<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1999
REGISTRATION NO. 333-___________
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MAXIM PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 87-0279983
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
8899 UNIVERSITY CENTER LANE, SUITE 400
SAN DIEGO, CALIFORNIA 92122
(858) 453-4040
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OR REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DALE A. SANDER
VICE PRESIDENT, FINANCE, CHIEF FINANCIAL OFFICER AND SECRETARY
MAXIM PHARMACEUTICALS, INC.
8899 UNIVERSITY CENTER LANE, SUITE 400
SAN DIEGO, CALIFORNIA 92122
(858) 453-4040
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
LANCE W. BRIDGES, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CALIFORNIA 92121
(858) 550-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
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, other than securities offered in connection with dividend or
interest reinvestment plans, 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, please 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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / / ________________
CALCULATION OF REGISTRATION FEE
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proposed Maximum PROPOSED MAXIMUM
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered Per Share (1) Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, PAR VALUE $.001 ....... 2,327,820 $8.375 $19,495,492.50 $5,751.17
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933 based upon the average of
the high and low prices of Registrant's Common Stock on August 4, 1999 as
reported on the American Stock Exchange.
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 THAT 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.
- -----------------------------------------------------------------------------
<PAGE>
PROSPECTUS
2,327,820 SHARES
MAXIM PHARMACEUTICALS, INC.
COMMON STOCK
The selling stockholders identified in this prospectus are selling
2,327,820 shares of Maxim Pharmaceuticals, Inc. common stock. Maxim will not
receive any of the proceeds from the sale of shares by the selling
stockholders. Our common stock is listed on the American Stock Exchange
("AMEX") under the symbol "MMP" and on the Stockholm Stock Exchange under the
symbol "MAXM". The closing sale price of the common stock, as reported on
AMEX on August 4, 1999, was $8.625 per share.
The selling stockholders may sell the shares of common stock described
in this prospectus in public or private transactions, on or off AMEX, at
prevailing market prices, or at privately negotiated prices. The selling
stockholders may sell shares directly to purchasers or through brokers or
dealers. Brokers or dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders. More
information is provided in the section entitled "Plan of Distribution."
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 5.
Neither the Securities Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The date of this prospectus is August 6, 1999.
<PAGE>
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read
and copy these reports, proxy statements and other information at the SEC's
public reference rooms in Washington, D.C., New York, NY and Chicago, IL.
You can request copies of these documents by writing to the SEC and paying a
fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the public reference rooms. Our SEC
filings are also available at the SEC's Web site at "http://www.sec.gov". In
addition, you can read and copy our SEC filings at the office of the National
Association of Securities Dealers, Inc. at 1735 K Street, Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
- Annual Report on Form 10-K for the year ended September 30, 1998;
- Proxy Statement on Schedule 14A dated January 13, 1999;
- Proxy Statement on Schedule 14A dated June 1, 1999;
- Quarterly Reports on Form 10-Q for the quarters ended December 31,
1998 and March 31, 1999; and
- Our registration statement on Form 8-A filed on June 28, 1996 which
includes a description of our common stock.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address or telephone number:
Maxim Pharmaceuticals
8899 University Center Lane, Suite 400
San Diego, CA 92122
Attn: Secretary
(858) 453-4040
This prospectus is part of a larger registration statement we filed with
the SEC. In deciding whether to buy our common stock, you should rely only
on the information incorporated by reference or provided in this prospectus.
We have not authorized anyone else to provide you with different information.
We are not making an offer of these securities in any state where the offer
is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
2
<PAGE>
THE COMPANY
IN THIS PROSPECTUS, THE WORDS "WE," "OUR," AND "US" REFER ONLY TO MAXIM
AND NOT TO THE SELLING STOCKHOLDERS OR ANY OTHER PERSON. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD BE VERY DIFFERENT THAN THE RESULTS
WE DISCUSS IN THIS PROSPECTUS OR THE INFORMATION WE INCORPORATE BY REFERENCE
INTO THIS PROSPECTUS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE FOLLOWING
SECTION AND THOSE DISCUSSED IN THE SECTION ENTITLED "RISK FACTORS."
Maxim is developing a new generation of drugs, therapies and vaccines
for cancer, infectious diseases and topical disorders.
Our lead drug candidate, MAXAMINE-TM-, is currently being tested in
three Phase III cancer clinical trials and two Phase II trials in 12
countries around the world. The initial market launch of the drug is planned
for early 2001 in the U.S. and late 2001 in certain countries outside the
U.S.
In many patients with cancer and chronic infectious diseases, the
capacity of the patient's immune system to detect and destroy tumor cells or
virally infected cells is compromised. MAXAMINE THERAPY combines the
administration of MAXAMINE, an immuno-enhancer that protects critical immune
cells, with the administration of certain agents that stimulate these immune
cells (these agents include cytokines such as interleukin-2 and
interferon-alpha). This combination of actions is designed to allow MAXAMINE
THERAPY to improve the immune system's ability to identify, disable and
destroy malignant or infected cells. We believe that MAXAMINE THERAPY has
the potential to:
- extend life and extend remission duration;
- reduce the toxic side effects of cytokines;
- maintain the patient's quality of life during therapy;
- allow for self-administration at home; and
- provide cost-effective therapy.
A series of Phase II clinical trials of MAXAMINE in the treatment of
malignant melanoma and acute myelogenous leukemia (AML) have shown a more
than doubling of survival and remission times while maintaining patient
quality of life during treatment. Earlier-stage clinical studies have also
suggested promise in renal cell carcinoma, multiple myeloma and hepatitis C.
More than 750 patients have been treated in our completed and ongoing
clinical trials.
In addition to extending survival, maintaining the quality of a
patient's life during treatment is an important objective of MAXAMINE
THERAPY. Many current treatments for cancer and some infectious diseases are
as harsh as the illnesses themselves, forcing patients to make the difficult
choice of whether to continue therapy. MAXAMINE can be safely
self-administered by patients in their own homes.
Each of our three Phase III cancer trials are designed to independently
support applications for approval to market MAXAMINE. Enrollment in a
300-patient U.S. study in advanced malignant melanoma, the most deadly form
of skin cancer, was completed in February 1999. In March 1999, a Data Safety
Monitoring Board (DSMB) performed an interim analysis of data from the U.S.
study and concluded that there were no ongoing safety concerns with the
trial. The DSMB also concluded that the trial had the opportunity to meet
its principal endpoints and should continue under its approved protocol. We
expect to complete this trial in the first half of the year 2000.
A separate international Phase III advanced malignant melanoma trial
centered in Europe, Australia, Canada and Israel was initiated in late 1997
and is currently enrolling patients. Additionally, we are enrolling patients
with AML, the most common form of acute adult leukemia, in a 360-patient
Phase III clinical trial that commenced in early 1998 in the United States,
Europe, Australia, Canada and Israel.
3
<PAGE>
In two Phase II clinical trials for the treatment of advanced malignant
melanoma, MAXAMINE THERAPY substantially improved patient survival. Median
survival time for patients treated with MAXAMINE THERAPY in the two studies
exceeded 13 and 15 months, respectively, as compared with reported median
survival times of approximately six to seven months for existing available
treatments. Additionally, in our three Phase II melanoma trials patients
with liver metastases were subject to additional evaluation due to the
historically poor prognosis for this patient group. The patients treated
with MAXAMINE THERAPY had a substantially improved survival outcome (a mean
of 14 months survival as a group) compared to the reported survival time of
four months or less for these patients.
Our Phase II clinical trial for the treatment of AML demonstrated a
substantial improvement of leukemia-free remission intervals. After a median
of 32 months of follow-up, 58% of patients treated with MAXAMINE THERAPY
during their first complete remission (CR1) remained in leukemia-free
remission. Less than 20-25% would be expected to remain in remission under
current treatments, suggesting that MAXAMINE increased the number of
longer-term survivors by more than 100%. Furthermore, 65% of patients
treated with MAXAMINE THERAPY without concurrent diseases or antecedent
illnesses remained in leukemia-free remission. Additionally, patients who
relapsed and achieved a second or greater remission (CR2+) were subsequently
treated with MAXAMINE THERAPY. The CR2+ patients historically have a poor
prognosis and less than 5% survive longer term. Patients treated with
MAXAMINE had a median time in remission in excess of 21 months as compared
with the historic reported median time in remission of approximately six
months under the current standard of care, and 38% of the CR2+ patients
treated with MAXAMINE remained in leukemia-free remission after 30 months of
follow up.
In May 1999 we commenced a 125-patient Phase II study of MAXAMINE in the
treatment of hepatitis C (HCV), a virus estimated to afflict at least 60
million people worldwide. Enrollment of the trial was completed in July
1999. We will perform the first evaluation of these patients after 12 weeks
of treatment, and accordingly we plan to report our progress in this study
during late 1999. A Phase I trial in HCV patients suggested that the
combination of MAXAMINE with interferon-alpha (IFN- ) is safe in the
treatment of HCV patients, and that MAXAMINE may enhance the efficacy of IFN-
in patients who were previously nonresponsive to IFN- therapy.
During 1998 we entered into clinical collaborations with Chiron
Corporation, Amgen Inc. and BioNative AB. Each of these companies possess
cytokines that may benefit from use in combination with MAXAMINE. Under each
of these agreements we receive economic and other support for important
clinical trials without giving up any marketing or other future rights to
MAXAMINE. These collaborations reinforce our belief that MAXAMINE is
complementary rather than competitive with many existing and future drugs,
and may be the key to the successful use of many biotherapeutic agents.
We expect that the potential global market launch of MAXAMINE will be
based on a combination of direct marketing by Maxim, possibly in
collaboration with a pharmaceutical company partner, in the United States,
and the establishment of marketing alliances with pharmaceutical companies
for international markets. In 1999 we entered into an agreement granting F.
H. Faulding & Co., Ltd, a leading pharmaceuticals company, the right to
market MAXAMINE in Australia and New Zealand. We also entered into an
agreement granting MegaPharm Ltd., a pharmaceutical company with significant
experience and presence in the oncology and the immunotherapy fields, the
right to market MAXAMINE in Israel. In other international markets we are in
the process of evaluating and selecting pharmaceutical companies to serve as
marketing collaborators for major geographic regions, including Europe and
the Pacific Rim.
A second product platform under development is MAXDERM-TM-, a
MAXAMINE-related series of drugs for the treatment of certain topical
disorders. Randomized, blinded, placebo-controlled trials have been conducted
in more than 75 patients. Studies in patients with oral mucositis, a serious
side effect of chemotherapy and radiation treatment of cancer patients, and
herpes labialis (cold sores) suggested that MAXDERM resolved lesions more
effectively than a placebo control. Other clinical data suggests that
MAXDERM may be beneficial in the treatment of decubitus ulcers, shingles,
burns, conjunctivitis and other related conditions. Our third technology
platform, MAXVAX-TM-, is currently in preclinical development and is designed
to facilitate a new class of needle-free mucosal vaccines for several
infectious diseases including respiratory infections, sexually transmitted
diseases, and gastrointestinal tract diseases.
4
<PAGE>
Our principal executive offices are located at 8899 University Center
Lane, Suite 400, San Diego, California 92122 and our telephone number is
(619) 453-4040.
USE OF PROCEEDS
Maxim will not receive any of the proceeds from the sale of the shares of common
stock offered by the selling stockholders.
5
<PAGE>
RISK FACTORS
IN EVALUATING OUR BUSINESS, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
AND INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
WE ARE NOT PROFITABLE AND EXPECT TO CONTINUE TO INCUR LOSSES
We are a development-stage enterprise. We have experienced net losses
every year since our inception and, as of March 31, 1999 had an accumulated
deficit of approximately $61.8 million. We have not commercially introduced
any product and our product candidates are in varying stages of development
and testing. We anticipate incurring substantial additional losses over at
least the next several years. We must spend substantial amounts on:
- clinical trials;
- other anticipated research and development activities;
- preparation for the planned market launch of MAXAMINE; and
- the general corporate expenses associated with these activities.
Attaining profitability will depend on our ability to develop products
that are effective and commercially viable. We must also obtain regulatory
approval for the manufacture and sale of our products and market our products
successfully. We cannot guarantee that we will ever achieve profitability or
that if we do that we will be able to sustain that profitability.
WE WILL LIKELY NEED TO RAISE ADDITIONAL FUNDS IN THE FUTURE
We have already spent substantial funds developing our products and
business. We expect to continue to have negative cash flow from our
operations for at least the next several years. We will likely have to raise
substantial additional funds to complete the development of our products and
to bring them to market. Our future capital requirements will depend on
numerous factors, including:
- the results of our clinical trials;
- the timing and scope of any additional clinical trials undertaken;
- the scope and results of our research and development programs;
- the time required to obtain regulatory approvals;
- our ability to establish marketing alliances and collaborative
agreements;
- the cost of our internal marketing activities; and
- the cost of filing, prosecuting and, if necessary, enforcing patent
claims.
If we raise money by selling equity securities, it will dilute the
ownership of our then existing stockholders. Further, additional financing
may not be available on acceptable terms, if at all. If adequate funds are
not available on acceptable terms, we may be required to delay, scale back or
eliminate one or more of our product development programs or obtain funds
through arrangements with collaborative partners or others that may require
us to relinquish rights to certain of our technologies or products that we
would not otherwise relinquish. This may have a detrimental effect on our
business, financial condition and results of operations.
WE DO NOT KNOW IF WE CAN SUCCESSFULLY DEVELOP OUR PRODUCTS
Potential products based on our MAXAMINE, MAXDERM and MAXVAX
technologies will require extensive clinical testing, regulatory approval and
substantial additional investment before we can sell them. We cannot assure
you that any of our products will:
- be successfully developed;
- prove to be safe and effective in clinical trials;
- meet applicable regulatory standards;
- be capable of being produced in commercial quantities at acceptable
costs;
- be eligible for third party reimbursement from governmental or private
insurers; or
6
<PAGE>
- be successfully marketed or achieve market acceptance.
We must conduct additional research and development and preclinical work
before we can initiate clinical trials with the MAXVAX technology, and
possibly before we can expand clinical trials of the MAXAMINE and MAXDERM
technologies.
We have not completed testing for efficacy or safety in humans on any of
our products. At any stage of the clinical testing process, we may find that
products we thought were promising in preclinical studies or Phase I and
Phase II clinical trials do not demonstrate efficacy in larger-scale, Phase
III clinical trials. Further, our products may have undesirable or
unintended side effects of which we are unaware that may prevent or limit
their commercial use. Because of this uncertainty, any product development
program we undertake may be curtailed, redirected or eliminated at any time.
Any delay in our expected testing and development schedules, or any
elimination of product development program entirely, could harm our business.
OUR PRODUCT CANDIDATES ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION
Our product candidates are subject to significant regulation by the U.S.
Food and Drug Administration as well as similar agencies in countries outside
the United States. Satisfaction of lengthy and detailed laboratory and
clinical testing procedures and other costly and time consuming requirements
of such governmental regulations typically takes a number of years and varies
substantially based upon the type, complexity and novelty of the
pharmaceutical agent. In general, the FDA approval process for
pharmaceuticals involves the submission of an investigational new drug
application following:
- preclinical studies;
- clinical trials in humans to demonstrate the safety and efficacy of
the product under the protocols set forth in the investigational new
drug application; and
- submission of preclinical and clinical data as well as other
information to the FDA in the new drug application or product license
application.
We are expending substantial time and financial resources to conduct
clinical trials, but we cannot be sure that the results of our clinical
trials will support the submission of an investigational new drug application
or a product license application, or that any applications we do file will be
approved by the FDA or any similar foreign agency on a timely basis, or at
all. If we do not receive FDA approval for our products under development, we
will not be able to market or sell our products in the United States. This
would prevent us from generating product revenue in the United States and
would be extremely detrimental to our business and financial condition.
European and other international regulatory approvals are subject to similar
risks and uncertainties as FDA and other regulatory approvals in the United
States.
In addition, the marketing and manufacturing of pharmaceuticals are
subject to continuing FDA (or comparable international agency) review and
surveillance. If we fail to comply with FDA regulations or discover a
previously unknown problem with any of our potential products, we may be
subject to FDA (or comparable international agency) disciplinary action,
including fines, recalls, product seizures and suspension or withdrawal of
previously granted regulatory approvals. Other effects of these ongoing
government regulations may be:
- to delay marketing of our products for a considerable period of time;
- to impose costly procedures upon our activities; and
- to furnish a competitive advantage to larger companies with more
resources that compete with us.
Furthermore, government regulation may increase at any time, creating
additional costs and delays for us. The extent of potential adverse government
regulation which might arise from future legislation or administrative action
cannot be predicted.
WE DO NOT KNOW IF WE CAN OBTAIN SIGNIFICANT PROPRIETARY RIGHTS
Our success depends in large part on our ability to obtain, maintain and
protect patents, trade secrets and operate without infringing upon the
proprietary rights of others. The patent positions of biotechnology and
7
<PAGE>
pharmaceutical companies are highly uncertain and involve complex legal and
factual questions, and the breadth of claims allowed in biotechnology and
pharmaceutical patents cannot be predicted. As a result, patents may not issue
from any of our patent applications.
Further, patent applications in the United States are secret until a
patent issues, and we cannot be certain that others have not filed patent
applications for technology covered by our pending applications or that we
were the first to file patent applications for this technology. Competitors
may have filed applications for, or may have received patents and may obtain
additional patents and proprietary rights relating to, compounds or processes
that block or compete without infringing on those held by us. In addition,
patents currently held by us or issued to us in the future, or to licensors
from whom we have licensed technology rights, may be challenged, invalidated
or circumvented so that our intellectual property rights may not protect our
technologies or provide commercial advantage to us.
Other public and private concerns, including universities, may have
filed applications for or have been issued patents with respect to technology
potentially useful or necessary to us. The scope and validity of such
patents, the extent to which we may wish or need to acquire licenses under
such patents, and the cost or availability of such licenses, are currently
unknown.
In addition to patents and proprietary rights, we rely on unpatented
trade secrets and proprietary know-how, and we cannot be sure that others
will not obtain access to or independently develop such trade secrets and
know-how. Although potential corporate partners and our research partners and
consultants are not given access to our trade secrets and proprietary
know-how until they execute confidentiality agreements, these agreements may
be breached by the other party or may otherwise be of limited effectiveness
or enforceability.
The pharmaceutical industry has experienced extensive litigation
regarding patent and other intellectual property rights. Accordingly, we
could be forced to incur substantial costs in defending ourselves in lawsuits
that are brought against us claiming that we have infringed the patent rights
of others or in asserting our patent rights in lawsuits against other
parties. We may also be required to participate in interference proceedings
declared by the United States Patent and Trademark Office for the purpose of
determining the priority of inventions in connection with our patent
applications or other parties' patent applications. Adverse determinations
in litigation or interference proceedings could require us to seek licenses
that may not be available on commercially reasonable terms or subject us to
significant liabilities to third parties. This too could negatively affect
our business.
