest, adverse claim, charge or
encumbrance upon the capital stock or assets of the Company pursuant to, (iv)
give any third party the right to accelerate any obligation under or terminate,
(v) result in a violation of, (vi) result in the loss of any license,
certificate, legal privilege or legal right enjoyed or possessed by the Company
under, or (vii) with the exception of an application to NASDAQ, require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to or require the consent
of any other Person under, the Certificate of Incorporation or By-Laws of the
Company or any law, statute, rule or regulation to which the Company is subject
or by which any of its properties are bound, or any agreement, instrument,
order, judgment or decree to which the Company is subject or by which its
properties are bound, except, in all instances, for matters which do not
materially adversely affect the Company's business, financial condition, result
of operations or prospects ("Material Adverse Effect").
5.7. No Material Adverse Changes. Since September 30, 1999,
except as disclosed on Schedule 5.7 there has not at any time been any material
adverse change in the business, financial condition, operating results, business
prospects, employee relations or customer relations of the Company. Except as
set forth on Schedule 5.7, no event or circumstance has occurred or exists with
respect to the Company or its business, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
5.8. Absence of Certain Developments. Except as contemplated
by this Agreement, and except as set forth on Schedule 5.8, since September 30,
1999 the Company has not, nor will have prior to the Closing Date: (a) issued
any securities (other than as permitted or contemplated by this Agreement or
securities issued subsequent to December 10, 1999 upon conversion of outstanding
securities or options); (b) borrowed any amount or incurred or became subject to
any liabilities (absolute or contingent) which involve $50,000 or more, other
than liabilities incurred in the ordinary course of business and liabilities
under contracts entered into in the ordinary course of business; (c) discharged
or satisfied any lien, adverse claim or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business; (d) declared or made any payment or distribution of
cash or other property to the stockholders of the Company with respect to the
Common Stock or purchased or redeemed any shares of Common Stock; (e) mortgaged,
pledged or subjected to any lien, adverse claim, charge or any other
encumbrance, any of its properties or assets, except for liens for taxes not yet
due and payable and transactions in the ordinary course of business; (f) sold,
assigned or transferred any of its assets, tangible or intangible, except in the
ordinary course of business or in an amount less than $50,000, or disclosed to
any person, firm or entity not subject to a confidentiality obligation with the
Company any proprietary confidential information; (g) suffered any extraordinary
losses or waived any rights of material value; (h) made any capital expenditures
or commitments therefor greater than $50,000 in the aggregate; (i) entered into
any other transaction other than in the ordinary course of business; (j) made
any charitable contributions or pledges; (k) suffered damages, destruction or
casualty loss, whether or not covered by insurance, affecting any of the
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properties or assets of the Company or any other properties or assets of the
Company which could have a material adverse effect on the business, financial
condition, operating results, employee or customer relations or prospects of the
Company; (l) made any material change in the nature or operations of the
business of the Company; or (m) resolved to or entered into any agreement or
understanding with respect to any of the foregoing.
5.9. Properties. The Company has good and marketable title to
all of the real property and good title to all of the personal property and
assets it purports to own as set forth in the Financial Statements, whether such
property is real or personal, free and clear of all liens, adverse claims,
charges, encumbrances or restrictions of any nature whatsoever, except (a) such
as are reflected on Schedule 5.9 or in the notes to the Financial Statements in
the Company's Annual Report on Form 10-K for the year ended June 30, 1999, (b)
for receivables and charges collected in the ordinary course of business, (c)
liens with respect to taxes not yet due and (d) immaterial exceptions of a
routine and customary nature. Except as disclosed in Schedule 5.9, the Company
owns or leases all such properties as are necessary to its operations as now
conducted and as presently proposed to be conducted and all such properties are,
in all material respects, in good operating condition and repair.