WE ARE DEPENDANT ON KEY PERSONNEL
Our future performance depends in part upon the continued contributions
of our senior management team and on our ability to attract and retain
qualified management and scientific personnel. Competition for such
personnel is intense, and we do not know if we will be able to continue to
attract, assimilate or retain highly qualified technical and management
personnel. The loss of key personnel or the failure to recruit additional
personnel or develop needed expertise could have materially and adversely
affect our business.
WE ARE DEPENDANT ON OUR COLLABORATIVE PARTNERS AND CONTRACTORS
Our business strategy requires us to rely on our collaborative partners and
contractors to assist us with:
- clinical testing;
- manufacturing;
- international marketing; and
- certain research and development activities.
Our collaborative partners and contractors include universities,
hospitals and other clinical trial sites, clinical contract research
organizations, contract manufacturers, other corporate and university
collaborators, licensors, marketing partners, licensees, consultants and
others. Our success is dependent upon the success of these outside parties
in performing their responsibilities. Although we believe our collaborative
partners are economically
8
<PAGE>
motivated to perform on their contractual obligations, we can not control the
amount of and timing of resources and skill applied to these activities by
our collaborators. In addition, we may not be able to negotiate acceptable
collaborative arrangements in the future required to implement our business
strategy, and even if we are able to enter into further collaborative
arrangements in the future, we cannot be sure that these arrangements will be
successful.
WE HAVE NO EXPERIENCE MARKETING OR SELLING PHARMACEUTICAL PRODUCTS
Although we intend to market MAXAMINE directly in the United States, we
have never marketed or sold any pharmaceutical product before. In order to
market and sell MAXAMINE or other products, we will need to develop a sales
force and a marketing group with relevant pharmaceutical experience, or make
appropriate arrangements with strategic partners. We cannot guarantee that
we will be able to attract, assimilate or retain highly qualified marketing
and sales personnel, or successfully employ them to commercialize MAXAMINE.
If we cannot develop the required marketing and sales expertise our business
will likely suffer.
We intend to rely on our collaborative partners to market and sell
MAXAMINE in international markets, and such arrangements may be sought to
market MAXDERM and MAXVAX in all markets. We have not yet entered into any
collaborative arrangement with respect to marketing or selling MAXAMINE with
the exception of agreements relating to Australia, New Zealand and Israel,
and have not entered into any agreements regarding MAXDERM or MAXVAX, and we
cannot guarantee that we will be able to enter into any such arrangements on
terms favorable to us, or at all. If we are able to enter into marketing and
selling arrangements with collaborative partners we cannot assure you that
such marketing collaborators will apply adequate resources and skills to
their responsibilities, or that their marketing efforts will be successful.
OUR PRODUCTS MAY NOT ACHIEVE MARKET ACCEPTANCE
MAXAMINE, and any of our other products in development, may not achieve
market acceptance even if the FDA (and similar foreign regulatory agencies)
approve the drug. The degree of market acceptance of our products will
depend on a number of factors, including:
- the scope of regulatory approvals;
- the establishment and demonstration in the medical community of the
clinical efficacy and safety of our products;
- their potential advantages over existing treatment methods; and
- reimbursement policies of government and other third-party payors.
We cannot guarantee that physicians, patients, payors or the medical
community in general will accept and utilize any products that may be developed
by us.
WE WILL BE DEPENDENT ON THIRD PARTY MANUFACTURERS OF OUR PRODUCTS
We do not intend to acquire or establish our own dedicated manufacturing
facilities for MAXAMINE in the foreseeable future and have, and expect to
continue to, contract with established pharmaceutical manufacturers for the
production of the product. If we are unable to continue to contract with
third-party manufacturers on acceptable terms, our ability to conduct
clinical testing and to produce commercial quantities of MAXAMINE and other
products will be adversely affected. If we cannot adequately manufacture our
products, it could result in delays in submissions for regulatory approval
and in commercial product launches, which in turn could materially impair our
competitive position and the possibility of achieving profitability. We
cannot guarantee that we will be able to maintain our existing contract
manufacturing relationships, or acquire or establish new, satisfactory
third-party relationships to provide adequate manufacturing capabilities in
the future.
OUR MARKETS ARE HIGHLY COMPETITIVE
There are many companies, both publicly and privately held, including
well-known pharmaceutical companies, and academic and other research
institutions, engaged in developing pharmaceutical and
9
<PAGE>
biologically-derived products for the treatment of cancer and vaccines and
therapeutics for the prevention or the treatment of infectious diseases.
Many of our competitors and potential competitors have substantially greater
capital, research and development capabilities and human resources than we do
and represent significant competition. Many of these competitors also have
significantly greater experience than we do in undertaking preclinical
testing and clinical trials of new pharmaceutical products and obtaining FDA
and other regulatory approvals. Additional mergers and acquisitions in the
pharmaceutical industry may result in even more resources being concentrated
with our competitors. If any of our products are approved for commercial
sale, we will also be competing with companies that have greater resources
and experience in manufacturing, marketing and selling pharmaceutical
products. Our competitors may also succeed in developing products that are
more effective, less costly, or have better side effect profiles than any
product we develop.
OUR BUSINESS IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE
We are engaged in the pharmaceutical field, which is characterized by
extensive research efforts and rapid technological progress. New
developments in oncology, cancer therapy, medicinal pharmacology,
biochemistry and other fields are expected to continue at a rapid pace.
Research and discoveries by others may render some or all of our proposed
programs or products noncompetitive or obsolete. Our business strategy is
subject to the risks inherent in the development of new products using new
technologies and approaches. Unforeseen problems may develop with these
technologies or applications, and we may not be able to successfully address
technological challenges we encounter in our research and development
programs. This may result in our inability to develop commercially feasible
products.
A PRODUCT LIABILITY CLAIM MAY ADVERSELY AFFECT OUR BUSINESS
Our business exposes us to potential product liability risks which are
inherent in the clinical testing, manufacturing and marketing of human
therapeutic products. We currently maintain product liability insurance
coverage for our clinical trials and intend to expand our insurance coverage
to include the sale of commercial products if marketing approval is obtained
for MAXAMINE or our other products under development. However, our insurance
coverage may not be adequate now or in the future. Further, adequate
insurance coverage may not be available in the future at an acceptable cost,
if at all. As a result, a product liability claim, even if we have insurance
coverage, could materially adversely affect our business or financial
condition.
THERE ARE SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE; THE SALE OF SUCH
SHARES MAY DEPRESS OUR STOCK PRICE
Sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices for our common stock and our
ability to raise equity capital in the future. As of August 5, 1999 we have
outstanding 10,203,600 shares of common stock. Of these shares, an aggregate
of 9,299,724 shares are freely tradable in the public market, unless acquired
by our affiliates. The remaining 903,876 shares are restricted securities as
that term is defined in Rule 144 under the Securities Act (the "Restricted
Shares"), all of which are eligible for immediate sale in the public market
pursuant to Rule 144 subject to certain volume and manner of sale
limitations. As of August 5, 1999 we also have outstanding 206,874 shares of
preferred stock which are convertible into 2,068,740 shares of common stock.
All of these shares are Restricted Shares, none of which are eligible for
immediate sale in the public market pursuant to Rule 144. However, the
shares of common stock issuable upon conversion of such shares of preferred
stock are being registered hereby and will be eligible for immediate sale in
the public market pursuant to such registration.
As of August 5, 1999 approximately 2,483,000 shares of common stock
underlying warrants, 977,310 shares issued or reserved for issuance under our
equity incentive plan, and 44,006 shares reserved for issuance under our
401(k) plan will be available for immediate sale in the public market, unless
purchased by our affiliates. However, 704,668 shares of common stock
underlying certain warrants outstanding as of August 5, 1999 have not been
registered for public sale and will be subject to the public sale
restrictions of Rule 144 or Rule 701 under the Securities Act, where
applicable if the warrants are exercised.
10
<PAGE>
OUR STOCK PRICE MAY BE HIGHLY VOLATILE
Our common stock currently trades on the American Stock Exchange and on
the Stockholm Stock Exchange. Historically, our common stock has generally
experienced relatively low daily trading volumes in relation to the aggregate
number of shares outstanding. Sales of substantial amounts of our common
stock in the public market could adversely affect the prevailing market
prices of our common stock and our ability to raise equity capital in the
future.
Factors that may have a significant impact on the market price or the
liquidity of our common stock also include:
- actual or potential clinical trial results relating to products under
development by us or our competitors;
- delays in our testing and development schedules;
- events or announcements relating to our collaborative relationships
with others;
- announcements of technological innovations or new products by us or
our competitors;
- developments or disputes concerning patents or proprietary rights;
- regulatory developments in both the United States and countries
outside of the United States;
- economic and other external factors, as well as period-to-period
fluctuations in our financial results.
External factors may also adversely affect the market prices for our
common stock. The price and liquidity of our common stock may be
significantly affected by the overall trading activity and market factors on
the American Stock Exchange and the Stockholm Stock Exchange, and these
factors may differ between the two markets. In addition, the securities
markets have from time to time experienced significant price and volume
fluctuations that may be unrelated to the operating performance of particular
companies. The market prices of the common stock of many publicly traded
pharmaceutical or biotechnology companies have in the past been, and can in
the future be expected to be, especially volatile.
11
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of each of the selling stockholders,
the number of shares of common stock beneficially owned by the selling
stockholders as of August 5, 1999 and the number of shares of common stock being
offered by each of them pursuant to this prospectus. This information is based
upon information provided by each respective selling stockholder. Because the
selling stockholders may offer all, some or none of their respective shares of
common stock, no definitive estimate can be provided as to the number of shares
or percentage of outstanding common stock that will be held by the selling
stockholders after such offering. The term "selling stockholders" includes the
stockholders listed below and their transferees, pledgees, donees or other
successors.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED NUMBER OF SHARES BENEFICIALLY OWNED
BEFORE OFFERING (1) SHARES AFTER OFFERING
BEING
SELLING STOCKHOLDER NUMBER PERCENT(2) OFFERED (3) NUMBER PERCENT
- -------------------- ------ ---------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
5:e AP Fonden (4)
P.O. Box 1639 347,180 3.29 347,180 - -
SE-111 86 Stockholm, Sweden
The Aries Master Fund (5) 79,260 * 79,260 - -
787 Seventh Avenue, 48th Floor
New York, NY 10019
Aries Domestic Fund, L.P. (6) 35,270 * 35,270 - -
787 Seventh Avenue, 48th Floor
New York, NY 10019
Aries Domestic Fund II, L.P. (7) 1,150 * 1,150 - -
787 Seventh Avenue, 48th Floor
New York, NY 10019
Carnegie-Cowen Global Healthcare Fund 57,840 * 57,840 - -
(8)
5 Place de la Gare
P.O. Box 1141
L-1011 Luxembourg
Carnegie Fund - Medical Sub-Fund (9) 57,840 * 57,840 - -
5 Place de la Gare
P.O. Box 1141
L-1011 Luxembourg
DVG Deutsche 462,910 4.34% 462,910 - -
Vermogensbildungsgesellschaft mbH (10)
Feldbergstrasse 22
60323 Frankfurt, Germany
Dunross & Co. AB (11) 136,770 1.33% 46,270 90,500 *
Vasagatan 40
SE-411 37 Gothenburg, Sweden
E. Ohman J:or Fondkommission AB (12) 68,380 * 13,880 54,500 *
Kapitalforvaltning
P.O. Box 7415
SE-103 91 Stockholm, Sweden
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED NUMBER OF SHARES BENEFICIALLY OWNED
BEFORE OFFERING (1) SHARES AFTER OFFERING
BEING
SELLING STOCKHOLDER NUMBER PERCENT(2) OFFERED (3) NUMBER PERCENT
- -------------------- ------ ---------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
Forenade Liv Gruppforsakringsbolag
AB (13)
SE-103 72 Stockholm, Sweden 68,630 3.29% 15,030 53,600 *
Forenade Liv Kollektivavtalsforsakrings
AB (14) 104,920 1.02% 23,120 81,800 *
SE-103 72 Stockholm, Sweden
Forenade Liv Omsesidigt
Gruppforsakringsbolag (15) 196,910 1.91% 37,010 159,900 1.56%
SE-103 72 Stockholm, Sweden
Forsakringsbolaget SPP Omsesidigt (16) 606,720 5.88% 115,720 491,000 4.81%
SE-103 73 Stockholm, Sweden
HealthCap KB (17)
Sturegatan 34 816,157 7.66% 138,410 677,747 6.45%
SE-114 36 Stockholm, Sweden
Mikael Hellberg (18) 1,700 * 1,700 - -
Bergsstigen 103
SE-138 33 Alta, Sweden
Charles Johnston (19) 17,340 * 17,340 - -
706 Ocean Drive
Juno Beach, FL 33408
Alexander Lindstrom (20) 21,530 * 5,530 16,000 *
Lundagatan 36, uppg 10
SE-117 27 Stockholm, Sweden
Livforsakrings AB Skandia (21) 705,840 6.76% 231,440 474,400 4.65%
SE-103 50 Stockholm, Sweden
Carl Henrik Permert (22) 3,450 * 3,450 - -
Setterwallsvagen 6
SE-131 36 Nacka, Sweden
Kenth Petersson (23) 11,090 * 11,090 - -
Heleneborgsgatan 20
SE-117 32 Stockholm, Sweden
RGC International Investors, LDC (24) 647,180 5.96% 347,180 300,000 2.86%
Three Bala Plaza East, Suite 200
Bala Cynwyd, PA 19004
Roston Enterprises (25) 28,910 * 28,910 - -
2201 Canyonback Road
Los Angles, CA 90049
SEB Lakemedelsfond (26) 98,360 * 98,360 - -
ST S6
SE-106 40 Stockholm
Sweden
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED NUMBER OF SHARES BENEFICIALLY OWNED
BEFORE OFFERING (1) SHARES AFTER OFFERING
BEING
SELLING STOCKHOLDER NUMBER PERCENT(2) OFFERED (3) NUMBER PERCENT
- -------------------- ------ ---------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
SEB Luxembourg (27)
16 Boulevard Royal 17,350 * 17,350 - -
P.O. Box 487
L-2014 Luxembourg
Luxembourg
SEB Private Bank (28) 1,830 * 1,830 - -
P.O. Box 487
L-2014 Luxembourg
Luxembourg
Skogs- och Lantarbetsgivareforbundet (29) 23,120 * 23,120 - -
P.O. Box 16006
SE-103 21 Stockholm
Sweden
Svenska Handelsbanken S.A. Luxembourg (30) 52,060 * 52,060 - -
P.O. Box 678
L-2016 Luxembourg
Luxembourg
Unibank S.A. (31)
P.O.Box 562 34,630 * 5,530 29,100 *
L-2015 Luxembourg
Luxembourg
Wechsler & Co., Inc. (32) 34,700 * 34,700 - -
105 South Bedford Road, Suite 310
Mount Kisco, NY 10549
Wendt Family Revocable Trust (33) 18,340 * 17,340 1,000 *
4900 West Dry Creek Road
Healdsburg, CA 95448
</TABLE>
- -----------------------
* Less than 1%
(1) To our knowledge, the persons named in the table have sole voting and
investment power with respect to all shares of the common stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
(2) Percentage ownership is based on 10,203,600 shares of common stock
outstanding as of August 5, 1999.
(3) Reflects shares of common stock issuable upon conversion of shares of our
Series A Convertible Preferred stock beneficially owned by such selling
stockholder. Includes shares of common stock issuable in connection with
dividends payable on such shares, assuming such dividends are paid in stock
in lieu of cash.
(4) Includes 347,180 shares of common stock issuable upon conversion of Series
A Convertible Preferred Stock beneficially owned by 5:e AP Fonden, which
includes 38,700 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash).
14
<PAGE>
(5) Includes 79,260 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Aries Master Fund, which
includes 8,820 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(6) Includes 35,270 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Aries Domestic Fund,
L.P., which includes 3,910 shares of common stock issuable in connection
with dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash).
(7) Includes 1,150 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Aries Domestic Fund II,
L.P., which includes 120 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash).
(8) Includes 57,840 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Carnegie-Cowen Global
Healthcare Fund, which includes 6,430 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash).
(9) Includes 57,840 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Carnegie Fund-Medical
Sub-Fund, which includes 6,430 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash).
(10) Includes 462,910 shares of common stock issuable upon conversion of Series
A Convertible Preferred Stock beneficially owned by DVG Deutsche
Vermogensbildungsgesellschaft mbH, which includes 51,600 shares of common
stock issuable in connection with dividends on such shares (assuming the
holder will elect to take such dividends in shares of stock in lieu of
cash).
(11) Includes 46,270 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Dunross & Co AB, which
includes 5,140 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(12) Includes 13,880 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by E. Ohman J:or
Fondkommission AB, which includes 1,540 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash).
(13) Includes 15,030 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Forenade Liv
Gruppforsakringsbolag AB, which includes 1,660 shares of common stock
issuable in connection with dividends on such shares (assuming the holder
will elect to take such dividends in shares of stock in lieu of cash).
Shares also include 17,000 warrants, all of which are immediately
exercisable.
(14) Includes 23,120 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Forenade Liv
Kollektivavtalsfrsakrings AB, which includes 2,560 shares of common stock
issuable in connection with dividends on such shares (assuming the holder
will elect to take such dividends in shares of stock in lieu of cash).
Shares also include 20,000 warrants, all of which are immediately
exercisable.
(15) Includes 37,010 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Forenade Liv Omsesidigt
Gruppforsakringsbolag, which includes 4,100 shares of common stock issuable
in connection with dividends on such shares (assuming the holder will elect
to take such dividends in shares of stock in lieu of cash). Shares also
include 63,900 warrants, all of which are immediately exercisable.
15
<PAGE>
(16) Includes 115,720 shares of common stock issuable upon conversion of Series
A Convertible Preferred Stock beneficially owned by Forsakringsbolaget SPP
Omsesidigt, which includes 12,890 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash).
(17) Includes 138,410 shares of common stock issuable upon conversion of Series
A Convertible Preferred Stock beneficially owned by Health Cap KB, which
includes 15,420 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash). Shares also include 310,100
warrants, all of which are immediately exercisable.
(18) Includes 1,700 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Mikael Hellberg, which
includes 160 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(19) Includes 17,340 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Charles Johnston, which
includes 1,920 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(20) Includes 5,530 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Alexander Lindstrom,
which includes 600 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash). Shares also include 15,000
warrants, all of which are immediately exercisable.
(21) Includes 231,440 shares of common stock issuable upon conversion of Series
A Convertible Preferred Stock beneficially owned by Livforsakrings AB
Skandia, which includes 25,790 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash).
(22) Includes 3,450 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Carl Henrik Permert,
which includes 370 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash).
(23) Includes 11,090 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Kenth Petersson, which
includes 1,220 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(24) Includes 347,180 shares of common stock issuable upon conversion of Series
A Convertible Preferred Stock beneficially owned by RCG International
Investors, LDC, which includes 38,700 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash). Shares also
include 300,000 warrants, all of which are immediately exercisable.
(25) Includes 28,910 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Roston Enterprises, which
includes 3,210 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(26) Includes 98,360 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by SEB Lakemedelsfond, which
includes 10,960 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash).
(27) Includes 17,350 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by SEB Luxembourg, which
includes 1,920 shares of common stock issuable in
16
<PAGE>
connection with dividends on such shares (assuming the holder will elect
to take such dividends in shares of stock in lieu of cash).
(28) Includes 1,830 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by SEB Private Bank, which
includes 190 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(29) Includes 23,120 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Skogs- och
Lantarbetsgivareforbundet, which includes 2,560 shares of common stock
issuable in connection with dividends on such shares (assuming the holder
will elect to take such dividends in shares of stock in lieu of cash).
(30) Includes 52,060 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Svenska Handelsbanken
S.A. Luxembourg, which includes 5,780 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash).
(31) Includes 5,530 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Unibank S.A., which
includes 600 shares of common stock issuable in connection with dividends
on such shares (assuming the holder will elect to take such dividends in
shares of stock in lieu of cash).
(32) Includes 34,700 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Wechsler & Co., Inc.,
which includes 3,860 shares of common stock issuable in connection with
dividends on such shares (assuming the holder will elect to take such
dividends in shares of stock in lieu of cash).
(33) Includes 17,340 shares of common stock issuable upon conversion of Series A
Convertible Preferred Stock beneficially owned by Wendt Family Revocable
Trust, Inc., which includes 1,920 shares of common stock issuable in
connection with dividends on such shares (assuming the holder will elect to
take such dividends in shares of stock in lieu of cash). Shares
beneficially owned also include 1,000 warrants, all of which are
immediately exercisable.
None of the selling stockholders has, or within the past three years has
had, any position, office or other material relationship with Maxim
Pharmaceuticals, Inc. or any of its predecessors or affiliates.
17
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholders in one or more transactions at fixed prices, at market prices at
the time of sale, at varying prices determined at the time of sale or at
negotiated prices. The selling stockholders may offer their shares of common
stock in one or more of the following transactions:
- on any national securities exchange or quotation service at which the
common stock may be listed or quoted at the time of sale,
including the American Stock Exchange and the Stockholm Stock
Exchange,
- in the over-the-counter market,
- in private transactions,
- through options, and
- by pledge to secure debts and other obligations, or a combination of
any of the above transactions.
If required, we will distribute a supplement to this prospectus to
describe material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling stockholders. Alternatively, the
selling stockholders may from time to time offer shares of common stock to or
through underwriters, broker/dealers or agents. The selling stockholders and
any underwriters, broker/dealers or agents that participate in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933. Any profits on the resale
of shares of common stock and any compensation received by any underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act of 1933 may be sold under rule 144 rather
than pursuant to this prospectus. The selling stockholders do not have to
sell all of the shares they own pursuant to this prospectus. The selling
stockholders may transfer, devise or gift such shares by other means not
described in this prospectus.
To comply with the securities laws of certain jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the common stock may not be
offered or sold unless they have been registered or qualified for sale or an
exemption is available and complied with.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may not simultaneously engage in
market-making activities with respect to the common stock for nine business
days prior to the start of the distribution. In addition, each selling
stockholder and any other person participating in a distribution will be
subject to the Securities Exchange Act of 1934 which may limit the timing of
purchases and sales of common stock by the selling stockholders or any such
other person. These factors may affect the marketability of the common stock
and the ability of brokers or dealers to engage in market-making activities.
We will pay all expenses of this registration. These expenses include
the SEC's filing fees and fees under state securities or "blue sky" laws. We
estimate that our expenses in connection with this offering will be
approximately $1.8 million. All expenses for the issuance of a supplement to
this prospectus, when requested by selling stockholder(s), will also be paid
by us.
18
<PAGE>
LEGAL MATTERS
Cooley Godward LLP will give its opinion that the shares offered in
this prospectus have been validly issued and are fully paid and
non-assessable.
EXPERTS
The financial statements of Maxim Pharmaceuticals, Inc. as of September
30, 1998 and 1997, and for each of the years in the three-year period ended
September 30, 1998, and for the period from inception (October 23, 1989)
through September 30, 1998, have been incorporated by reference herein and in
the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide that we will indemnify our directors and executive
officers, and may indemnify our other officers, employees and other agents,
to the fullest extent not prohibited by Delaware law. We are also empowered
under our Certificate of Incorporation and Bylaws to enter into
indemnification agreements with our directors, officers, employees and other
agents and to purchase insurance on behalf of any person whom we are required
or permitted to indemnify. Pursuant to this provision, we have entered into
indemnity agreements with each of our directors and executive officers.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses payable by the Company
in connection with the sale of the shares of common stock being registered. All
amounts shown are estimates except for the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee $ 5,751
Legal Fees and expenses $10,000
Blue sky qualification fees and expenses $ 1,000
Accounting fees and expenses $ 3,000
Printing and engraving $ 500
Miscellaneous $ 4,749
-------
Total $25,000
-------
-------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide that the Company will indemnify its
directors and executive officers and may indemnify its other officers,
employees and other agents to the fullest extent permitted by Delaware law.
The Company is also empowered under its Bylaws to enter into indemnification
contracts with its directors and officers and to purchase insurance on behalf
of any person whom it is required or permitted to indemnify. Pursuant to this
provision, the Company has entered into indemnity agreements with each of its
directors and officers and currently maintains directors and officers
insurance coverage.
In addition, the Company's Certificate of Incorporation provides that to
the fullest extent permitted by Delaware law, the Company's directors will
not be liable for monetary damages for breach of the directors' fiduciary
duty of care to the Company and its stockholders. This provision in the
Certificate of Incorporation does not eliminate the duty of care, and in
appropriate circumstances equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under Delaware law. Each
director will continue to be subject to liability for breach of the
director's duty of loyalty to the Company or its stockholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for any transaction from which the director derived an
improper personal benefit, and for unlawful payments of dividends or unlawful
stock purchase or redemption. This provision also does not affect a
director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of Registrant. (1)
3.2 Certificate of Amendment of Amended and Restated Certificate of
Incorporation.
3.3 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof of Series A
Convertible Preferred Stock.
3.4 Bylaws of Registrant. (1)
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2 Form of Common Stock Certificate. (1)
5.1 Opinion of Cooley Godward LLP.
10.1 Form of Indemnification Agreement for directors and officers of the
Registrant. (1)
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
10.2 Form of Representative's Warrant Agreement between the Company and
National Securities Corporation, as representative of the several
Underwriters (the "Representative"), including form of
Representative's Warrant Certificate. (1)
10.3 Form of Warrant Agreement between the Company, the Representative and
American Stock Transfer & Trust Company, including form of Warrant
Certificate. (1)
10.4 Option to Buy Technology and Rights Agreement, dated March 30, 1993,
between the Registrant and Estero Anstalt. (1)(2)
10.5 Security Agreement, dated July 27,1993, between the Registrant and
Estero Anstalt. (1)(2)
10.6 Exclusive License Agreement, dated June 14, 1995, among the
Registrant, Jan Holmgren, M.D., Ph.D., Cecil Czerkinsky, Duotol AB and
Triotol Ltd. (1)(2)
10.7 Option and License Agreement, dated May 19, 1993, among the
Registrant, Vitec AB and SBL Vaccin AB, as amended. (1)(2)
10.8 License Agreement dated January 14, 1994, among the Registrant, Vitec
AB and SBL Vaccin, AB, as amended. (1)(2)
10.9 Agreement, dated December 2, 1995, among the Registrant, Syntello
Vaccine Development AB and Estero Anstalt. (1)(2)
10.10 Agreement, dated April 23, 1996, among the Registrant, Anders Vahlne,
M.D., Ph.D. and Syntello Vaccine Development AB. (1)(2)
10.11 Letter Agreement, dated February 15, 1996, between the Registrant and
Burrill & Craves, Inc.(1)
10.12 Lease dated November 1, 1996 between DM Spectrum LLC, a California
limited liability company, as Landlord and the Registrant for 3099
Science Park Road, Suite 150, San Diego, California 92121. (3)
10.13 Stock Purchase Agreement, dated as of July 5, 1996, by and between Dr.
Anders Vahlne and the Registrant. (1)
10.14 Amended and Restated 1993 Long-Term Incentive Plan and forms of stock
option agreements. (4)
10.15 Employment Agreement dated October 1, 1998 between the Registrant and
Kurt R. Gehlsen. (10)
10.16 Employment Agreement dated October 1, 1998 between the Registrant and
Dale A. Sander. (10)
10.17 Employment Agreement dated November 9, 1998 between the Registrant and
Larry G. Stambaugh. (10)
10.18 Loan and Security Agreement between the Registrant and Silicon Valley
Bank. (5)
10.19 Financial Advisory Services Agreement between the Registrant and
Rodman & Renshaw, Inc. dated September 17, 1997.(6)
10.20 Lease dated January 13, 1998 between British Pacific Properties
Corporation, a California Corporation, as Landlord, and the
Registrant. (7)
10.21 Amendment to Loan and Security Agreement dated March 16, 1998 between
the Registrant and Silicon Valley Bank. (8)
10.22 Lease dated July 2, 1998 between British Pacific Properties, a
California Corporation, as Landlord, and the Registrant. (9)
10.23 Employment Agreement dated October 1, 1998 between the Registrant and
Geoffrey B. Altman. (10)
10.24 Amendment to Loan and Security Agreement dated September 1, 1998
between the Registrant and Silicon Valley Bank. (10)
10.25 License Agreement dated November 6, 1998 among the Registrant,
Professional Pharmaceutical, Inc., Bruce A. Jack, D.D.S. and
B. Thomas White, R.PH.(11)
10.26 Series A Convertible Preferred Stock Purchase Agreement, dated July
20, 1999, between the Registrant and certain purchasers of
Registrant's preferred stock.
10.27 Series A Convertible Preferred Stock Purchase Agreement, dated July
20, 1999 between the Registrant and Alfred Berg.
23.1 Consent of KPMG LLP, Independent Auditors.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- -----------
(1) Previously filed together with Registrant's Registration Statement on Form
SB-2 (File No. 333-4854-LA) or amendments thereto and incorporated herein
by reference.
(2) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Act of 1933 and Rule 406 thereunder
respecting confidential treatment.
(3) Previously filed together with Registrant's Annual Report on Form 10-K
(File No. 1-4430) dated September 30, 1996 and incorporated herein by
reference.
(4) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated December 31, 1996 and incorporated herein by
reference.
(5) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated March 31, 1997 and incorporated herein by
reference.
(6) Previously filed together with Registrant's Registration Statement on Form
S-1 (File No. 333-35895) dated September 18, 1997 and incorporated herein
by reference.
(7) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated December 31, 1997 and incorporated herein by
reference.
(8) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated March 31, 1998 and incorporated herein by
reference.
(9) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated June 30, 1998 and incorporated herein by reference.
(10) Previously filed together with the Registrant's Annual Report on Form
10-K/A (File No. 1-4430) dated September 30, 1998 and incorporated herein
by reference.
(11) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated December 31, 1998 and incorporated herein by
reference.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification by us for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Maxim Pharmaceuticals, Inc. pursuant to the provisions referenced
above or otherwise, we have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of Maxim Pharmaceuticals, Inc. 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
hereunder, we 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 of 1933, as amended, and
will be governed by the final adjudication of such issue.
We hereby undertake:
(1) To file, during any period in which offers or sales are being made
pursuant to this registration statement, a post-effective amendment to this
registration statement 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;
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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; and
(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.
We hereby undertake 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.
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 6th day of
August, 1999.
MAXIM PHARMACEUTICALS, INC.
/s/ DALE A. SANDER
---------------------------
Dale A. Sander
Vice President, Finance
Chief Financial Officer
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Larry G. Stambaugh and Dale A. Sander
as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned and in his name, place
and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the Registration Statement and to
file the same, with exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and conforming all that such attorney-in-fact and
agent, or his substitute or substitutes may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <S> <S>
/s/ LARRY G. STAMBAUGH Chairman of the Board, August 6, 1999
- ---------------------------- President and Chief Executive Officer
Larry G. Stambaugh (PRINCIPAL EXECUTIVE OFFICER)
/s/ DALE A. SANDER Vice President, Finance, August 6, 1999
- ---------------------------- Chief Financial Officer and Secretary
Dale A. Sander (PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
Director
- ----------------------------
Colin B. Bier, Ph.D.
/s/ GARY E. FRASHIER Director August 6, 1999
- ----------------------------
Gary E. Frashier
/s/ THEODOR H. HEINRICHS Director August 6, 1999
- ----------------------------
Theodor H. Heinrichs
/s/ PER-OLOF MORTENSSON Director August 6, 1999
- ----------------------------
Per-Olof Mortensson
/s/ F. DUWAINE TOWNSEN Director August 6, 1999
- ----------------------------
F. Duwaine Townsen
</TABLE>
II-5
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of Registrant. (1)
3.2 Certificate of Amendment of Amended and Restated Certificate of
Incorporation.
3.3 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof of Series A
Convertible Preferred Stock.
3.4 Bylaws of Registrant. (1)
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2 Form of Common Stock Certificate. (1)
5.1 Opinion of Cooley Godward LLP.
10.1 Form of Indemnification Agreement for directors and officers of the
Registrant. (1)
10.2 Form of Representative's Warrant Agreement between the Company and
National Securities Corporation, as representative of the several
Underwriters (the "Representative"), including form of
Representative's Warrant Certificate. (1)
10.3 Form of Warrant Agreement between the Company, the Representative and
American Stock Transfer & Trust Company, including form of Warrant
Certificate. (1)
10.4 Option to Buy Technology and Rights Agreement, dated March 30, 1993,
between the Registrant and Estero Anstalt. (1)(2)
10.5 Security Agreement, dated July 27,1993, between the Registrant and
Estero Anstalt. (1)(2)
10.6 Exclusive License Agreement, dated June 14, 1995, among the
Registrant, Jan Holmgren, M.D., Ph.D., Cecil Czerkinsky, Duotol AB and
Triotol Ltd. (1)(2)
10.7 Option and License Agreement, dated May 19, 1993, among the
Registrant, Vitec AB and SBL Vaccin AB, as amended. (1)(2)
10.8 License Agreement dated January 14, 1994, among the Registrant, Vitec
AB and SBL Vaccin, AB, as amended. (1)(2)
10.9 Agreement, dated December 2, 1995, among the Registrant, Syntello
Vaccine Development AB and Estero Anstalt. (1)(2)
10.10 Agreement, dated April 23, 1996, among the Registrant, Anders Vahlne,
M.D., Ph.D. and Syntello Vaccine Development AB. (1)(2)
10.11 Letter Agreement, dated February 15, 1996, between the Registrant and
Burrill & Craves, Inc.(1)
10.12 Lease dated November 1, 1996 between DM Spectrum LLC, a California
limited liability company, as Landlord and the Registrant for 3099
Science Park Road, Suite 150, San Diego, California 92121. (3)
10.13 Stock Purchase Agreement, dated as of July 5, 1996, by and between Dr.
Anders Vahlne and the Registrant. (1)
10.14 Amended and Restated 1993 Long-Term Incentive Plan and forms of stock
option agreements. (4)
10.15 Employment Agreement dated October 1, 1998 between the Registrant and
Kurt R. Gehlsen. (10)
10.16 Employment Agreement dated October 1, 1998 between the Registrant and
Dale A. Sander. (10)
10.17 Employment Agreement dated November 9, 1998 between the Registrant and
Larry G. Stambaugh. (10)
10.18 Loan and Security Agreement between the Registrant and Silicon Valley
Bank. (5)
10.19 Financial Advisory Services Agreement between the Registrant and
Rodman & Renshaw, Inc. dated September 17, 1997.(6)
<PAGE>
10.20 Lease dated January 13, 1998 between British Pacific Properties
Corporation, a California Corporation, as Landlord, and the
Registrant. (7)
10.21 Amendment to Loan and Security Agreement dated March 16, 1998 between
the Registrant and Silicon Valley Bank. (8)
10.22 Lease dated July 2, 1998 between British Pacific Properties, a
California Corporation, as Landlord, and the Registrant. (9)
10.23 Employment Agreement dated October 1, 1998 between the Registrant and
Geoffrey B. Altman. (10)
10.24 Amendment to Loan and Security Agreement dated September 1, 1998
between the Registrant and Silicon Valley Bank. (10)
10.25 License Agreement dated November 6, 1998 among the Registrant,
Professional Pharmaceutical, Inc., Bruce A. Jack, D.D.S. and
B. Thomas White, R.PH.
10.26 Series A Convertible Preferred Stock Purchase Agreement, dated July
20, 1999, between the Registrant and certain purchasers of
Registrant's preferred stock.
10.27 Series A Convertible Preferred Stock Purchase Agreement, dated July
20, 1999 between the Registrant and Alfred Berg.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- -----------
(1) Previously filed together with Registrant's Registration Statement on Form
SB-2 (File No. 333-4854-LA) or amendments thereto and incorporated herein
by reference.
(2) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Act of 1933 and Rule 406 thereunder
respecting confidential treatment.
(3) Previously filed together with Registrant's Annual Report on Form 10-K
(File No. 1-4430) dated September 30, 1996 and incorporated herein by
reference.
(4) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated December 31, 1996 and incorporated herein by
reference.
(5) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated March 31, 1997 and incorporated herein by
reference.
(6) Previously filed together with Registrant's Registration Statement on Form
S-1 (File No. 333-35895) dated September 18, 1997 and incorporated herein
by reference.
(7) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated December 31, 1997 and incorporated herein by
reference.
(8) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated March 31, 1998 and incorporated herein by
reference.
(9) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated June 30, 1998 and incorporated herein by reference.
(10) Previously filed together with the Registrant's Annual Report on Form
10-K/A (File No. 1-4430) dated September 30, 1998 and incorporated herein
by reference.
(11) Previously filed together with Registrant's Quarterly Report on Form 10-Q
(File No. 1-4430) dated December 31, 1998 and incorporated herein by
reference.
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAXIM PHARMACEUTICALS, INC.
MAXIM PHARMACEUTICALS, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The name of the corporation is Maxim Pharmaceuticals, Inc.
2. Maxim Pharmaceuticals, Inc. was originally incorporated on September
24, 1954, under the name "Wilco Oil & Minerals, Corp."
3. This Certificate of Amendment amends certain provisions of the Amended
and Restated Certificate of Incorporation of the corporation and has been duly
adopted by the Board of Directors in accordance with the provisions of Sections
141 and 242 of the General Corporation Law of the State of Delaware and by the
stockholders of the corporation in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
4. Paragraph A of Article IV shall be amended to read in its entirety as
follows:
"A. This corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares of all
classes of stock which the corporation shall have authority
to issue is Forty Million (40,000,000) shares consisting of
(a) Thirty-Five Million (35,000,000) shares of Common Stock,
each having a par value of one tenth of one cent ($.001) and
(b) Five Million (5,000,000) shares of Preferred Stock, each
having a par value of one tenth of one cent ($0.001)."
IN WITNESS WHEREOF, Maxim Pharmaceuticals, Inc. has caused this
Certificate of Amendment to be signed by its President this 24th day of June,
1999.
MAXIM PHARMACEUTICALS, INC.