5.10. Taxes. Except as set forth on Schedule 5.10, the Company
has timely filed all federal, state, local and foreign tax returns and reports
required to be filed, and all taxes, fees, assessments and governmental charges
of any nature shown by such returns and reports to be due and payable have been
timely paid except for those amounts being contested in good faith and for which
appropriate amounts have been reserved in accordance with generally accepted
accounting principles. There is no tax deficiency that has been, or, to the best
knowledge of the Company after due inquiry may reasonably be, asserted against
the Company that would materially adversely affect the business or operations,
or proposed business or operations, of the Company. All such tax returns and
reports were prepared in accordance with the relevant rules and regulations of
each taxing authority having jurisdiction over the Company and are true and
correct in all material respects. The Company has neither given nor been
requested to give any waiver of any statute of limitations relating to the
payment of federal, state, local or foreign taxes. The Company has not been,
nor, to its knowledge, is it now being, audited by any federal, state, local or
foreign tax authorities. The Company has made all required deposits for taxes
applicable to the current tax year. The Company is not, and has never been, a
member of any "affiliated group" within the meaning of Section 1504 of the Code,
as in effect from time to time.
5.11. Litigation. Except as set forth on Schedule 5.11, there
are no actions, suits, proceedings, orders, investigations or claims pending or,
to the best knowledge of the Company after due inquiry, threatened against or
affecting the Company, at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality; there are no arbitration proceedings pending under collective
bargaining agreements or otherwise.
5.12. Compliance with Law. The Company has complied in all
material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and applicable agencies and foreign
jurisdictions or bodies in respect of the conduct of its business and
operations.
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5.13. Trademarks and Patents. Schedule 5.13 contains a true,
complete and correct list of all registered, certificated or issued trademarks,
trade names, patents and copyrights (and applications therefor), if any, owned
or (to the extent evidenced by contract or license agreement) licensed or used
or required to be used by the Company as of or prior to the Closing Date in
connection with its business and, except as set forth on Schedule 5.13, each
such trademark, trade name, patent and copyright (and application therefor)
listed in Schedule 5.13 as being owned by the Company is not subject to any
license, royalty arrangement, option or dispute and is free and clear of all
material liens. To the best knowledge of the Company after due inquiry, none of
the trademarks, trade names, patents or copyrights used by the Company in
connection with its business infringes any trademark, trade name, patent or
copyright of others in the United States or in any other country, in any way
which materially adversely affects or which in the future is reasonable likely
to materially adversely affect the business or operations of the Company. Except
as set forth on Schedule 5.13 or in the Company's Annual Report on Form 10-K for
the year ended June 30, 1999, no stockholder, officer or director of the Company
or any other person owns or has any interest in any trademark, trade name,
service mark, patent, copyright or application therefor, or trade secret,
licenses, invention, information or proprietary right or process, if any, used
by the Company in connection with its business. The Company has no notice or
knowledge of any objection or claim being asserted by any person with respect to
the ownership, validity, enforceability or use of any such trademarks, trade
names, patents and copyrights (and applications therefor) listed on Schedule
5.13 or challenging or questioning the validity or effectiveness of any license
relating thereto. There are no unresolved conflicts with, or pending claims of,
any other person, whether in litigation or otherwise, involving the trademarks,
trade names, patents and copyrights (and applications therefor), and there are
no liens, encumbrances, adverse claims, or rights of any other person which
would prevent the Company from fulfilling its obligations under this Agreement
except in all cases which would not have a Material Adverse Effect. To the best
knowledge of the Company after due inquiry, the business of the Company, as
presently conducted does not cause the Company to violate any trademark, trade
name, patent, copyright, trade secret, license or proprietary interest of any
other person or entity, in any way which materially adversely affects the
business or operations of the Company. Except as disclosed in Schedule 5.13, the
Company possesses all proprietary technology necessary for the conduct of its
business.
5.14. Insurance. Each of the Company's insurance policies is
in full force and effect; and the Company is not in default in any material
respect with respect to its obligations under any of such insurance policies.