By: /s/ LARRY G. STAMBAUGH
-------------------------------------
Larry G. Stambaugh,
President and Chief Executive Officer
Attest:
By: /s/ DALE A. SANDER
------------------
Dale A. Sander,
Secretary
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
MAXIM PHARMACEUTICALS, INC.,
A DELAWARE COMPANY
-------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-------------------------
MAXIM PHARMACEUTICALS, INC., a Delaware Company (the "Company"), certifies
that pursuant to the authority contained in its Certificate of Incorporation
(the "Certificate of Incorporation") and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company adopted the following resolution, which resolution
remains in full force and effect on the date hereof:
RESOLVED, that there is hereby established a series of authorized preferred
stock having a par value of $.001 per share, which series shall be designated as
"Series A Convertible Preferred Stock," shall consist of Three Hundred Thousand
(300,000) shares and shall have the following voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof as follows:
1. DESIGNATION AND AMOUNT. The designation of the series of the
Preferred Stock shall be "Series A Convertible Preferred Stock", par value $.001
per share (the "Series A Preferred"). The number of authorized shares of
Series A Preferred shall be Three Hundred Thousand (300,000). The Series A
Preferred shall have an initial issue price of $97.25 per share (the "Original
Issue Price"). The date on which any shares of Series A Preferred are first
issued is referred to herein as the "Original Issue Date."
2. DIVIDEND RIGHTS.
a. At the election of each holder of Series A Preferred, each
holder of Series A Preferred, in preference to the holders of any other stock of
the Company ("Junior Stock"), shall be entitled to receive, whether or not
dividends are declared by the Board, either (i)
1
<PAGE>
cumulative cash dividends at a rate of twelve percent (12%) of the "Original
Issue Price" per annum on each outstanding share of Series A Preferred (as
adjusted for any stock dividend, combination, splits, recapitalization and
the like with respect to such shares), out of funds of the Company, whether
such funds are legally available therefor or not, or (ii) cumulative
dividends payable in additional shares of Series A Preferred at the rate of
twelve percent (12%) per annum of the number of shares of Series A Preferred
issued (whether issued on the Original Issue Date or subsequent to the
Original Issue Date as a dividend) and outstanding and held by such holder.
Such dividends shall accrue daily from the date of issuance based on a 360
day year and shall be paid quarterly in arrears, with the date for such
quarterly payments measured from the Original Issue Date. Should any
dividend that is paid through the issuance and delivery of additional shares
of Series A Preferred require the issuance and delivery of a fractional share
of Series A Preferred, no such fractional share shall be so issued, but
instead the Company shall pay the equivalent value of such fractional share
in cash at a rate based upon the Original Issue Price of the Series A
Preferred.
b. So long as any shares of Series A Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 2a above) on the Series A Preferred shall
have been paid or declared and set apart. In the event dividends are paid on
any share of Common Stock, an additional dividend shall be paid with respect to
all outstanding shares of Series A Preferred in an amount equal per share (on an
as-if-converted to Common Stock basis) to the amount paid or set aside for each
share of Common Stock. The provisions of this Section 2b shall not, however,
apply to a dividend payable in Common Stock..
3. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series A Preferred shall be voted equally with the shares
of the Common Stock of the Company and not as a separate class, at any annual or
special meeting of stockholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series A Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series A Preferred are convertible
(pursuant to Section 5 hereof) as of the close of business on the record date
fixed for such meeting or the effective date of such written consent.
b. SEPARATE VOTE OF SERIES A PREFERRED. In addition to any
other vote or consent required herein or by law, the vote or written consent of
the holders of at least a majority of the outstanding Series A Preferred shall
be necessary for effecting or validating the following actions:
2
<PAGE>
(i) any amendment to the Company's Certificate of
Incorporation or Bylaws that materially and adversely alters or changes
(whether by merger, consolidation or otherwise) the rights, preferences or
privileges of the Series A Preferred in a manner different than other classes of
stock or increases or decreases the authorized number of shares of Series A
Preferred;
(ii) any merger or consolidation of the Company with one
or more other companies in which the stockholders of the Company immediately
before such merger or consolidation hold stock representing less than a majority
of the outstanding stock of the surviving company or any sale of all or
substantially all of the assets of the Company;
(iii) any sale of Common Stock or other security
convertible into Common Stock of the Company for cash at a price per share (or,
in the case of a convertible security at a conversion price per share) less than
the Conversion Price, which sale would result in the issuance of shares of
Common Stock equal to 10% or more of the number of shares of Common Stock
outstanding at the time of such sale (including, for the purposes of such
calculation, the shares of Common Stock issuable upon conversion of the Series A
Preferred);
(iv) any redemption by the Company of any equity
securities of the Company;
(v) any payment of a dividend other than dividends
payable on the Series A Preferred;
(vi) any grant by the Company of an exclusive license
under its core technology (other than licensing arrangements related to
marketing or selling the Company's products); or
(vii) any issuance of securities senior in rights,
preferences or privileges to the Series A Preferred.
c. ELECTION OF DIRECTORS. If at any time the Company shall not
make a regularly scheduled dividend payment and such dividend shall remain
accrued and unpaid at the time of an election of the Company's directors, the
holders of the Series A Preferred, voting as a separate class, shall be entitled
to elect one (1) director to the Company's Board of Directors, and to remove
from office such director and to fill any vacancy caused by the resignation,
death or removal of such director.
4. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series A
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series A Preferred equal to the greater of (i) the Original
Issue Price plus all accrued and unpaid dividends on the Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series A Preferred held
by them, or (ii) such amount per share as
3
<PAGE>
would have been payable had each such share been converted to Common Stock
pursuant to Section 5 immediately prior to such liquidation, dissolution or
winding-up (the "Liquidation Preference").
b. After the payment of the full Liquidation Preference of the
Series A Preferred as set forth in Section 4a above, the remaining assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or
into any other company or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred (an "Acquisition"); or
(ii) a sale, lease, transfer or other disposition of all
or substantially all of the assets of the Company or the grant of an exclusive
license of all or substantially all of the Company's rights to its core
technology (other than licensing arrangements related to marketing or selling
the Company's products) (an "Asset Transfer").
d. If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to all
holders of Series A Preferred of the Liquidation Preference set forth in Section
4a, then such assets shall be distributed among the holders of Series A
Preferred at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
e. In any of such events, if the consideration received by the
Company is other than cash, the amount of the consideration shall be deemed to
be the fair market value of such consideration as determined in good faith by
the Board of Directors; provided, however, that any securities shall be valued
as follows:
(i) Securities not subject to restrictions on free
marketability covered by (ii) below:
(A) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the thirty (30)
day period ending three (3) days prior to the closing; and
4
<PAGE>
(C) If there is no active public market, the value
shall be the fair market value thereof, as determined by the Board of Directors.
(ii) The method of valuation of securities subject to
restrictions on free marketability (other than restrictions arising solely by
virtue of a stockholder's status as an affiliate or former affiliate) shall be
to make an appropriate discount from the market value determined as set forth in
(i) (A), (B) or (C) to reflect the approximate fair market value thereof, as
determined by the Board of Directors.
5. CONVERSION RIGHTS.
The holders of the Series A Preferred shall have the following
rights with respect to the conversion of the Series A Preferred into shares of
Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Series A Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Preferred Conversion Rate" then in effect
(determined as provided in Section 5b) by the number of shares of Series A
Preferred being converted.
b. SERIES A PREFERRED CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series A Preferred (the "Series A
Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series A Preferred by the "Series A Preferred
Conversion Price," calculated as provided in Section 5c.
c. SERIES A PREFERRED CONVERSION PRICE. The conversion price
for the Series A Preferred shall initially be $9.725 (the "Series A Preferred
Conversion Price"). Such initial Series A Preferred Conversion Price shall be
adjusted from time to time in accordance with this Section 5. All references to
the Series A Preferred Conversion Price herein shall mean the Series A Preferred
Conversion Price as so adjusted.
d. MECHANICS OF CONVERSION. Each holder of Series A Preferred
who desires to convert the same into shares of Common Stock pursuant to this
Section 5 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series A
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series A Preferred being converted. Thereupon, the Company shall promptly,
but no later than three business days after surrender of the Series A Preferred
stock certificates being converted, issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common Stock to
which such holder is entitled and shall promptly pay in cash, or in the event a
holder elects to receive Series A Preferred Stock dividends in lieu of cash
dividends, in Series A Preferred, any accrued and unpaid dividends on the shares
of Series A Preferred being converted. In the event dividends are paid in
Series A Preferred, such Series A
5
<PAGE>
Preferred shall also be converted into Common Stock pursuant to the terms of
this Section 5. Such conversion shall be deemed to have been made at the
close of business on the date of such surrender of the certificates
representing the shares of Series A Preferred to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of
Common Stock on such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series A Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the Series A
Preferred, the Series A Preferred Conversion Price in effect immediately before
that subdivision shall be proportionately decreased. Conversely, if the Company
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Series A Preferred, the Series A Preferred
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5e shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Preferred Conversion
Price that is then in effect shall be decreased as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Series A Preferred Conversion Price then in
effect by a fraction (i) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (ii) the denominator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; PROVIDED, HOWEVER, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Series A Preferred Conversion Price shall
be recomputed accordingly as of the close of business on such record date and
thereafter the Series A Preferred Conversion Price shall be adjusted pursuant to
this Section 5f to reflect the actual payment of such dividend or distribution.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Series A Preferred is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 4c or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 5), in any such event each holder
of Series A Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
6
<PAGE>
maximum number of shares of Common Stock into which such shares of Series A
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 4c or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 5), as a part of such capital reorganization,
provision shall be made so that the holders of the Series A Preferred shall
thereafter be entitled to receive upon conversion of the Series A Preferred the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
A Preferred after the capital reorganization to the end that the provisions of
this Section 5 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series A
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series A
Preferred, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series A
Preferred at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the Series A Preferred Conversion Price at the time in effect,
and (ii) the type and amount, if any, of other property which at the time would
be received upon conversion of the Series A Preferred.
j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 4c) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other Company, or any Asset Transfer (as defined in Section
4c), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series A Preferred at
least ten (10) days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to
7
<PAGE>
become effective, and (C) the date, if any, that is to be fixed as to when
the holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for securities
or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer,
dissolution, liquidation or winding up.
k. AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred shall automatically
be converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the outstanding shares of the Series A
Preferred, or (B) at any time after on or after the date that is ninety (90)
days after the Original Issue Date upon at least five (5) business days advance
written notice from the Company to the holders of the Series A Preferred;
PROVIDED, HOWEVER, that the Company shall not be entitled to force the
conversion of the Series A Preferred under this Section 5(k)(i)(B): (i) until
such time as a registration statement covering all of the shares of Common Stock
issuable upon conversion of the Series A Preferred is effective with the
Securities and Exchange Commission, and (ii) all of the shares of Common Stock
issuable upon conversion of all outstanding shares of Series A Preferred are
then (x) authorized and reserved for issuance, and (y) eligible to be traded on
the American Stock Exchange, the NASDAQ National Market, the New York Stock
Exchange or the NASDAQ SmallCap Market. Upon such automatic conversion, any
accrued and unpaid dividends shall be paid in accordance with the provisions of
Section 5d and Section 2; PROVIDED, HOWEVER, that in the event the Series A
Preferred is converted pursuant to subsection k(i)(B) above on a date that is
prior to the one year anniversary of the Original Issue Date, then the Company
shall pay to the holders of the Series A Preferred dividends equal to the
dividends that would have accrued and been payable on such Series A Preferred
had such shares remained outstanding until the one year anniversary of the
Original Issue Date in accordance with the provisions of Section 5(d) and
Section 2.
(ii) Upon the occurrence of the event specified in
subsection (k)(i) above, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; PROVIDED, HOWEVER, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series A Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A Preferred, the holders of Series A Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series A Preferred. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series A Preferred surrendered were convertible on the date on which such
automatic conversion
8
<PAGE>
occurred, and any accrued and unpaid dividends shall be paid in accordance
with the provisions of Section 5d.
l. FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series A Preferred by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Company shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
n. NOTICES. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
o. PAYMENT OF TAXES. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series A Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
so converted were registered.
6. NO REISSUANCE OF SERIES A PREFERRED.
No share or shares of Series A Preferred acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued.
9
<PAGE>
IN WITNESS WHEREOF, Maxim Pharmaceuticals, Inc. has caused these presents
to be signed by its Chief Executive Officer on July ____, 1999.
MAXIM PHARMACEUTICALS, INC.
By: /s/ Larry G. Stambaugh
\ -----------------------------
Name: Larry G. Stambaugh
Title: Chief Executive Officer
10
<PAGE>
EXHIBIT 5.1
CONSENT OF COOLEY GODWARD LLP
[COOLEY GODWARD LLP LETTERHEAD]
August 5, 1999
Maxim Pharmaceuticals, Inc.
8899 University Center Lance, Suite 400
San Diego, CA 92122
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Maxim Pharmaceuticals, Inc. (the "Company") of a Registration
Statement on Form S-3 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") covering the offering of 2,327,820 shares
of the Company's Common Stock to be sold by certain stockholders (the "Selling
Stockholders"), as described in the Registration Statement (the "Shares").
In connection with this opinion, we have examined and relied upon the
Registration Statement, the Company's Certificate of Incorporation, as amended,
and the Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof of Series A Convertible Preferred Stock,
filed with the Delaware Secretary of State on July 23, 1999 (the "Certificate of
Designations"), and Bylaws and the originals or copies certified to our
satisfaction, of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when issued upon conversion of the Series A Convertible
Preferred Stock, will be validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
/s/ Lance W. Bridges
Lance W. Bridges, Esq.
<PAGE>
EXHIBIT 10.26
MAXIM PHARMACEUTICALS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is entered into as of July 20, 1999, by and among Maxim
Pharmaceuticals, Inc., a Delaware corporation (the "Company") and each of those
persons and entities, severally and not jointly, whose names are set forth on
the Schedule of Purchasers attached hereto as Exhibit A (which persons and
entities are hereinafter collectively referred to as "Purchasers" and each
individually as a "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an aggregate
of Three Hundred Thousand (300,000) shares of its Series A Convertible Preferred
Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchasers on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (i) the sale and issuance
to Purchasers of the Shares and (ii) the issuance of shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
shall have the rights, preferences, privileges and restrictions set forth in the
Certificate of Designations in the form attached hereto as Exhibit B (the
"Certificate of Designations").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue and
sell to each Purchaser, severally and not jointly, and each Purchaser agrees to
purchase from the Company, severally and not jointly, the number of Shares set
forth opposite such Purchaser's name on Exhibit A, at a purchase price of $97.25
per share, such price per share determined based on the average of the closing
bid price for the five days preceding the Closing Date as reported on the
American Stock Exchange multiplied by the number of shares of Common Stock into
which each Share is initially convertible as set forth in the Certificate of
Designations.
1
<PAGE>
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 10:00 a.m. on the date
each of the conditions to closing set forth in Section 5 hereof have occurred,
at the offices of Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San
Diego, CA 92121 or at such other time or place as the Company and Purchasers may
mutually agree (such date is hereinafter referred to as the "Closing Date").
Payment for the Shares and delivery of the stock certificates representing the
Shares shall take place no later than five (5) business days after the Closing
Date (the "Settlement Date") and in accordance with Section 2.2 below.
2.2 DELIVERY AND SETTLEMENT. On the Settlement Date, subject to the
terms and conditions hereof, the Company will deliver to the Purchasers
certificates representing the number of Shares to be purchased at the Closing by
each Purchaser, against payment of the purchase price therefor by check, wire
transfer made payable to the order of the Company, cancellation of indebtedness
or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as of the date
of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and to issue and sell the Shares and the Conversion Shares and to
carry out the provisions of this Agreement and the Certificate of Designations
and to carry on its business as presently conducted and as presently proposed to
be conducted. The Company is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in all jurisdictions in which
the nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the assets, liabilities,
financial condition, regulatory condition, capital, properties, results of
operations or prospects of the Company or its business (a "Material Adverse
Effect").
3.2 SUBSIDIARIES. The Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 35,000,000 shares
of Common Stock, (par value $ .001) per share, 10,203,600 shares of which are
issued and outstanding as of the date of this Agreement, 5,000,000 shares of
Preferred Stock, (par value $ .001) per share, 300,000 of which are designated
Series A Preferred Stock, none of which are issued and outstanding as of the
date of this Agreement. All issued and outstanding shares of the Company's
Common Stock (a) have been duly authorized and validly issued and (b) are fully
paid and nonassessable. The
2
<PAGE>
rights, preferences, privileges and restrictions of the Shares are as stated
in the Certificate of Designations; all such rights, preferences, privileges
and restrictions are valid, binding and enforceable against the Company and
in accordance with applicable laws. The Conversion Shares have been duly and
validly reserved for issuance. Other than the 977,310 shares reserved for
issuance under the Company's 1993 Long Term Incentive Plan and outstanding
warrants to purchase an aggregate of 2,961,104 shares of Common Stock and
44,006 shares reserved for issuance under the Company's 401(k) plan, there
are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or shareholder
agreements, or agreements of any kind authorized or outstanding for the
purchase or acquisition from the Company of any of its securities or any
interest therein. Except as set forth herein, there is no commitment by the
Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
equity securities any evidence of indebtedness or asset. The Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend
(other than dividends payable on the Shares) or to make any other
distribution in respect thereof. When issued in compliance with the
provisions of this Agreement and the Certificate of Designations, the Shares
and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer is
proposed.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the
Certificate of Designations has been taken or will be taken prior to the
Closing. The Agreement when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights;
(b) general principles of equity that restrict the availability of equitable
remedies; and (c) to the extent that the enforceability of the indemnification
provisions in Section 6.2 may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
3.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to each Purchaser a complete
and accurate copy (excluding copies of exhibits) of the Company's (i) Annual
Report of Form 10-K for the year ended September 30, 1998, (ii) Quarterly
Reports on Form 10-Q for the quarters ended December 31, 1998 and March 31,
1999, (iii) Proxy Statement on Schedule 14A dated January 13, 1999, and (iv)
Proxy Statement on Schedule 14A dated June 1, 1999, each filed by the Company
with the Securities and Exchange Commission ("SEC") (collectively, the "Company
SEC Documents"). The Company SEC Documents (i) complied with the
3
<PAGE>
requirements of the Securities Act or the Exchange Act, as the case may be,
at and as of the times they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
(ii) were filed in a timely manner, and (iii) did not at and as of the time
they were filed (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Each of the sets of financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Documents
(collectively, the "Past Financial Statements") including the Company's
unaudited consolidated balance sheet as of March 31, 1999 (the "March Balance
Sheet") (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes
thereto and, in the case of unaudited interim financial statements, as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments which are not
expected to be material in amount) and (iii) fairly presents the financial
position of the Company as at the respective dates thereof and the results of
operations of the Company and cash flows for the periods indicated.
3.6 LIABILITIES. The Company has no material liabilities and, to
the best of its knowledge, knows of no material contingent liabilities not
disclosed in the Past Financial Statements, except current liabilities incurred
in the ordinary course of business subsequent to the March Balance Sheet which
have not been, either in any individual case or in the aggregate, materially
adverse.
3.7 CHANGES. Since the March Balance Sheet, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Past Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a Material
Adverse Effect;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, which has a Material Adverse Effect;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
4
<PAGE>
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any officer, director or shareholder of the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity involving the Company's
employees;
(j) Any debt, obligation or liability (absolute, accrued or
contingent) incurred, assumed or guaranteed by the Company, except those for
immaterial amounts and for current liabilities incurred in the ordinary course
of business;
(k) Any sale, assignment, pledge or transfer of tangible assets
or any patents, trademarks, copyrights, trade secrets or other intangible
assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which has a Material Adverse Effect; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has a Material Adverse Effect.
3.8 PATENTS AND TRADEMARKS.
(a) To the best of its knowledge, the Company owns or possesses
sufficient rights under all material patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names and know-how
(collectively, "Intellectual Property") described or referred to in the Company
SEC Documents as owned or used by it or that are necessary for the conduct of
its business as now conducted, (ii) the Company has not received any notice of,
or has no knowledge of, any infringement of or conflict with asserted rights of
the Company by others with respect to any Intellectual Property, and (iii) the
Company has not received any notice of, or has no knowledge of, any infringement
of or conflict with asserted rights of a third party with respect to any
Intellectual Property.
(b) In addition to the foregoing, the Company is unaware of any
facts which would preclude the Company from having clear title to the patents
and patent applications referred to or described in the Company SEC Documents
(the "Maxamine Patents"). The Company has complied with the Patent and
Trademark Office ("PTO") duty of candor and good faith in dealing with the PTO,
including the duty to disclose to the PTO all information known to be material
to the patentability of each of such United States patents and patent
applications. To the best of its knowledge, all assignments from each named
inventor to the Company have been executed and recorded with the PTO for each
Maxamine Patent. To the best of its knowledge,
5
<PAGE>
the Company has maintained all rights with respect to the Maxamine Patents.
The Company has no reason to believe that any of the claims of the Maxamine
Patents is unpatentable, unenforceable or invalid. The Company is not aware
of any pending U.S. or foreign patent applications which, if issued, would
limit, prohibit or materially affect the business now conducted or proposed
to be conducted by the Company as described in the Company SEC Document. The
Company is not aware of any facts which would form the basis for a belief
that the products or processes of any third party infringe the claims of any
Maxamine Patent.
(c) The Company is unaware of any legal or governmental
proceedings pending relating to the Maxamine Patents, other than PTO review of
pending applications for patents, including appeal proceedings, and, to the best
of its knowledge, no such proceedings are threatened or contemplated by
governmental authorities or others.
(d) The Company is unaware of any contracts or other documents
material to the Company's Maxamine Patents or Intellectual Property other than
those described in the Company SEC Documents.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of (i) any term of its Certificate of Incorporation or
Bylaws, each as amended to date, (ii) any provision of any mortgage, indenture,
contract, agreement, instrument or contract to which it is party or by which it
is bound or of any judgment, decree, order, writ, except such violations or
defaults which, alone or in the aggregate, do not have a Material Adverse
Effect, or (iii) to its knowledge, any statute, rule or regulation applicable to
the Company, except such violations or defaults which, alone or in the
aggregate, would not have a Material Adverse Effect. The execution, delivery,
and performance of and compliance with this Agreement and the issuance and sale
of the Shares pursuant hereto and of the Conversion Shares pursuant to the
Certificate of Designations, will not, with or without the passage of time or
giving of notice, result in any such violation, or be in conflict with or
constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.10 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened against
the Company that questions the validity of this Agreement or the right of the
Company to enter into this Agreement, or to consummate the transactions
contemplated hereby, or which might result, either individually or in the
aggregate, in a Material Adverse Effect, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis for
the foregoing. There is no action or suit by the Company pending, threatened or
contemplated against others.
3.11 REGISTRATION RIGHTS. Except for National Securities Corporation
and HealthCap KB and as set forth in Section 6 of this Agreement, the Company is
presently not under any obligation, and has not granted any rights, to register
any of the Company's presently outstanding securities or any of its securities
that may hereafter be issued.
6
<PAGE>
3.12 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties, except such violations which, alone or in the aggregate, do not have
a Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Shares or the Conversion
Shares, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could have a Material Adverse Effect and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted.
3.13 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
3.14 OTHER AGREEMENTS. Except as set forth under the Company SEC
Documents, the Company is not a party to or otherwise bound by any written or
oral agreement, instrument, commitment or restriction which individually could
reasonably be expected to have a Material Adverse Effect or any other written or
oral:
(a) agreement with any labor union representing employees of the
Company;
(b) agreement for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(c) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(d) guaranty of any obligations for borrowed money or otherwise;
(e) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a registration statement on Form S-1 if the Company were registering
securities under the Securities Act.
The Company, and to the best of its knowledge, each other party thereto have in
all material respects performed all the obligations required to be performed by
them to date (or each non-performing party has received a valid, enforceable and
irrevocable written waiver with respect to its non-performance), have received
no notice of default and are not in default (with due notice or elapse of time
or both) under any agreement, instrument, commitment or plan or arrangement to
7
<PAGE>
which the Company is a party or by which it or its property may be bound
except such defaults which, alone or in the aggregate, are not reasonably
expected to have a Material Adverse Effect. The Company has no present
expectation or intention of not performing all its material obligations under
each such agreement, instrument, commitment, plan or arrangement, and the
Company has no knowledge of any breach or anticipated breach by the other
party to any agreement, instrument, commitment, plan or arrangement to which
the Company is a party except for such breaches which, alone or in the
aggregate, are not reasonably expected to have a Material Adverse Effect.
The Company is in compliance with all of the material terms of its Charter
and By-Laws, as amended.
3.15 DISCLOSURE. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor any documents furnished or made available to the
Purchasers relating to this Agreement, contains any material misstatement of
fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains any material misstatement of fact or omits to state
a material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. There is no fact
which the Company has not disclosed to the Purchasers and their counsel and of
which the Company is aware which, alone or in the aggregate is reasonably
expected to have a Material Adverse Effect. The financial projections and other
estimates contained in any documents furnished to the Purchasers relating to
this Agreement were prepared by the Company based on the Company's experience in
the industry and on assumptions of fact and opinions as to future events which
the Company believed to be reasonable, but which the Company cannot and does not
assure or guarantee the attainment of in any manner. As of the date hereof, no
facts have come to the attention of the Company which would, in its opinion,
require the Company to materially revise or amplify the assumptions underlying
such projections and other estimates or the conclusions derived therefrom.
3.16 OFFERING OF SHARES. Neither the Company nor any person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Shares or any security of the
Company similar to the Shares has offered the Shares or any such similar
security for sale to, or solicited any offer to buy the Shares or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including, without
limitation, any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of such security with the
Shares under the Securities Act or the rules and regulations of the SEC
thereunder), in either case so as to subject the offering, issuance or sale of
the Shares to the registration provisions of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows:
8
<PAGE>
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver and to perform its obligations under this Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement will be valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights and
(b) general principles of equity that restrict the availability of equitable
remedies.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an applicable exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in the
Agreement. Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that, except as set forth in this Agreement,
the Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its Common Stock. Purchaser also understands that there
is no assurance that any exemption from registration under the Securities Act
will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has received and read the
Company SEC Reports and the Past Financial Statements and has had an opportunity
to discuss the Company's business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity to
review the Company's operations
9
<PAGE>
and facilities. Purchaser has also had the opportunity to ask questions of
and receive answers from the Company and its management regarding the terms
and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state, province or country identified in the address of
the Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 ADDITIONAL REGULATION S REPRESENTATIONS. Each Purchaser who is
not a resident of the United States also represents as follows:
(a) Purchaser certifies that he, she or it is neither a citizen
nor a resident of the United States and that his, her or its address set forth
on Schedule A of this Agreement is correct.
(b) No public offer or solicitation of the Shares was made to
such Purchaser and no offer of the Shares was made to such Purchaser while such
purchaser was present in the United States.
(c) At the time any buy order for the Shares was originated,
such Purchaser was located outside the United States and is outside the United
States on the date of the execution and delivery of this Agreement and will be
outside the United States on the Closing Date.
(d) Purchaser is aware that the Shares and the Conversion Shares
have not been registered under the Securities Act and may only be offered or
sold pursuant to registration under the Securities Act or an available exemption
therefrom, and such Purchaser has not, and will not, engage in any public
offering or distribution of the Shares or Conversion Shares or engage in any
hedging transaction with respect thereto, except in accordance with the
registration or exemption provisions of the Securities Act.
(e) Except to the extent the Shares or Conversion Shares have
been registered under the Securities Act, such Purchaser (i) will not, during
the period commencing on the Closing Date and ending one year after the Closing
Date (the "Distribution Compliance Period"), offer or sell or agree to sell the
Shares or Conversion Shares in the United States, to a
10
<PAGE>
U.S. Person (as defined in Regulation S promulgated under the Securities Act
("Regulation S")) or for the account or benefit of a U.S. Person other than
in accordance with Regulation S, and (ii) will, after the expiration of the
Distribution Compliance Period, offer, sell, pledge or otherwise transfer the
Shares or Conversion Shares only pursuant to registration under the
Securities Act or an available exemption therefrom and, in any case, in
accordance with applicable United States federal and state securities laws.
(f) Purchaser has been advised of, and is familiar with, has
complied, and will comply, with the offering restrictions, and any other
requirements of Regulation S.
(g) The transactions contemplated by this Agreement (i) have not
been pre-arranged by Purchaser with the view to sell or transfer the Shares or
Conversion Shares to another purchaser located in the United Stated who is a
U.S. Person, and (ii) are not part of a plan or scheme by Purchaser to evade the
registration provisions of the Securities Act.
(h) Neither Purchaser nor any of his, her or its affiliates has
entered, has the intention of entering, or will during the Distribution
Compliance Period enter into, with any U.S. Person, any put option, short
position or other similar instrument or position with respect to the Shares or
Conversion Shares or participate in any other attempt designed to lower the
trading prices of the Shares or Conversion Shares.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Each
Purchaser's obligation to purchase the Shares at the Closing are subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct (except to the extent that the aggregate of
all inaccuracies and breaches thereof would not have a Material Adverse Effect)
as of the Closing Date (except to the extent such representations specifically
relate to an earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date, and in any event subject to
the foregoing materiality qualification) with the same force and effect as if
they had been made as of the Closing Date, and the Company shall have performed
all obligations and conditions herein required to be performed or observed by it
on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. As of the Closing Date, the
Company shall have obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by the
Agreement (except for such as may be properly obtained subsequent to the
Closing).
11
<PAGE>
(d) FILING OF CERTIFICATE OF DESIGNATIONS. On the Settlement
Date, the Certificate of Designations shall have been filed with the Secretary
of State of the State of Delaware.
(e) RESERVATION OF CONVERSION SHARES. As of the Closing Date,
the Conversion Shares issuable upon conversion of the Shares shall have been
duly authorized and reserved for issuance upon such conversion.
(f) WRITTEN ASSURANCE FROM AMEX. As of the Closing Date, the
Company shall have received written assurance from the American Stock Exchange
to the effect that the issuance of the Shares contemplated hereby will not
result in a violation of the listing requirements of the American Stock
Exchange.
(g) LEGAL OPINION. On the Settlement Date, the Purchasers shall
have received from legal counsel to the Company an opinion addressed to them,
dated as of the Settlement Date, in substantially the form attached hereto as
Exhibit C.
(h) COMPLIANCE CERTIFICATE. The Company shall have delivered a
certificate, executed by the President of the Company, dated the Settlement
Date, stating that the conditions set forth in paragraphs (a), (c), (d), (e) and
(f) have been complied with and that between the date of execution of this
Agreement and the Settlement Date, there has been no material adverse change
affecting the Company or its business which, alone or in the aggregate, shall
have a Material Adverse Effect.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by those Purchasers acquiring Shares in Section 4 hereof
shall be true and correct (except to the extent that the aggregate of all
inaccuracies and breaches thereof would not have a Material Adverse Effect) at
the Closing Date (except to the extent such representations specifically relate
to an earlier date, in which case such representations and warranties shall be
true and correct as of such earlier date, and in any event subject to the
foregoing materiality qualification), with the same force and effect as if they
had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) FILING OF CERTIFICATE OF DESIGNATIONS. On the Settlement
Date, the Certificate of Designations shall have been filed with the Secretary
of State of the State of Delaware.
(d) CONSENTS, PERMITS, AND WAIVERS. As of the Closing Date, the
Company shall have obtained any and all consents, permits and waivers necessary
or appropriate
12
<PAGE>
for consummation of the transactions contemplated by the Agreement (except
for such as may be properly obtained subsequent to the Closing).
(e) WRITTEN ASSURANCE FROM AMEX. As of the Closing Date, the
Company shall have received written assurance from the American Stock Exchange
to the effect that the issuance of the Shares contemplated hereby will not
result in a violation of the listing requirements of the American Stock
Exchange.
6. REGISTRATION.
6.1 REGISTRATION REQUIREMENTS.
(a) The Company shall prepare and file, not later than thirty
(30) days after the Closing Date, a registration statement on Form S-3 or
another available form (the "Registration Statement") with the SEC under the
Securities Act to register the resale of the Conversion Shares by the Purchasers
and thereafter shall use its best efforts to secure effectiveness of the
Registration Statement within ninety (90) days after the Closing Date. In the
event the Company fails to secure effectiveness of the Registration Statement
within ninety (90) days after the Closing Date, the dividend rate on the Series
A Preferred shall be increased to 15% per annum for the period the Registration
Statement remains ineffective, and at such time as the Registration Statement
becomes effective, the dividend rate on the Series A Preferred shall revert to
12% per annum. In order to have shares included in the Registration Statement,
each Purchaser must complete and deliver to the Company not later than ten (10)
days after the Closing, a Registration Statement Questionnaire in the form
attached hereto as Exhibit D.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all of its respective Selling Expenses
(as defined below) and other expenses that are not Registration Expenses
relating to the Shares resold by such Purchaser. "Registration Expenses" shall
mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions herein described, including, without
limitation, all registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, blue sky fees
and expenses and the expense of any special audits incidents to or required by
any such registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Conversion Shares
and all fees and disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its reasonable
best efforts to: (i) keep such registration effective until the earlier of (A)
such date as all of the Conversion Shares have been resold or (B) the date on
which each Purchaser is entitled to sell all of its Conversion Shares pursuant
to Rule 144(k) promulgated under the Securities Act; (ii) prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Conversion Shares covered by the Registration Statement;
(iii) cause the Conversion Shares to be listed on each securities exchange
13
<PAGE>
and quoted on each quotation service on which similar securities issued by
the Company are then listed or quoted; (iv) provide a transfer agent and
registrar for all Conversion Shares registered pursuant to the Registration
Statement and a CUSIP number for all such Conversion Shares; (v) comply with
all applicable rules and regulations of the SEC governing such registration;
and (vi) file the documents required of the Company by, and otherwise use its
reasonable best efforts to maintain requisite blue sky clearance in, (X) all
jurisdictions in which any of the Shares are originally sold and (Y) all
other states specified in writing by a Purchaser; provided, however, that as
to clause (Y), the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is now so qualified or
has not so consented.
(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of the prospectus
used in connection with the Registration Statement as may be necessary in order
to facilitate the public sale or other disposition of all or any of the
Conversion Shares held by the Purchaser.
(e) With a view to making available to the Purchasers the
benefit of Rule 144 and Form S-3 and any other rule or regulation of the SEC
that may at any time permit a Purchaser to sell shares to the public without
registration, the Company covenants and agrees to use its reasonable best
efforts to: (i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) the date on which
each Purchaser is entitled to sell all of its Conversion Shares pursuant to Rule
144(k) promulgated under the Securities Act or (B) such date as all of the
Conversion Shares shall have been resold; (ii) file with the SEC in a timely
manner all reports and other documents required of the Company under the
Exchange Act; and furnish to any Purchaser upon request, as long as the
Purchaser owns any Shares or Conversion Shares, (A) a written statement by the
Company that it has complied with the reporting requirement of the Exchange Act,
(B) a copy of the most recent annual or quarterly report of the Company, and (C)
such other information as may be reasonably requested in order to avail any
Purchaser of any rule or regulation of the SEC that permits the selling of any
such Shares or Conversion Shares without registration or pursuant to such
registration statement on Form S-3.
(f) The Company may suspend the use of the Registration
Statement and refuse to permit the Purchasers to resell any Conversion Shares
pursuant to the Registration Statement for a period not to exceed 20 days in any
twelve month period; PROVIDED, HOWEVER, that in order to exercise this right,
the Company must notify the Purchasers to the effect that such action is
necessary because there then exists material, non-public information relating to
the Company, which, in the reasonable opinion of the board of directors of the
Company would not be appropriate for disclosure during that time. In such an
event, the Company shall use its best efforts to amend the Registration
Statement as necessary and to take all other actions necessary to allow such
sales and shall notify the Purchasers promptly after it has determined that such
sales have become permissible.
6.2 INDEMNIFICATION.
14
<PAGE>
(a) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, on the effective date
thereof, the omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, any violation by the
Company of any rule or regulation promulgated under the Securities Act, the
Exchange Act or state securities laws applicable to the Company in connection
with such registration, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement, and the Company will, as
incurred, reimburse such Purchaser for any reasonable legal or other expenses
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement, (ii) the failure of such Purchaser to
comply with the covenants and agreements contained in Section 6.3 hereof, or
(iii) any untrue statement in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon an untrue statement made in
such Registration Statement in reliance upon and in conformity with written
information furnished by such Purchaser on Exhibit D hereto for use in
preparation of the Registration Statement; PROVIDED, HOWEVER, that no Purchaser
shall be liable in any such case for any untrue statement included in any
Prospectus which statement has been corrected, in writing, by such Purchaser and
delivered to the Company before the sale from which such loss occurred, and each
Purchaser, severally and not jointly, will, as incurred, reimburse the Company
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; PROVIDED, FURTHER,
HOWEVER, that in no event shall any indemnity under this Section 6.2(b) exceed
the net proceeds from the offering received by the applicable Purchaser or
Purchasers from the sale of the Conversion Shares.
(c) Promptly after receipt by any indemnified person of a notice
of a claim to the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 6.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and subject to the provisions hereinafter
stated, in case any such action shall be brought against an indemnified person
and the indemnifying person shall have been notified thereof, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall wish, to
15
<PAGE>
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the
defense thereof, the indemnifying person shall not be liable to such
indemnified person for any legal expense subsequently incurred by such
indemnified person in connection with the defense thereof; PROVIDED, HOWEVER,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the
same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying
person. No indemnifying person shall, without the prior written consent of
the indemnified person (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and
indemnification could have been sought hereunder by such indemnified party.
(d) The obligations of the Company and the Purchasers under this
Section 6.2 shall be in addition to any liability which the Company and each
respective Purchaser may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Securities Act.