Such insurance coverage is in amounts not less than is customarily maintained by
corporations engaged in the same or similar business and similarly situated,
including, without limitation, insurance against loss, damage, fire, theft,
public liability and other risks. The activities and operations of the Company
have been conducted in a manner so as to conform to all applicable provisions of
these insurance policies and the Company has not taken or failed to take any
action which would cause any such insurance policy to lapse.
5.15. Agreements. Except as set forth on Schedule 5.15 or as
disclosed in the Company's proxy statement for its 1999 annual meeting of
stockholders or as filed on the Company's most recent Annual Report on Form
10-K, the Company is not party to nor bound by any agreement or commitment,
written or oral, which obligates the Company to make payments to any person, or
which obligates any person to make payments to the Company, in the case of each
such agreement in an amount exceeding $60,000, or which is otherwise material to
the conduct and operation of the business of the Company or any of its
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properties or assets, including, without limitation, all shareholder,
employment, non-competition and consulting agreements and employee benefit plans
and arrangements and collective bargaining agreements to which the Company is a
party or by which it is bound. The Company has performed all material
obligations required to be performed by it, and is not in default, or in receipt
of any claim, under any such agreement or commitment, and the Company has no
present expectation or intention of not fully performing all of such
obligations, nor does the Company have any knowledge of any breach or
anticipated breach by the other parties to any such agreement or commitment.
Each Purchaser has been furnished with, or the Company has made available for
such Purchaser's review, a true and correct copy of each written agreement
referred to in Schedule 5.15, together with all amendments, waivers or other
changes thereto.
5.16. Undisclosed Liabilities. Except to the extent reflected,
disclosed or reserved against in the Financial Statements or the notes thereto
and except for liabilities incurred since September 30, 1999 in the ordinary
course and consistent with past practice, the Company does not have any
obligation or liability whether absolute, accrued, contingent or otherwise,
which is material to the business, operations, assets or financial condition of
the Company.
5.17. Employees; Conflicting Agreements. (a) The Company has
caused all present members of management and all professional employees of and
consultants and advisors to the Company, including all employees and consultants
and advisors involved in research and development, and will cause all such
persons in the future, to be subject to agreements with respect to (i)
nondisclosure of confidential information, (ii) assignment of patents,
trademarks, copyrights and proprietary rights to the Company and (iii)
disclosure to the Company of inventions.
(b) To the best knowledge of the Company after due inquiry, no
stockholder, director, officer or key employee of the Company is a party to or
bound by any agreement, contract or commitment, or subject to any restrictions
in connection with any previous or current employment of any such person (other
than as set forth on Schedule 5.17(b) with respect to the Company), which
materially adversely affects, or which in the future may materially adversely
affect, the business or the proposed business of the Company or the rights of
any of the Purchasers under this Agreement.
5.18. Disclosure. Neither this Agreement nor any of the
schedules, exhibits, written statements, documents or certificates prepared or
supplied by the Company with respect to the transactions contemplated by this
Agreement contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which made. Except for general factors that are
common in the market and industry of the Company and such other information made
available to the Purchasers and their representatives, there exists no fact or
circumstance which, to the best knowledge of the Company after due inquiry,
materially adversely affects, or which could reasonably be anticipated to have a
material adverse effect on, the existing or expected financial condition,
operating results, assets, customer relations, employee relations or business
prospects of the Company.
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5.19. Compliance with Securities Laws. (a) Assuming the
accuracy and truth of each of Purchasers' representations set forth in Section
6, all securities of the Company heretofore sold and issued were sold and
issued, and the Common Shares were offered and will be sold and issued, in
compliance with all applicable federal, state and foreign securities laws.
Neither the Company, nor any of its Affiliates, nor, to its best knowledge after
due inquiry, any person or entity acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Common Shares under the Securities Act of 1933, as amended (the "Securities
Act") or for the offering of the same to be integrated with any other offering
of securities.
(b) The Company has not directly or indirectly purchased or
redeemed any shares of Common Stock during the 30 days preceding the Closing
Date.
5.20. Brokers. Except as set forth on Schedule 5.20, no
finder, broker, agent, financial person or other intermediary has acted on
behalf of the Company in connection with the offering of the Common Shares, the
execution of the Agreement or the consummation of any of the transactions
contemplated hereby.
5.21. Transactions with Affiliates. Except as set forth on
Schedule 5.21 or in the Company's proxy statement for its 1999 annual meeting of
stockholders, no director, officer, employee, consultant or agent of the
Company, or member of the family of any such person or any corporation,
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a substantial interest in or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a party to any transaction with the Company, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by or requiring payments to any such person or firm.
5.22. Environmental Matters. (a) The Company, and all
properties owned, operated or leased by the Company, have obtained and currently
maintain all material environmental permits required for their business and
operations and are in compliance with all such environmental permits. There are
no legal proceedings pending nor, to the best knowledge of the Company after due
inquiry, threatened to modify or revoke any such environmental permits. The
Company has not received any notice from any source that there is lacking any
environmental permit required for the current use or operation of the business
of the Company, or any property owned, operated or leased by the Company.
(b) Except as set forth on Schedule 5.22, all real property
owned, operated or leased by the Company, and, to the best knowledge of the
Company after due inquiry, all property adjacent to such properties, are free
from contamination by any hazardous material other than any such contamination
as would not have a Material Adverse Effect; and the Company is not subject to
environmental costs and liabilities with respect to hazardous materials, and no
facts or circumstances exist which could give rise to environmental costs and
liabilities with respect to hazardous materials.
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(c) Except as set forth on Schedule 5.22, there is not now,
nor, to the best knowledge of the Company after due inquiry, has there been in
the past, on, in, or under any real property owned, leased, or operated by the
Company, or by any of their respective predecessors (i) any asbestos-containing
materials, (ii) any underground storage tanks, (iii) above-ground storage tanks,
(iv) impoundments, (v) poly-chlorinated biphenyls or (vi) radioactive
substances.
(d) The Company, and all properties owned, operated or leased
by the Company, comply with all environmental laws.
(e) Since June 30, 1998, neither the Company, nor any property
owned, leased or operated by the Company, has received or been issued any
written request for information, or has been notified that it is a potentially
responsible party under the environmental laws with respect to any on-site or
off-site for which environmental costs and liabilities are asserted.
6. Representations, Warranties and Covenants of Purchasers.
Purchasers severally represent, warrant and covenant to the Company as of the
Closing Date as follows:
6.1. Investment Intent. Each Purchaser is an "accredited
investor" within the meaning of Regulation D under the Securities Act. Each
Purchaser has experience in making investments in development stage
biotechnology companies and is acquiring the Common Shares for its own account
and not with a present view to, or for sale in connection with, any distribution
thereof in violation of the registration requirements of the Securities Act.
Each Purchaser consents to the placing of a legend on the certificates
representing its respective Common Shares to the effect that, and each Purchaser
acknowledges that, such Common Shares have not been registered under the
Securities Act and may not be transferred unless registered in accordance with
applicable securities laws or, in the opinion of counsel to the Purchasers (such
opinion to be in form and substance reasonably satisfactory to the Company),
exempt therefrom.
6.2. Authorization. Each Purchaser has the power and authority
to execute and deliver this Agreement and to perform its obligations hereunder,
having obtained all required consents, if any, and this Agreement, when executed
and delivered, will constitute a legal valid and binding obligation of such
Purchaser except as such enforceability may be limited by (a) bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (b) the availability of remedies under general equitable principles.
6.3. Brokers. No finder, broker, agent, financial person or
other intermediary has acted on behalf of the Purchasers in connection with the
offering of the Common Shares or the consummation of this Agreement or any of
the transactions contemplated hereby.