(e) In order to provide for just and equitable contribution to
joint liability in any case in which a claim for indemnification is made
pursuant to this Section 6 but it is judicially determined (by entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding that this
Section 6 provides for indemnification in such case, the Company and each
Purchaser shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
proportion to the relative fault of the Company on the one hand, and the
Purchasers, severally, on the other hand; provided, however, that in any such
case, no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was no guilty of such fraudulent misrepresentation
and; provided, further, that in no event shall any contribution under this
Section 6.2(e) on the part of any seller exceed the net proceeds received by
such seller from the sale of Conversion Shares.
6.3 TRANSFER OF CONVERSION SHARES AFTER REGISTRATION. Each
Purchaser hereby covenants with the Company not to make any sale of the
Conversion Shares except either (a) in accordance with the Registration
Statement, in which case the Purchaser covenants to comply with the requirements
of delivering a current prospectus, (b) in accordance with Rule 144, in which
case Purchaser covenants to comply with Rule 144, or (c) subject to such
conditions as the Company shall reasonably impose, in accordance with another
exemption from the registration requirements of the Securities Act. Each
Purchaser also covenants that it will not make any sale of the Conversion Shares
pursuant to the Registration Statement during any period in which the Company
has suspended use of the Registration Statement pursuant to Section 6.1(f) of
this Agreement. Each Purchaser further acknowledges and agrees that such
Conversion
16
<PAGE>
Shares are not transferable on the books of the Company unless the
certificate submitted to the Company's transfer agent evidencing such
Conversion Shares is accompanied by such additional certification,
documentation or information as the Company shall reasonably require in order
to effect such sale in accordance with the Registration Statement, Rule 144
or such other exemption from the registration requirements of the Securities
Act.
6.4 ADDITIONAL PURCHASER COVENANTS. Each Purchaser covenants that
it will promptly notify the Company of any changes in the information set forth
in the Registration Statement regarding such Purchaser or such Purchaser's "Plan
of Distribution," including, without limitation, the information contained in
the Registration Statement Questionnaire attached hereto as Exhibit D relating
to such Purchaser. Each Purchaser shall provide the Company in writing with
such change or additional information necessary so that the information set
forth in the Registration Statement regarding such Purchaser will be true and
correct as of the effective date of the Registration Statement and until the
Company is no longer required to keep the Registration Statement effective
pursuant to Section 6.1(c) of this Agreement.
6.5 TERMINATION. All registration rights granted under this Section
6 shall expire and be of no further force and effect if all Shares or Conversion
Shares held by or issuable to each Purchaser (and its affiliates, partners,
former partners, members and former members) may be sold under Rule 144(k)
promulgated under the Securities Act.
7. CO-SALE RIGHTS
7.1 The following definitions shall apply to this Section 7:
(a) "Co-Sale Shares" shall mean shares of the Company's Common
Stock now owned or subsequently acquired by the Key Holders.
(b) "Key Holders" shall mean Larry G. Stambaugh, Dale Sander and
Kurt Gehlson.
(c) "Purchaser Common Stock" shall mean the shares of Common
Stock into which the Shares are convertible (excluding shares of Common Stock
which have already been issued upon conversion of the Shares or shares of Common
Stock acquired by a Purchaser other than under this Agreement).
7.2 If one or more Key Holders proposes to sell or transfer any
Co-Sale Shares in one or more related transactions which will result in the
transferee of such shares holding more than 50% of the voting stock of the
Company, then such Key Holder(s) shall promptly give written notice (the
"Notice") to the Company and to each of the Purchasers at least 20 days prior
to the closing of such sale or transfer. The Notice shall describe in
reasonable detail the proposed sale or transfer including, without
limitation, the number of Co-Sale Shares to be sold or transferred, the
nature of such sale or transfer, the consideration to be paid, and the name
and address of each prospective purchaser or transferee. In the event that
the sale or transfer is being made pursuant to the provisions of Section 7.9
hereof, the Notice shall state under which subsection the sale or transfer is
being made.
17
<PAGE>
7.3 Each Purchaser shall have the right, exercisable upon written
notice to such Key Holder(s) within 15 days after receipt of the Notice, to
participate in such sale on a pro rata basis on the same terms and conditions
specified in the Notice. To the extent that one or more of the Purchasers
exercise such co-sale right in accordance with the terms and conditions set
forth below, the number of Co-Sale Shares that the Key Holder(s) may sell in the
transaction shall be correspondingly reduced.
7.4 Each Purchaser may sell all or any part of that number of
shares of Purchaser Common Stock equal to the product obtained by multiplying
(i) the aggregate number of Co-Sale Shares covered by the Notice by (ii) a
fraction, the numerator of which is the number of shares of Purchaser Common
Stock owned by the Purchaser at the time of the sale or transfer and the
denominator of which is the total number of shares of voting stock and Purchaser
Common Stock owned by the Key Holder(s) and the Purchasers, respectively, at the
time of the sale or transfer.
7.5 Each Purchaser shall effect its participation in the sale by
promptly delivering to the Key Holder(s) for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent that number of shares of Series A Preferred which is at such time
convertible into the number of shares of Purchaser Common Stock which such
Purchaser elects to sell; PROVIDED, HOWEVER, that if the prospective
purchaser objects to the delivery of Series A Preferred in lieu of Common
Stock, such Purchaser shall convert such Series A Preferred into Purchaser
Common Stock and deliver Purchaser Common Stock as provided above. The
Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the purchaser and that such a conversion shall not
terminate such Purchaser's co-sale rights with respect to the Shares
converted.
7.6 The stock certificate or certificates that the Purchaser
delivers to the Key Holder(s) pursuant to Section 7.4 shall be transferred to
the prospective purchaser in consummation of the sale of the voting stock
pursuant to the terms and conditions specified in the Notice, and the Key
Holder(s) shall concurrently therewith remit to such Purchaser that portion
of the sale proceeds to which such Purchaser is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser, or
purchasers, prohibits such assignment or otherwise refuses to purchase
Purchaser Common Stock from a Purchaser exercising its rights of co-sale
hereunder, the Key Holder(s) shall not sell to such prospective purchaser or
purchasers any Co-Sale Shares unless and until, simultaneously with such
sale, the Key Holder(s) shall purchase such Purchaser Common Stock from such
Purchaser.
7.7 The exercise or non-exercise of the rights of the Purchasers
hereunder to participate in one or more sales of Co-Sale Shares made by the Key
Holders shall not adversely affect their rights to participate in subsequent
sales of Co-Sale Shares subject to Section 7.2.
7.8 If none of the Purchasers elects to participate in the sale of
the Co-Sale Shares subject to the Notice, the Key Holder(s) may, not later than
thirty (30) days following delivery to the Company and each of the Purchasers of
the Notice, enter into an agreement providing for the closing of the transfer of
the Co-Sale Shares covered by the Notice on terms
18
<PAGE>
and conditions not more favorable to the transferor than those described in
the Notice. Any proposed transfer on terms and conditions more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Shares by the Key Holder(s), shall again be subject to the
co-sale rights of the Purchasers and shall require compliance by the Key
Holder(s) with the procedures described in this Section 7.
7.9 EXEMPT TRANSFERS. Notwithstanding the foregoing, the
provisions of this Section 7 shall not apply to (i) any pledge of Co-Sale
Shares made pursuant to a bona fide loan transaction that creates a mere
security interest; (ii) any transfer to the ancestors, descendants or spouse
of a Key Holder or to trusts for the benefit of such persons or a Key Holder;
or (iii) any bona fide gift; provided that (A) the transferring Key Holder
shall inform the Purchasers of such pledge, transfer or gift prior to
effecting it and (B) the pledgee, transferee or donee shall furnish the
Purchasers with a written agreement to be bound by and comply with all the
terms of this Agreement, including the provisions of Section 7.2. Such
transferred Co-Sale Shares shall remain "Co-Sale Shares" hereunder, and such
pledgee, transferee or donee shall be treated as a "Key Holder" for purposes
of this Agreement.
7.10 TERMINATION OF CO-SALE RIGHTS. The co-sale rights established
by this Section 7 shall terminate as to each Purchaser at such time as all of
such Purchaser's Series A Preferred has been converted into Common Stock.
8. RIGHTS OF FIRST REFUSAL
8.1 SUBSEQUENT OFFERINGS. Each Purchaser shall have a right of
first refusal to purchase its PRO RATA share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 8.4 hereof. Each Purchaser's PRO RATA share is equal to the
ratio of (a) the number of shares of the Common Stock issuable upon conversion
of the Shares (and excluding those shares of Common Stock already issued upon
conversion of the Shares and any other Common Stock acquired by a Purchaser
other than under this Agreement) which such Purchaser is deemed to be a holder
immediately prior to the issuance of such Equity Securities to (b) the total
number of shares of the Company's outstanding Common Stock (including all shares
of Common Stock issued or issuable upon conversion of the Shares or upon the
exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security convertible, with or without
consideration, into any Common Stock or Preferred Stock (including any option to
purchase such a convertible security), (ii) any security carrying any warrant or
right to subscribe to or purchase any Common Stock or Preferred Stock or (iii)
any such warrant or right.
8.2 Exercise of Rights. If the Company proposes to issue any
Equity Securities, it shall give each Purchaser written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Purchaser shall have fifteen
(15) days from the giving of such notice to agree to purchase its PRO RATA share
of the Equity Securities for the price and upon the terms and
19
<PAGE>
conditions specified in the notice by giving written notice to the Company
and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Purchaser who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer
or sale.
8.3 Issuance of Equity Securities to Other Persons. If the
Purchasers do not exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which the Purchaser's rights were not exercised, at a price and upon general
terms and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to the Purchaser's pursuant to Section 8.2
hereof. If the Company has not sold such Equity Securities within ninety (90)
days of the notice provided pursuant to Section 8.2, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Purchaser's in the manner provided above.
8.4 Excluded Securities. The rights of first refusal established
by this Section 8 shall have no application to any of the following Equity
Securities:
(a) any shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights and shares of Common Stock issued upon the
exercise or conversion thereof) issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary of the
Company, pursuant to its 1993 Long Term Incentive Plan;
(b) stock issued pursuant to any rights or agreements (including
options or warrants) outstanding as of the date of this Agreement;
(c) any Equity Securities issued pursuant to any acquisition by
the Company;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution;
(g) shares of the Company's Common Stock or Preferred Stock
issued in connection with any licensing arrangement entered into by the Company,
including strategic transactions involving the Company and other entities, such
as joint ventures, manufacturing, marketing or distribution arrangements or
technology transfer or development arrangements.
8.5 Termination of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall terminate as to each Purchaser at
such time as all such Purchaser's Series A Preferred has been converted into
Common Stock
20
<PAGE>
9. MISCELLANEOUS.
9.1 DIVIDEND GROSS-UP PAYMENT. The Company shall pay any and all
United States withholding tax on foreign persons imposed in connection with
dividends paid or payable on the Shares (including any United States withholding
tax imposed on such additional payments), and the amount of dividends otherwise
payable to a holder of Shares with respect to which the Company makes such a
payment shall not be reduced. The intention of this provision is that each
Purchaser who is a foreign person shall receive dividend payments from the
Company with respect to the Shares, net of United States withholding taxes,
equal to the dividend provided in the Certificate of Designations.
9.2 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Shares to further current clinical trials, for other activities
associated with the commercialization of its product candidates and for general
corporate purposes.
9.3 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
9.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
9.5 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto and the other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
9.6 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
9.7 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least fifty percent (50%) of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold by such holder).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under this Agreement may be waived only
with the written consent of the holders of at least fifty percent (50%) of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold by such holder).
21
<PAGE>
9.8 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
9.9 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement; provided, however, that the Company shall reimburse the
reasonable fees of and expenses of one special counsel for the Purchasers, not
to exceed $30,000.
9.10 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
9.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.13 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
9.14 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
MAXIM PHARMACEUTICALS, INC. ----------------------------
[PRINT NAME OF PURCHASER]
By: /s/ Larry Stambaugh By:
-------------------------- -------------------------
Larry Stambaugh, President
Title:
----------------------
KEY HOLDERS:
/s/ Larry G. Stambaugh
- ---------------------------
Larry G. Stambaugh
/s/ Dale Sander
- ---------------------------
Dale Sander
/s/ Kurt Gehlsen
- ---------------------------
Kurt Gehlsen
MAXIM PHARMACEUTICALS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
<PAGE>
MAXIM PHARMACEUTICALS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. AGREEMENT TO SELL AND PURCHASE.............................................. 1
1.1 Authorization of Shares................................................ 1
1.2 Sale and Purchase...................................................... 1
2. CLOSING, DELIVERY AND PAYMENT............................................... 2
2.1 Closing................................................................ 2
2.2 Delivery and Settlement................................................ 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 2
3.1 Organization, Good Standing and Qualification.......................... 2
3.2 Subsidiaries........................................................... 2
3.3 Capitalization; Voting Rights.......................................... 2
3.4 Authorization; Binding Obligations..................................... 3
3.5 SEC Filings; Financial Statements...................................... 3
3.6 Liabilities............................................................ 4
3.7 Changes................................................................ 4
3.8 Patents and Trademarks................................................. 5
3.9 Compliance with Other Instruments...................................... 6
3.10 Litigation............................................................. 6
3.11 Registration Rights.................................................... 6
3.12 Compliance with Laws; Permits.......................................... 7
3.13 Offering Valid......................................................... 7
3.14 Other Agreements....................................................... 7
3.15 Disclosure............................................................. 8
3.16 Offering of Shares..................................................... 8
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................ 8
4.1 Requisite Power and Authority.......................................... 9
4.2 Investment Representations............................................. 9
4.3 Additional Regulation S Representations................................ 10
5. CONDITIONS TO CLOSING....................................................... 11
5.1 Conditions to Purchasers' Obligations at the Closing................... 11
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
5.2 Conditions to Obligations of the Company................................ 12
6. REGISTRATION................................................................. 13
6.1 Registration Requirements............................................... 13
6.2 Indemnification......................................................... 14
6.3 Transfer of Conversion Shares After Registration........................ 16
6.4 Additional Purchaser Covenants.......................................... 17
6.5 Termination............................................................. 17
7. CO-SALE RIGHTS............................................................... 17
8. RIGHTS OF FIRST REFUSAL...................................................... 19
9. MISCELLANEOUS................................................................ 21
9.1 Dividend Gross-Up Payment............................................... 21
9.2 Use of Proceeds......................................................... 21
9.3 Governing Law........................................................... 21
9.4 Successors and Assigns.................................................. 21
9.5 Entire Agreement........................................................ 21
9.6 Severability............................................................ 21
9.7 Amendment and Waiver.................................................... 21
9.8 Notices................................................................. 22
9.9 Expenses................................................................ 22
9.10 Attorneys' Fees......................................................... 22
9.11 Titles and Subtitles.................................................... 22
9.12 Counterparts............................................................ 22
9.13 Pronouns................................................................ 22
9.14 California Corporate Securities Law..................................... 22
</TABLE>
ii
<PAGE>
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
Certificate of Designations Exhibit B
Form of Legal Opinion Exhibit C
Registration Statement Questionnaire Exhibit D
iii
<PAGE>
LIST OF EXHIBITS
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK AGGREGATE
NAME AND ADDRESS SHARES OF INTO WHICH THE SERIES A PURCHASE
SERIES A PREFERRED IS CONVERTIBLE PRICE
PREFERRED (AT THE INITIAL
CONVERSION PRICE)
- ---------------- --------- ------------------------ -------------
<S> <C> <C> <C>
DVG Deutsche 41,131 411,310 $3,999,989.75
Vermogensbildungsgesellschaft mbH
c/o Daniel Endrikat
FeldbergstraBe 22
60323 Frankfurt
Germany
Wechsler & Co., Inc. 3,084 30,840 $ 299,919.00
105 South Bedford Road, Suite 310
Mount Kisco, NY 10549
The Aries Master Fund 7,044 70,440 $ 685,029.00
Aries Domestic Fund, L.P. 3,136 31,360 $ 304,976.00
Aries Domestic Fund II, L.P. 103 1,030 $ 10,016.75
c/o Paramount Capital
787 Seventh Avenue, 48th Floor
New York, NY 10019
Wendt Family Revocable Trust 1,542 15,420 $ 149,959.50
4900 West Dry Creek Road
Healdsburg, CA 95448
Carnegie-Cowen Global Healthcare Fund 5,141 51,410 $ 499,962.25
Carnegie Fund - Medical Sub-Fund 5,141 51,410 $ 499,962.25
5 Place de la Gare
P.O. Box 1141
L-1011 Luxembourg
Roston Enterprises 2,570 25,700 $ 249,932.50
2201 Canyonback Road
Los Angeles, CA 90049
Charles Johnston 1,542 15,420 $ 149,959.50
70 Finnell Drive, Suite 14
Weymouth, MA 02188
</TABLE>
iv
<PAGE>
LIST OF EXHIBITS
(CONTINUED)
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK AGGREGATE
NAME AND ADDRESS SHARES OF INTO WHICH THE SERIES A PURCHASE
SERIES A PREFERRED IS CONVERTIBLE PRICE
PREFERRED (AT THE INITIAL
CONVERSION PRICE)
- ---------------- --------- ------------------------ -------------
<S> <C> <C> <C>
RGC International Investors, LDC 30,848 308,480 $2,999,968.00
c/o Rose Glen Capital Management, L.P.
Three Bala Plaza East, Suite 200
Bala Cynwyd, PA 19004
--------- ------------------------ -------------
TOTAL: 101,282 1,012,820 $9,849,577.25
--------- ------------------------ -------------
--------- ------------------------ -------------
</TABLE>
v
<PAGE>
EXHIBIT 10.27
MAXIM PHARMACEUTICALS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is entered into as of July 20, 1999, by and among Maxim
Pharmaceuticals, Inc., a Delaware corporation (the "Company") and each of
those persons and entities, severally and not jointly, whose names are set
forth on the Schedule of Purchasers attached hereto as Exhibit A-1 (which
persons and entities are hereinafter collectively referred to as "Purchasers"
and each individually as a "Purchaser"). The Purchaser set forth on Exhibit
A-1 intends to distribute the Shares to the entities and in the amounts set
forth on Exhibit A-2.
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of Three Hundred Thousand (300,000) shares of its Series A
Convertible Preferred Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized (i) the sale
and issuance to Purchasers of the Shares and (ii) the issuance of shares of
Common Stock to be issued upon conversion of the Shares (the "Conversion
Shares"). The Shares shall have the rights, preferences, privileges and
restrictions set forth in the Certificate of Designations in the form
attached hereto as Exhibit B (the "Certificate of Designations").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser
agrees to purchase from the Company, severally and not jointly, the number of
Shares set forth opposite such Purchaser's name on Exhibit A, at a purchase
price of $97.25 per share, such price per share determined based on the
average of the closing bid price for the five days preceding the Closing Date
as reported on the American Stock Exchange multiplied by the number of shares
of Common Stock into which each Share is initially convertible as set forth
in the Certificate of Designations.
1
<PAGE>
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 10:00 a.m. on the
date each of the conditions to closing set forth in Section 5 hereof have
occurred, at the offices of Cooley Godward LLP, 4365 Executive Drive, Suite
1100, San Diego, CA 92121 or at such other time or place as the Company and
Purchasers may mutually agree (such date is hereinafter referred to as the
"Closing Date"). Payment for the Shares and delivery of the stock
certificates representing the Shares shall take place no later than five (5)
business days after the Closing Date (the "Settlement Date") and in
accordance with Section 2.2 below.