6.4. No Short. For a period of six months from the Closing
Date, the Purchasers will not "short" or "short against the box" (as those terms
are generally understood) any equity security of the Company; provided, however,
that if the Shelf Registration Statement (as defined below) is not effective by
the date that is 60 days following the Closing Date, then the Purchasers shall
have no obligation under this section 6.4 until such time as the Shelf
Registration Statement is declared effective by the SEC.
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7. Covenants of the Company. Until such time as (a) Purchasers
and their Affiliates beneficially own less than five percent (5%) of the Common
Stock then outstanding, the Company covenants and agrees with Purchasers as
follows:
7.1. Books and Accounts. The Company will: (a) make and keep
books, records and accounts, which, in reasonable detail, accurately and fairly
reflect its transactions, including without limitation, dispositions of its
assets; and (b) devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and in
accordance with the Company's past practices or any other criteria applicable to
such statements, and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
7.2. Periodic Reports. The Company will furnish to the
Purchasers, other than documents available via EDGAR: (i) as soon as practicable
(but in the case of the annual report of the Company to its stockholders, within
ninety (90) days after the end of each fiscal year of the Company) one copy of:
(A) its annual report to its stockholders (which annual report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of America by a firm of certified public
accountants of recognized standing), (B) if not included in substance in its
annual report to stockholders, its annual report on Form 10-K, (C) each of its
quarterly reports to its stockholders, and if not included in substance in its
quarterly reports to stockholders, its quarterly report on Form 10-Q, (D) each
of its current reports on Form 8-K, and (E) a copy of the full Shelf
Registration Statement (as defined below), (the foregoing, in each case,
excluding exhibits); and (ii) upon reasonable request, all exhibits excluded by
the parenthetical to the immediately preceding clause 7.2(a)(i)(E) and any other
information published by the Company that is generally available to the public.
7.3. Other Reports and Inspection. The Company will furnish to
the Purchasers, other than documents available via EDGAR: (a) as soon as
practicable after issuance, copies of any financial statements or reports
prepared by the Company for, or otherwise furnished to, its stockholders or the
SEC (other than information furnished to the SEC on a confidential or
supplemental basis) and (b) promptly, such other documents, reports and
financial data as Purchasers may reasonably request, provided that the
Purchasers agree to preserve the confidential nature of, and to refrain from
trading on the basis of, material requested by the Purchasers which the Company
has marked as confidential. In addition the Company will, upon reasonable prior
notice, make available to Purchasers or its representatives or designees (x) all
assets, properties and non-confidential business records of the Company for
inspection and (y) the directors and officers of the Company for interviews
concerning the business, affairs and finances of the Company.
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7.4. Insurance. The Company will at all times maintain valid
policies of worker's compensation insurance and such other insurance with
respect to its properties and business of the kinds and in amounts not less than
is customarily maintained by corporations engaged in the same or similar
business and similarly situated, including, without limitation, insurance
against fire, loss, damage, theft, public liability and other risks. The
activities and operations of the Company shall be conducted in a manner to
conform in all material respects to all applicable provisions of such policies.
7.5. Use of Proceeds. The Company shall use the net proceeds
from the sale of the Common Shares for the redemption of all outstanding shares
of its Series F Convertible Preferred Stock at a price equal to 109% of the
stated value of such Series F Convertible Preferred Stock (which is $10,000).
Any net proceeds exceeding the amount required to redeem the Series F
Convertible Preferred Stock shall be used for general corporate purposes.
7.6. Transactions with Affiliates. Except for employment and
consulting agreements entered into in the ordinary course of business (including
such agreements in effect as of the Closing Date) and the transactions
contemplated by this Agreement, the Company shall not (a) engage in any
transaction with, (b) make any loans to, nor (c) enter into any contract,
agreement or other arrangement (i) providing for (x) the employment of, (y) the
furnishing of services by (other than employment and consulting services), or
(z) the rental of real or personal property from, or (ii) otherwise requiring
payments to, any officer, director or key employee of the Company or any
relative of such persons or any other "associate" of such persons (as such terms
are defined in the rules and regulations promulgated under the Securities Act),
without the prior written approval of the Purchasers, which approval shall not
be unreasonably withheld.
7.7. Corporate Existence, Licenses and Permits; Maintenance of
Properties; New Businesses. The Company will at all times conduct its business
in the ordinary course and will use its best efforts to cause to be done all
things necessary to maintain, preserve and renew its existence and will use its
best efforts to preserve and keep in force and effect, all licenses, permits and
authorizations necessary to the conduct of its business. The Company will also
maintain and keep its properties in good repair, working order and condition,
and from time to time, to make all needful and proper repairs, renewals and
replacements, so that the business carried on in connection therewith may be
properly conducted at all times.
7.8. Other Material Obligations. The Company will use its best
efforts to comply in all material respects with, (a) all material obligations
which it is subject to, or becomes subject to, pursuant to any contract or
agreement, whether oral or written, as such obligations are required to be
observed or performed, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and the Company has set
aside on its books adequate reserves with respect thereto, and (b) all
applicable laws, rules, and regulations of all governmental authorities, the
violation of which could have a material adverse effect upon the business,
financial condition, operating results, employee or customer relations or
prospects of the Company.
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7.9. Amendment to the Certificate of Incorporation and the
By-Laws. The Company will perform and be in compliance with and observe all of
the provisions set forth in its Certificate of Incorporation and By-Laws to the
extent that the performance of such obligations is legally permissible; provided
that the fact that performance is not legally permissible will not prevent such
nonperformance from constituting an event of default under this Agreement.
Except with the consent of the Purchasers, which consent shall not be
unreasonably withheld, the Company will not amend its Certificate of
Incorporation or By-Laws or any Certificate of Designations for any series of
Preferred Stock of the Company so as to affect adversely the rights of
Purchasers under this Agreement, the Certificate of Incorporation or the
By-Laws.
7.10. Consents and Waivers. The Company has obtained all
consents and waivers needed to enable it to perform all of its obligations under
this Agreement and the transactions contemplated hereby.
7.11. Taxes and Liens. The Company shall duly pay and
discharge when payable, all taxes, assessments and governmental charges imposed
upon or against the Company or its properties, or any part thereof or upon the
income or profits therefrom, in each case before the same become delinquent and
before penalties accrue thereon, as well as all claims for labor, materials or
supplies which if unpaid might by law become a lien upon any of its property,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings and the Company has set aside on its books adequate
reserves with respect thereto.
7.12. Restrictive Agreement. The Company covenants and agrees
that subsequent to the Closing, it shall not be a party to any agreement or
instrument which by its terms would restrict the Company's performance of its
obligations pursuant to this Agreement, the Certificate of Incorporation or
By-laws of the Company or the Common Shares.
7.13. Publicity. The Company shall not issue any press release
or make any other public announcement with respect to this Agreement or the
transactions contemplated hereby or utilizing the names of Purchasers or their
officers, directors, employees, agents or Affiliates without obtaining the prior
approval of Purchasers, except as may be required by law or the regulations of
any securities exchange.
7.14. Restriction on Securities. (a) During the 12-month
period following the Closing Date, the Company will not extend the expiration
date or lower the exercise price of any options or warrants, or take any similar
action with respect to any convertible securities of the Company.
(b) Prior to the Closing Date, the Company shall obtain the
written agreement of all executive officers and directors of the Company to (i)
"lock-up" all of the shares of Common Stock owned by each of them at any time
until (1) the date on which all Common Shares may be sold in a single
transaction on a registered securities exchange or national market under an
applicable exemption from the registration requirements of the Securities Act
and all other applicable securities laws and (2) the date that is six months
14
following the Closing Date; provided that the executive officers and directors
of the Company may sell an aggregate of one million (1,000,000) shares of Common
Stock in such 6-month period so long as any such executive officer or director
provide to the Purchasers a written notice of their intent to sell at least five
(5) days prior to the earlier of (A) the filing of a Form 144 by such person and
(B) the date of such proposed sale, (ii) not directly or indirectly sell "short"
or "short against the box" (as those terms are generally understood), until the
date that is 6 months following the Closing Date.