2.2 DELIVERY AND SETTLEMENT. On the Settlement Date, subject to
the terms and conditions hereof, the Company will deliver to the Purchasers
certificates representing the number of Shares to be purchased at the Closing
by each Purchaser, against payment of the purchase price therefor by check,
wire transfer made payable to the order of the Company, cancellation of
indebtedness or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as of the
date of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement and to issue and sell the Shares and the Conversion
Shares and to carry out the provisions of this Agreement and the Certificate
of Designations and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse
effect on the assets, liabilities, financial condition, regulatory condition,
capital, properties, results of operations or prospects of the Company or its
business (a "Material Adverse Effect").
3.2 SUBSIDIARIES. The Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not
a participant in any joint venture, partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of 35,000,000
shares of Common Stock, (par value $ .001) per share, 10,203,600 shares of
which are issued and outstanding as of the date of this Agreement, 5,000,000
shares of Preferred Stock, (par value $ .001) per share, 300,000 of which are
designated Series A Preferred Stock, none of which are issued and outstanding
as of the date of this Agreement. All issued and outstanding shares of the
Company's Common Stock (a) have been duly authorized and validly issued and
(b) are fully paid and nonassessable. The
2
<PAGE>
rights, preferences, privileges and restrictions of the Shares are as stated
in the Certificate of Designations; all such rights, preferences, privileges
and restrictions are valid, binding and enforceable against the Company and
in accordance with applicable laws. The Conversion Shares have been duly and
validly reserved for issuance. Other than the 977,310 shares reserved for
issuance under the Company's 1993 Long Term Incentive Plan and outstanding
warrants to purchase an aggregate of 2,961,104 shares of Common Stock and
44,006 shares reserved for issuance under the Company's 401(k) plan, there
are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or shareholder
agreements, or agreements of any kind authorized or outstanding for the
purchase or acquisition from the Company of any of its securities or any
interest therein. Except as set forth herein, there is no commitment by the
Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
equity securities any evidence of indebtedness or asset. The Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend
(other than dividends payable on the Shares) or to make any other
distribution in respect thereof. When issued in compliance with the
provisions of this Agreement and the Certificate of Designations, the Shares
and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer is
proposed.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and shareholders necessary
for the authorization of this Agreement, the performance of all obligations
of the Company hereunder at the Closing and the authorization, sale, issuance
and delivery of the Shares pursuant hereto and the Conversion Shares pursuant
to the Certificate of Designations has been taken or will be taken prior to
the Closing. The Agreement when executed and delivered, will be valid and
binding obligations of the Company enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (b) general principles of equity that
restrict the availability of equitable remedies; and (c) to the extent that
the enforceability of the indemnification provisions in Section 6.2 may be
limited by applicable laws. The sale of the Shares and the subsequent
conversion of the Shares into Conversion Shares are not and will not be
subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with.
3.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to each Purchaser a
complete and accurate copy (excluding copies of exhibits) of the Company's
(i) Annual Report of Form 10-K for the year ended September 30, 1998, (ii)
Quarterly Reports on Form 10-Q for the quarters ended December 31, 1998 and
March 31, 1999, (iii) Proxy Statement on Schedule 14A dated January 13, 1999,
and (iv) Proxy Statement on Schedule 14A dated June 1, 1999, each filed by
the Company with the Securities and Exchange Commission ("SEC")
(collectively, the "Company SEC Documents"). The Company SEC Documents (i)
complied with the
3
<PAGE>
requirements of the Securities Act or the Exchange Act, as the case may be,
at and as of the times they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
(ii) were filed in a timely manner, and (iii) did not at and as of the time
they were filed (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Each of the sets of financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Documents
(collectively, the "Past Financial Statements") including the Company's
unaudited consolidated balance sheet as of March 31, 1999 (the "March Balance
Sheet") (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered (except as may be indicated
in the notes thereto and, in the case of unaudited interim financial
statements, as permitted by Form 10-Q of the SEC, and except that unaudited
financial statements may not contain footnotes and are subject to year-end
audit adjustments which are not expected to be material in amount) and (iii)
fairly presents the financial position of the Company as at the respective
dates thereof and the results of operations of the Company and cash flows for
the periods indicated.
3.6 LIABILITIES. The Company has no material liabilities and, to
the best of its knowledge, knows of no material contingent liabilities not
disclosed in the Past Financial Statements, except current liabilities
incurred in the ordinary course of business subsequent to the March Balance
Sheet which have not been, either in any individual case or in the aggregate,
materially adverse.
3.7 CHANGES. Since the March Balance Sheet, there has not been:
(a) Any change in the assets, liabilities, financial
condition or operations of the Company from that reflected in the Past
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has had or is expected to have
a Material Adverse Effect;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered
by insurance, which has a Material Adverse Effect;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
4
<PAGE>
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than
advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any officer, director or shareholder of the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity involving the Company's
employees;
(j) Any debt, obligation or liability (absolute, accrued or
contingent) incurred, assumed or guaranteed by the Company, except those for
immaterial amounts and for current liabilities incurred in the ordinary
course of business;
(k) Any sale, assignment, pledge or transfer of tangible
assets or any patents, trademarks, copyrights, trade secrets or other
intangible assets;
(l) Any change in any material agreement to which the Company
is a party or by which it is bound which has a Material Adverse Effect; or
(m) Any other event or condition of any character that,
either individually or cumulatively, has a Material Adverse Effect.
3.8 PATENTS AND TRADEMARKS.
(a) To the best of its knowledge, the Company owns or
possesses sufficient rights under all material patents, patent rights,
trademarks, copyrights, licenses, inventions, trade secrets, trade names and
know-how (collectively, "Intellectual Property") described or referred to in
the Company SEC Documents as owned or used by it or that are necessary for
the conduct of its business as now conducted, (ii) the Company has not
received any notice of, or has no knowledge of, any infringement of or
conflict with asserted rights of the Company by others with respect to any
Intellectual Property, and (iii) the Company has not received any notice of,
or has no knowledge of, any infringement of or conflict with asserted rights
of a third party with respect to any Intellectual Property.
(b) In addition to the foregoing, the Company is unaware of
any facts which would preclude the Company from having clear title to the
patents and patent applications referred to or described in the Company SEC
Documents (the "Maxamine Patents"). The Company has complied with the Patent
and Trademark Office ("PTO") duty of candor and good faith in dealing with
the PTO, including the duty to disclose to the PTO all information known to
be material to the patentability of each of such United States patents and
patent applications. To the best of its knowledge, all assignments from each
named inventor to the Company have been executed and recorded with the PTO
for each Maxamine Patent. To the best of its knowledge,
5
<PAGE>
the Company has maintained all rights with respect to the Maxamine Patents.
The Company has no reason to believe that any of the claims of the Maxamine
Patents is unpatentable, unenforceable or invalid. The Company is not aware
of any pending U.S. or foreign patent applications which, if issued, would
limit, prohibit or materially affect the business now conducted or proposed
to be conducted by the Company as described in the Company SEC Document. The
Company is not aware of any facts which would form the basis for a belief
that the products or processes of any third party infringe the claims of any
Maxamine Patent.
(c) The Company is unaware of any legal or governmental
proceedings pending relating to the Maxamine Patents, other than PTO review
of pending applications for patents, including appeal proceedings, and, to
the best of its knowledge, no such proceedings are threatened or contemplated
by governmental authorities or others.
(d) The Company is unaware of any contracts or other
documents material to the Company's Maxamine Patents or Intellectual Property
other than those described in the Company SEC Documents.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of (i) any term of its Certificate of Incorporation or
Bylaws, each as amended to date, (ii) any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party
or by which it is bound or of any judgment, decree, order, writ, except such
violations or defaults which, alone or in the aggregate, do not have a
Material Adverse Effect, or (iii) to its knowledge, any statute, rule or
regulation applicable to the Company, except such violations or defaults
which, alone or in the aggregate, would not have a Material Adverse Effect.
The execution, delivery, and performance of and compliance with this
Agreement and the issuance and sale of the Shares pursuant hereto and of the
Conversion Shares pursuant to the Certificate of Designations, will not, with
or without the passage of time or giving of notice, result in any such
violation, or be in conflict with or constitute a default under any such
term, or result in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit license,
authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
3.10 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened
against the Company that questions the validity of this Agreement or the
right of the Company to enter into this Agreement, or to consummate the
transactions contemplated hereby, or which might result, either individually
or in the aggregate, in a Material Adverse Effect, or any change in the
current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing. There is no action or suit by the Company
pending, threatened or contemplated against others.
3.11 REGISTRATION RIGHTS. Except for National Securities
Corporation and HealthCap KB and as set forth in Section 6 of this Agreement,
the Company is presently not under any obligation, and has not granted any
rights, to register any of the Company's presently outstanding securities or
any of its securities that may hereafter be issued.
6
<PAGE>
3.12 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company
is not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of
its properties, except such violations which, alone or in the aggregate, do
not have a Material Adverse Effect. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business
as now being conducted by it, the lack of which could have a Material Adverse
Effect and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
3.13 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
3.14 OTHER AGREEMENTS. Except as set forth under the Company SEC
Documents, the Company is not a party to or otherwise bound by any written or
oral agreement, instrument, commitment or restriction which individually
could reasonably be expected to have a Material Adverse Effect or any other
written or oral:
(a) agreement with any labor union representing employees of
the Company;
(b) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its
normal operating requirements;
(c) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest
on, any asset of the Company;
(d) guaranty of any obligations for borrowed money or
otherwise;
(e) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the SEC as an
exhibit to a registration statement on Form S-1 if the Company were
registering securities under the Securities Act.
The Company, and to the best of its knowledge, each other party thereto have
in all material respects performed all the obligations required to be
performed by them to date (or each non-performing party has received a valid,
enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or elapse of time or both) under any agreement, instrument,
commitment or plan or arrangement to
7
<PAGE>
which the Company is a party or by which it or its property may be bound
except such defaults which, alone or in the aggregate, are not reasonably
expected to have a Material Adverse Effect. The Company has no present
expectation or intention of not performing all its material obligations under
each such agreement, instrument, commitment, plan or arrangement, and the
Company has no knowledge of any breach or anticipated breach by the other
party to any agreement, instrument, commitment, plan or arrangement to which
the Company is a party except for such breaches which, alone or in the
aggregate, are not reasonably expected to have a Material Adverse Effect.
The Company is in compliance with all of the material terms of its Charter
and By-Laws, as amended.
3.15 DISCLOSURE. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor any documents furnished or made available to
the Purchasers relating to this Agreement, contains any material misstatement
of fact or omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they
are made, not misleading. None of the statements, documents, certificates or
other items prepared or supplied by the Company with respect to the
transactions contemplated hereby contains any material misstatement of fact
or omits to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. There is no fact which the Company has not disclosed to the
Purchasers and their counsel and of which the Company is aware which, alone
or in the aggregate is reasonably expected to have a Material Adverse Effect.
The financial projections and other estimates contained in any documents
furnished to the Purchasers relating to this Agreement were prepared by the
Company based on the Company's experience in the industry and on assumptions
of fact and opinions as to future events which the Company believed to be
reasonable, but which the Company cannot and does not assure or guarantee the
attainment of in any manner. As of the date hereof, no facts have come to
the attention of the Company which would, in its opinion, require the Company
to materially revise or amplify the assumptions underlying such projections
and other estimates or the conclusions derived therefrom.
3.16 OFFERING OF SHARES. Neither the Company nor any person
authorized or employed by the Company as agent, broker, dealer or otherwise
in connection with the offering or sale of the Shares or any security of the
Company similar to the Shares has offered the Shares or any such similar
security for sale to, or solicited any offer to buy the Shares or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including,
without limitation, any offer, issuance or sale of any security of the
Company under circumstances which might require the integration of such
security with the Shares under the Securities Act or the rules and
regulations of the SEC thereunder), in either case so as to subject the
offering, issuance or sale of the Shares to the registration provisions of
the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows:
8
<PAGE>
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver and to perform its obligations under this Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement will be valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except (a)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors'
rights and (b) general principles of equity that restrict the availability of
equitable remedies.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered
and sold pursuant to an applicable exemption from registration contained in
the Securities Act based in part upon Purchaser's representations contained
in the Agreement. Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk
of this investment indefinitely unless the Shares (or the Conversion Shares)
are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that, except as set forth
in this Agreement, the Company has no present intention of registering the
Shares, the Conversion Shares or any shares of its Common Stock. Purchaser
also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares or the Conversion Shares under the circumstances, in
the amounts or at the times Purchaser might propose.
(b) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement, and the
Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the
Agreement.
(c) COMPANY INFORMATION. Purchaser has received and read the
Company SEC Reports and the Past Financial Statements and has had an
opportunity to discuss the Company's business, management and financial
affairs with directors, officers and management of the Company and has had
the opportunity to review the Company's operations and facilities. Purchaser
has also had the opportunity to ask questions of and receive answers from the
Company and its management regarding the terms and conditions of this
investment.
(d) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available.
9
<PAGE>
Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which
permits limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the
resale occurring following the required holding period under Rule 144 and the
number of shares being sold during any three-month period not exceeding
specified limitations.
(e) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state, province or country identified in the address
of the Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on Exhibit A.
4.3 ADDITIONAL REGULATION S REPRESENTATIONS. Each Purchaser who is
not a resident of the United States also represents as follows:
(a) Purchaser certifies that he, she or it is neither a
citizen nor a resident of the United States and that his, her or its address
set forth on Schedule A of this Agreement is correct.
(b) No public offer or solicitation of the Shares was made to
such Purchaser and no offer of the Shares was made to such Purchaser while
such purchaser was present in the United States.
(c) At the time any buy order for the Shares was originated,
such Purchaser was located outside the United States and is outside the
United States on the date of the execution and delivery of this Agreement and
will be outside the United States on the Closing Date.
(d) Purchaser is aware that the Shares and the Conversion
Shares have not been registered under the Securities Act and may only be
offered or sold pursuant to registration under the Securities Act or an
available exemption therefrom, and such Purchaser has not, and will not,
engage in any public offering or distribution of the Shares or Conversion
Shares or engage in any hedging transaction with respect thereto, except in
accordance with the registration or exemption provisions of the Securities
Act.
(e) Except to the extent the Shares or Conversion Shares have
been registered under the Securities Act, such Purchaser (i) will not, during
the period commencing on the Closing Date and ending one year after the
Closing Date (the "Distribution Compliance Period"), offer or sell or agree
to sell the Shares or Conversion Shares in the United States, to a U.S.
Person (as defined in Regulation S promulgated under the Securities Act
("Regulation S")) or for the account or benefit of a U.S. Person other than
in accordance with Regulation S, and (ii) will, after the expiration of the
Distribution Compliance Period, offer, sell, pledge or otherwise transfer the
Shares or Conversion Shares only pursuant to registration under the
Securities Act or an available exemption therefrom and, in any case, in
accordance with applicable United States federal and state securities laws.
10
<PAGE>
(f) Purchaser has been advised of, and is familiar with, has
complied, and will comply, with the offering restrictions, and any other
requirements of Regulation S.
(g) The transactions contemplated by this Agreement (i) have
not been pre-arranged by Purchaser with the view to sell or transfer the
Shares or Conversion Shares to another purchaser located in the United Stated
who is a U.S. Person, and (ii) are not part of a plan or scheme by Purchaser
to evade the registration provisions of the Securities Act.
(h) Neither Purchaser nor any of his, her or its affiliates
has entered, has the intention of entering, or will during the Distribution
Compliance Period enter into, with any U.S. Person, any put option, short
position or other similar instrument or position with respect to the Shares
or Conversion Shares or participate in any other attempt designed to lower
the trading prices of the Shares or Conversion Shares.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Each
Purchaser's obligation to purchase the Shares at the Closing are subject to
the satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct (except to the extent that the
aggregate of all inaccuracies and breaches thereof would not have a Material
Adverse Effect) as of the Closing Date (except to the extent such
representations specifically relate to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date, and in any event subject to the foregoing materiality qualification)
with the same force and effect as if they had been made as of the Closing
Date, and the Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares
shall be legally permitted by all laws and regulations to which Purchasers
and the Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. As of the Closing Date,
the Company shall have obtained any and all consents, permits and waivers
necessary or appropriate for consummation of the transactions contemplated by
the Agreement (except for such as may be properly obtained subsequent to the
Closing).
(d) FILING OF CERTIFICATE OF DESIGNATIONS. On the Settlement
Date, the Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
(e) RESERVATION OF CONVERSION SHARES. As of the Closing
Date, the Conversion Shares issuable upon conversion of the Shares shall have
been duly authorized and reserved for issuance upon such conversion.
11
<PAGE>
(f) WRITTEN ASSURANCE FROM AMEX. On the Closing Date, the
Company shall have received written assurance from the American Stock
Exchange to the effect that the issuance of the Shares contemplated hereby
will not result in a violation of the listing requirements of the American
Stock Exchange.
(g) LEGAL OPINION. On the Settlement Date, the Purchasers
shall have received from legal counsel to the Company an opinion addressed to
them, dated as of the Settlement Date, in substantially the form attached
hereto as Exhibit C.
(h) COMPLIANCE CERTIFICATE. The Company shall have delivered
a certificate, executed by the President of the Company, dated the Settlement
Date, stating that the conditions set forth in paragraphs (a), (c), (d), (e)
and (f) have been complied with and that between the date of execution of
this Agreement and the Settlement Date, there has been no material adverse
change affecting the Company or its business which, alone or in the
aggregate, shall have a Material Adverse Effect.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by those Purchasers acquiring Shares in Section 4 hereof
shall be true and correct (except to the extent that the aggregate of all
inaccuracies and breaches thereof would not have a Material Adverse Effect)
at the Closing Date (except to the extent such representations specifically
relate to an earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date, and in any event subject
to the foregoing materiality qualification), with the same force and effect
as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by such Purchasers on or before the Closing.
(c) FILING OF CERTIFICATE OF DESIGNATIONS. On the Settlement
Date, the Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
(d) CONSENTS, PERMITS, AND WAIVERS. As of the Closing Date,
the Company shall have obtained any and all consents, permits and waivers
necessary or appropriate for consummation of the transactions contemplated by
the Agreement (except for such as may be properly obtained subsequent to the
Closing).
(e) WRITTEN ASSURANCE FROM AMEX. On the Closing Date, the
Company shall have received written assurance from the American Stock
Exchange to the effect that the issuance of the Shares contemplated hereby
will not result in a violation of the listing requirements of the American
Stock Exchange.
12
<PAGE>
6. REGISTRATION.
6.1 REGISTRATION REQUIREMENTS.
(a) The Company shall prepare and file, not later than thirty
(30) days after the Closing Date, a registration statement on Form S-3 or
another available form (the "Registration Statement") with the SEC under the
Securities Act to register the resale of the Conversion Shares by the
Purchasers and thereafter shall use its best efforts to secure effectiveness
of the Registration Statement within ninety (90) days after the Closing Date.