7.15. Restriction on Liens. The Company shall not create or
permit the imposition of any liens on any of its assets from and after the
Closing Date without the prior written authorization of the Board of Directors.
7.16. Restrictions on Indebtedness. Without the prior approval
of the Board of Directors, the Company shall not incur, create, assume or permit
to exist any indebtedness except (i) pursuant to equipment lease financings with
commercial banks or Persons whose business consists in substantial part of
engaging in such financings, (ii) pursuant to customary accounts receivable and
inventory financing in the ordinary course of business, (iii) in an amount less
than $100,000 incurred in the ordinary course of business, and (iv) indebtedness
for borrowed money existing on the date hereof and disclosed in writing to the
Purchasers, but not any extensions, renewals or replacements of such
indebtedness.
7.17. Board of Directors. (a) The Company shall at all times
maintain provisions in its By-laws and/or Certificate of Incorporation
indemnifying all directors against liability and absolving all directors from
liability to the Company and its stockholders to the maximum extent permitted
under the laws of the State of Delaware.
(b) The By-laws of the Company shall always contain provisions
consistent with the provisions of this Section 7.17 except to the extent this
Section 7.17 deals with the possible observer.
7.18. Certain Subsidiaries. Except for wholly owned
subsidiaries of the Company., the Company will not create any entity that would
be a Subsidiary (as defined in Section 9.9) without the prior written consent of
the Purchasers. Notwithstanding the foregoing, the Company may acquire any
interest in any business from any person, firm or entity (whether by a purchase
of assets, purchase of stock, merger or otherwise) using cash or stock without
the prior written consent of the Purchasers.
7.19. Listing. The Company will take all action necessary
promptly to file an Application for Listing of Additional Shares with Nasdaq
National Market and/or take any other necessary action to enable the Common
Stock to trade on a national market.
7.20. Material Changes. The Company will promptly notify the
Purchasers of any material adverse change in its business or financial
condition.
7.21. Adjustment to Per Share Price. If, commencing on the
date that is six months from the Closing Date and ending on the date that is one
year from the Closing Date, the Company issues shares of Common Stock, or
securities convertible into or exercisable for shares of Common Stock, at a
15
price per share less than the Per Share Price, then the Company shall
simultaneously issue to the Purchasers for no additional consideration, a number
of shares of Common Stock sufficient to reduce the Per Share Price then in
effect to equal the "Adjusted Price" (as defined below). For purposes of this
section 7.21(b), the term Adjusted Price (which shall not be greater than the
Per Share Price then in effect) shall equal a fraction, the numerator of which
shall equal (1) the sum of (A) the number of shares of Common Stock outstanding
on the record date of such issuance or sale multiplied by the Per Share Price
then in effect plus (B) the Total Consideration (as defined below), and the
denominator of which shall be the number of shares of Common Stock outstanding
on the record date of such issuance or sale plus the maximum number of
additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities. "Total Consideration" shall mean the total
amount, if any, received or receivable by the Company in consideration of the
issuance or sale of such securities plus the total consideration, if any,
payable to the Company upon exercise thereof. The provisions of this section
7.21(b) shall not apply (i) to issuances of securities in any corporate
partnering arrangements (including mergers) consummated by the Company, (ii) to
the exercise or conversion of options, warrants or other convertible securities
outstanding as of the Closing Date, or (iii) to issuances which, in the
aggregate, yield gross proceeds to the Company of less than $250,000.
7.22. Right of First Refusal. In the event that, within the 12
month period following the Closing Date, the Company intends to conduct a
private placement of its securities through a placement agent, broker-dealer or
finder, pursuant to which it will pay such agent a commission, then the Company
shall (a) notify Paramount Capital, Inc. ("Paramount") of such intent in writing
detailing the terms of such proposed offering and (b) grant Paramount the right
of first refusal to act as placement agent for the Company in such private
placement. Paramount shall notify the Company within 15 days of its intent. In
the event that Paramount declines to act as placement agent for the Company on
the terms proposed to Paramount in the notice and the Company subsequently
offers to a third-party the opportunity to act as placement agent on terms more
favorable than those offered to Paramount, then the Company must first offer
such opportunity to Paramount on such more favorable terms.
8. Registration of Common Stock.
8.1. Registration. (i) Not later than 30 days after the Closing Date,
the Company will file with the SEC a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Common Shares
beneficially owned by Purchasers following the Closing (the "Registrable
Securities"). The Company will use its best efforts to effect the registrations,
qualifications or compliances (including, without limitation, the execution of
any required undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be reasonably requested and as would permit or facilitate
that sale and distribution of all Registrable Securities until the distribution
thereof is complete; provided that the Company shall not be obligated to
maintain the effectiveness of the Shelf Registration Statement (and any related
qualifications and compliance) following such time as the Company shall deliver
an opinion of counsel reasonably satisfactory to the holders of Registrable
Securities (the "Holders') and in form and substance satisfactory to each Holder
16
that (i) such Holders may sell in a single transaction all Registrable
Securities then held or issuable to such Holder on a registered securities
exchange or Nasdaq market under an applicable exemption from the registration
requirements of the Securities Act and all other applicable securities laws and
(ii) all transfer restrictions and restrictive legends with respect to such
Registrable Securities will be removed upon the consummation of such sale.
8.2. Registration Procedures. In connection with the
registration of any Registrable Securities under the Securities Act as provided
in this Section 8, the Company will use its best efforts, as expeditiously as
possible to:
(a) Prepare and file with the SEC the Shelf Registration
Statement with respect to such Registrable Securities and use its best efforts
to cause such Shelf Registration Statement to become effective as expeditiously
as possible;
(b) Prepare and file with the SEC such amendments and
supplements to such Shelf Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Shelf Registration
Statement effective until the disposition of all securities in accordance with
the intended methods of disposition by the seller or sellers thereof set forth
in such Shelf Registration Statement shall be completed, and to comply with the
provisions of the Securities Act (to the extent applicable to the Company) with
respect to such dispositions;
(c) Furnish to each seller of such Registrable Securities such
number of copies of such Shelf Registration Statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such Shelf Registration Statement
(including each preliminary prospectus), in conformity with the requirements of
the Securities Act, and such other documents, as such seller may reasonably
request, in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) Use its best efforts to register or qualify such
Registrable Securities covered by such Shelf Registration Statement under such
other securities or blue sky laws of such jurisdictions as any seller reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller, except
that the Company will not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would
not, but for the requirements of this Section 8.2(d) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction;
(e) Provide a transfer agent and registrar for all such
Registrable Securities covered by such Shelf Registration Statement not later
than the effective date of such Shelf Registration Statement;
(f) Notify each seller of such Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Shelf Registration Statement contains an untrue
17
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company will
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading. The Purchasers agree to
suspend, upon request of the Company, any disposition of Registrable Securities
pursuant to the Registration Statement contemplated hereby during any period,
not to exceed one 30-day period per circumstance or development.
(g) Cause all such Registrable Securities to be listed on each
securities exchange or automated over-the-counter trading system on which
similar securities issued by the Company are then listed;
(h) Enter into such customary agreements (including, in the
event Purchasers elect to engage an underwriter in connection with the Shelf
Registration Statement, an underwriting agreement containing customary terms and
conditions) and take all such other actions as reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities; and
(i) Make available for inspection by any seller of Registrable
Securities, all financial and other records, pertinent corporation documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller in
connection with the Shelf Registration Statement pursuant to Section 8.1.
8.3 Registration and Selling Expenses. (a) All expenses
incurred by the Company in connection with the Company's performance of or
compliance with this