In the event the Company fails to secure effectiveness of the Registration
Statement within ninety (90) days after the Closing Date, the dividend rate
on the Series A Preferred shall be increased to 15% per annum for the period
the Registration Statement remains ineffective, and at such time as the
Registration Statement becomes effective, the dividend rate on the Series A
Preferred shall revert to 12% per annum. In order to have shares included in
the Registration Statement, each Purchaser must complete and deliver to the
Company not later than ten (10) days after the Closing, a Registration
Statement Questionnaire in the form attached hereto as Exhibit D.
(b) The Company shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or
compliance hereunder, and each Purchaser shall pay all of its respective
Selling Expenses (as defined below) and other expenses that are not
Registration Expenses relating to the Shares resold by such Purchaser.
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, blue sky fees and expenses and the expense of
any special audits incidents to or required by any such registration.
"Selling Expenses" shall mean all selling commissions, underwriting fees and
stock transfer taxes applicable to the Conversion Shares and all fees and
disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its
reasonable best efforts to: (i) keep such registration effective until the
earlier of (A) such date as all of the Conversion Shares have been resold or
(B) the date on which each Purchaser is entitled to sell all of its
Conversion Shares pursuant to Rule 144(k) promulgated under the Securities
Act; (ii) prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Conversion Shares
covered by the Registration Statement; (iii) cause the Conversion Shares to
be listed on each securities exchange and quoted on each quotation service on
which similar securities issued by the Company are then listed or quoted;
(iv) provide a transfer agent and registrar for all Conversion Shares
registered pursuant to the Registration Statement and a CUSIP number for all
such Conversion Shares; (v) comply with all applicable rules and regulations
of the SEC governing such registration; and (vi) file the documents required
of the Company by, and otherwise use its reasonable best efforts to maintain
requisite blue sky clearance in, (X) all jurisdictions in which any of the
Shares are originally sold and (Y) all other states specified in writing by a
Purchaser; provided, however,
13
<PAGE>
that as to clause (Y), the Company shall not be required to qualify to do
business or consent to service of process in any state in which it is now so
qualified or has not so consented.
(d) The Company shall furnish to each Purchaser upon request
a reasonable number of copies of a supplement to or an amendment of the
prospectus used in connection with the Registration Statement as may be
necessary in order to facilitate the public sale or other disposition of all
or any of the Conversion Shares held by the Purchaser.
(e) With a view to making available to the Purchasers the
benefit of Rule 144 and Form S-3 and any other rule or regulation of the SEC
that may at any time permit a Purchaser to sell shares to the public without
registration, the Company covenants and agrees to use its reasonable best
efforts to: (i) make and keep public information available, as those terms
are understood and defined in Rule 144, until the earlier of (A) the date on
which each Purchaser is entitled to sell all of its Conversion Shares
pursuant to Rule 144(k) promulgated under the Securities Act or (B) such date
as all of the Conversion Shares shall have been resold; (ii) file with the
SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and furnish to any Purchaser upon request, as
long as the Purchaser owns any Shares or Conversion Shares, (A) a written
statement by the Company that it has complied with the reporting requirement
of the Exchange Act, (B) a copy of the most recent annual or quarterly report
of the Company, and (C) such other information as may be reasonably requested
in order to avail any Purchaser of any rule or regulation of the SEC that
permits the selling of any such Shares or Conversion Shares without
registration or pursuant to such registration statement on Form S-3.
(f) The Company may suspend the use of the Registration
Statement and refuse to permit the Purchasers to resell any Conversion Shares
pursuant to the Registration Statement for a period not to exceed 20 days in
any twelve month period; PROVIDED, HOWEVER, that in order to exercise this
right, the Company must notify the Purchasers to the effect that such action
is necessary because there then exists material, non-public information
relating to the Company, which, in the reasonable opinion of the board of
directors of the Company would not be appropriate for disclosure during that
time. In such an event, the Company shall use its best efforts to amend the
Registration Statement as necessary and to take all other actions necessary
to allow such sales and shall notify the Purchasers promptly after it has
determined that such sales have become permissible.
6.2 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, on the
effective date thereof, the omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made,
14
<PAGE>
any violation by the Company of any rule or regulation promulgated under the
Securities Act, the Exchange Act or state securities laws applicable to the
Company in connection with such registration, or arise out of any failure by
the Company to fulfill any undertaking included in the Registration
Statement, and the Company will, as incurred, reimburse such Purchaser for
any reasonable legal or other expenses incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon
(i) an untrue statement made in such Registration Statement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Purchaser specifically for use in preparation of the
Registration Statement, (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 6.3 hereof, or (iii) any untrue
statement in any Prospectus that is corrected in any subsequent Prospectus
that was delivered to the Purchaser prior to the pertinent sale or sales by
the Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to
which the Company may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon an untrue
statement made in such Registration Statement in reliance upon and in
conformity with written information furnished by such Purchaser on Exhibit D
hereto for use in preparation of the Registration Statement; PROVIDED,
HOWEVER, that no Purchaser shall be liable in any such case for any untrue
statement included in any Prospectus which statement has been corrected, in
writing, by such Purchaser and delivered to the Company before the sale from
which such loss occurred, and each Purchaser, severally and not jointly,
will, as incurred, reimburse the Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any
such action, proceeding or claim; PROVIDED, FURTHER, HOWEVER, that in no
event shall any indemnity under this Section 6.2(b) exceed the net proceeds
from the offering received by the applicable Purchaser or Purchasers from the
sale of the Conversion Shares.
(c) Promptly after receipt by any indemnified person of a
notice of a claim to the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 6.2, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, and subject to
the provisions hereinafter stated, in case any such action shall be brought
against an indemnified person and the indemnifying person shall have been
notified thereof, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to the indemnified person.
After notice from the indemnifying person to such indemnified person of the
indemnifying person's election to assume the defense thereof, the
indemnifying person shall not be liable to such indemnified person for any
legal expense subsequently incurred by such indemnified person in connection
with the defense thereof; PROVIDED, HOWEVER, that if there exists or shall
exist a conflict of interest that would make it inappropriate in the
reasonable judgment of the indemnified person for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled
15
<PAGE>
to retain its own counsel at the expense of such indemnifying person. No
indemnifying person shall, without the prior written consent of the
indemnified person (which consent shall not be unreasonably withheld), effect
any settlement of any pending or threatened proceeding in respect of which
any indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified party.
(d) The obligations of the Company and the Purchasers under
this Section 6.2 shall be in addition to any liability which the Company and
each respective Purchaser may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Company or any
Purchaser within the meaning of the Securities Act.
(e) In order to provide for just and equitable contribution
to joint liability in any case in which a claim for indemnification is made
pursuant to this Section 6 but it is judicially determined (by entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding that
this Section 6 provides for indemnification in such case, the Company and
each Purchaser shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
proportion to the relative fault of the Company on the one hand, and the
Purchasers, severally, on the other hand; provided, however, that in any such
case, no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was no guilty of such fraudulent
misrepresentation and; provided, further, that in no event shall any
contribution under this Section 6.2(e) on the part of any seller exceed the
net proceeds received by such seller from the sale of Conversion Shares.
6.3 TRANSFER OF CONVERSION SHARES AFTER REGISTRATION. Each
Purchaser hereby covenants with the Company not to make any sale of the
Conversion Shares except either (a) in accordance with the Registration
Statement, in which case the Purchaser covenants to comply with the
requirements of delivering a current prospectus, (b) in accordance with Rule
144, in which case Purchaser covenants to comply with Rule 144, or (c)
subject to such conditions as the Company shall reasonably impose, in
accordance with another exemption from the registration requirements of the
Securities Act. Each Purchaser also covenants that it will not make any sale
of the Conversion Shares pursuant to the Registration Statement during any
period in which the Company has suspended use of the Registration Statement
pursuant to Section 6.1(f) of this Agreement. Each Purchaser further
acknowledges and agrees that such Conversion Shares are not transferable on
the books of the Company unless the certificate submitted to the Company's
transfer agent evidencing such Conversion Shares is accompanied by such
additional certification, documentation or information as the Company shall
reasonably require in order to effect such sale in accordance with the
Registration Statement, Rule 144 or such other exemption from the
registration requirements of the Securities Act.
6.4 ADDITIONAL PURCHASER COVENANTS. Each Purchaser covenants that
it will promptly notify the Company of any changes in the information set
forth in the Registration
16
<PAGE>
Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution," including, without limitation, the information contained in
the Registration Statement Questionnaire attached hereto as Exhibit D
relating to such Purchaser. Each Purchaser shall provide the Company in
writing with such change or additional information necessary so that the
information set forth in the Registration Statement regarding such Purchaser
will be true and correct as of the effective date of the Registration
Statement and until the Company is no longer required to keep the
Registration Statement effective pursuant to Section 6.1(c) of this
Agreement.
6.5 TERMINATION. All registration rights granted under this
Section 6 shall expire and be of no further force and effect if all Shares or
Conversion Shares held by or issuable to each Purchaser (and its affiliates,
partners, former partners, members and former members) may be sold under Rule
144(k) promulgated under the Securities Act.
7. CO-SALE RIGHTS
7.1 The following definitions shall apply to this Section 7:
(a) "Co-Sale Shares" shall mean shares of the Company's
Common Stock now owned or subsequently acquired by the Key Holders.
(b) "Key Holders" shall mean Larry G. Stambaugh, Dale Sander
and Kurt Gehlson.
(c) "Purchaser Common Stock" shall mean the shares of Common
Stock into which the Shares are convertible (excluding shares of Common Stock
which have already been issued upon conversion of the Shares or shares of
Common Stock acquired by a Purchaser other than under this Agreement).
7.2 If one or more Key Holders proposes to sell or transfer any
Co-Sale Shares in one or more related transactions which will result in the
transferee of such shares holding more than 50% of the voting stock of the
Company, then such Key Holder(s) shall promptly give written notice (the
"Notice") to the Company and to each of the Purchasers at least 20 days prior
to the closing of such sale or transfer. The Notice shall describe in
reasonable detail the proposed sale or transfer including, without
limitation, the number of Co-Sale Shares to be sold or transferred, the
nature of such sale or transfer, the consideration to be paid, and the name
and address of each prospective purchaser or transferee. In the event that
the sale or transfer is being made pursuant to the provisions of Section 7.9
hereof, the Notice shall state under which subsection the sale or transfer is
being made.
7.3 Each Purchaser shall have the right, exercisable upon written
notice to such Key Holder(s) within 15 days after receipt of the Notice, to
participate in such sale on a pro rata basis on the same terms and conditions
specified in the Notice. To the extent that one or more of the Purchasers
exercise such co-sale right in accordance with the terms and conditions set
forth below, the number of Co-Sale Shares that the Key Holder(s) may sell in
the transaction shall be correspondingly reduced.
17
<PAGE>
7.4 Each Purchaser may sell all or any part of that number of
shares of Purchaser Common Stock equal to the product obtained by multiplying
(i) the aggregate number of Co-Sale Shares covered by the Notice by (ii) a
fraction, the numerator of which is the number of shares of Purchaser Common
Stock owned by the Purchaser at the time of the sale or transfer and the
denominator of which is the total number of shares of voting stock and
Purchaser Common Stock owned by the Key Holder(s) and the Purchasers,
respectively, at the time of the sale or transfer.
7.5 Each Purchaser shall effect its participation in the sale by
promptly delivering to the Key Holder(s) for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent that number of shares of Series A Preferred which is at such time
convertible into the number of shares of Purchaser Common Stock which such
Purchaser elects to sell; PROVIDED, HOWEVER, that if the prospective
purchaser objects to the delivery of Series A Preferred in lieu of Common
Stock, such Purchaser shall convert such Series A Preferred into Purchaser
Common Stock and deliver Purchaser Common Stock as provided above. The
Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the purchaser and that such a conversion shall not
terminate such Purchaser's co-sale rights with respect to the Shares
converted.
7.6 The stock certificate or certificates that the Purchaser
delivers to the Key Holder(s) pursuant to Section 7.4 shall be transferred to
the prospective purchaser in consummation of the sale of the voting stock
pursuant to the terms and conditions specified in the Notice, and the Key
Holder(s) shall concurrently therewith remit to such Purchaser that portion
of the sale proceeds to which such Purchaser is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser, or
purchasers, prohibits such assignment or otherwise refuses to purchase
Purchaser Common Stock from a Purchaser exercising its rights of co-sale
hereunder, the Key Holder(s) shall not sell to such prospective purchaser or
purchasers any Co-Sale Shares unless and until, simultaneously with such
sale, the Key Holder(s) shall purchase such Purchaser Common Stock from such
Purchaser.
7.7 The exercise or non-exercise of the rights of the Purchasers
hereunder to participate in one or more sales of Co-Sale Shares made by the
Key Holders shall not adversely affect their rights to participate in
subsequent sales of Co-Sale Shares subject to Section 7.2.
7.8 If none of the Purchasers elects to participate in the sale of
the Co-Sale Shares subject to the Notice, the Key Holder(s) may, not later
than thirty (30) days following delivery to the Company and each of the
Purchasers of the Notice, enter into an agreement providing for the closing
of the transfer of the Co-Sale Shares covered by the Notice on terms and
conditions not more favorable to the transferor than those described in the
Notice. Any proposed transfer on terms and conditions more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Shares by the Key Holder(s), shall again be subject to the
co-sale rights of the Purchasers and shall require compliance by the Key
Holder(s) with the procedures described in this Section 7.
18
<PAGE>
7.9 EXEMPT TRANSFERS. Notwithstanding the foregoing, the
provisions of this Section 7 shall not apply to (i) any pledge of Co-Sale
Shares made pursuant to a bona fide loan transaction that creates a mere
security interest; (ii) any transfer to the ancestors, descendants or spouse
of a Key Holder or to trusts for the benefit of such persons or a Key Holder;
or (iii) any bona fide gift; provided that (A) the transferring Key Holder
shall inform the Purchasers of such pledge, transfer or gift prior to
effecting it and (B) the pledgee, transferee or donee shall furnish the
Purchasers with a written agreement to be bound by and comply with all the
terms of this Agreement, including the provisions of Section 7.2. Such
transferred Co-Sale Shares shall remain "Co-Sale Shares" hereunder, and such
pledgee, transferee or donee shall be treated as a "Key Holder" for purposes
of this Agreement.
7.10 TERMINATION OF CO-SALE RIGHTS. The co-sale rights established
by this Section 7 shall terminate as to each Purchaser at such time as all of
such Purchaser's Series A Preferred has been converted into Common Stock.
8. RIGHTS OF FIRST REFUSAL
8.1 Subsequent Offerings. Each Purchaser shall have a right of
first refusal to purchase its PRO RATA share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 8.4 hereof. Each Purchaser's PRO RATA share is equal to
the ratio of (a) the number of shares of the Common Stock issuable upon
conversion of the Shares (and excluding those shares of Common Stock already
issued upon conversion of the Shares and any other Common Stock acquired by a
Purchaser other than under this Agreement) which such Purchaser is deemed to
be a holder immediately prior to the issuance of such Equity Securities to
(b) the total number of shares of the Company's outstanding Common Stock
(including all shares of Common Stock issued or issuable upon conversion of
the Shares or upon the exercise of any outstanding warrants or options)
immediately prior to the issuance of the Equity Securities. The term "Equity
Securities" shall mean (i) any Common Stock, Preferred Stock or other
security convertible, with or without consideration, into any Common Stock or
Preferred Stock (including any option to purchase such a convertible
security), (ii) any security carrying any warrant or right to subscribe to or
purchase any Common Stock or Preferred Stock or (iii) any such warrant or
right.
8.2 Exercise of Rights. If the Company proposes to issue any
Equity Securities, it shall give each Purchaser written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Purchaser
shall have fifteen (15) days from the giving of such notice to agree to
purchase its PRO RATA share of the Equity Securities for the price and upon
the terms and conditions specified in the notice by giving written notice to
the Company and stating therein the quantity of Equity Securities to be
purchased. Notwithstanding the foregoing, the Company shall not be required
to offer or sell such Equity Securities to any Purchaser who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
19
<PAGE>
8.3 Issuance of Equity Securities to Other Persons. If the
Purchasers do not exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in
respect of which the Purchaser's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Purchaser's
pursuant to Section 8.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
8.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Purchaser's in the manner
provided above.
8.4 Excluded Securities. The rights of first refusal established
by this Section 8 shall have no application to any of the following Equity
Securities:
(a) any shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights and shares of Common Stock issued upon the
exercise or conversion thereof) issued or to be issued to employees, officers
or directors of, or consultants or advisors to the Company or any subsidiary
of the Company, pursuant to its 1993 Long Term Incentive Plan;
(b) stock issued pursuant to any rights or agreements
(including options or warrants) outstanding as of the date of this Agreement;
(c) any Equity Securities issued pursuant to any acquisition
by the Company;
(d) shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution;
(g) shares of the Company's Common Stock or Preferred Stock
issued in connection with any licensing arrangement entered into by the
Company, including strategic transactions involving the Company and other
entities, such as joint ventures, manufacturing, marketing or distribution
arrangements or technology transfer or development arrangements.
8.5 Termination of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall terminate as to each Purchaser at
such time as all such Purchaser's Series A Preferred has been converted into
Common Stock
20
<PAGE>
9. MISCELLANEOUS.
9.1 DIVIDEND GROSS-UP PAYMENT. The Company shall pay any and all
United States withholding tax on foreign persons imposed in connection with
dividends paid or payable on the Shares (including any United States
withholding tax imposed on such additional payments), and the amount of
dividends otherwise payable to a holder of Shares with respect to which the
Company makes such a payment shall not be reduced. The intention of this
provision is that each Purchaser who is a foreign person shall receive
dividend payments from the Company with respect to the Shares, net of United
States withholding taxes, equal to the dividend provided in the Certificate
of Designations.
9.2 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Shares to further current clinical trials, for other activities
associated with the commercialization of its product candidates and for
general corporate purposes.
9.3 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and performed entirely
in California.
9.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
9.5 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
9.6 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
9.7 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least fifty percent (50%) of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold by such holder).
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under this Agreement may be
waived only with the written consent of the holders of at least fifty percent
(50%) of the Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold by
such holder).
21
<PAGE>
9.8 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified; (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall
be sent to the Company at the address as set forth on the signature page
hereof and to Purchaser at the address set forth on Exhibit A attached hereto
or at such other address as the Company or Purchaser may designate by ten
(10) days advance written notice to the other parties hereto.
9.9 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance
of this Agreement; provided, however, that the Company shall reimburse the
reasonable fees of and expenses of one special counsel for the Purchasers,
not to exceed $30,000.
9.10 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or
with respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
9.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.13 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
9.14 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN
EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH
CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
FROM SUCH QUALIFICATION BEING AVAILABLE.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
MAXIM PHARMACEUTICALS, INC. ______________________________
[PRINT NAME OF PURCHASER]
By: /s/ Larry Stambaugh
- ---------------------------------- By: __________________________
Larry Stambaugh, President
Title: _______________________
KEY HOLDERS:
/s/ Larry G. Stambaugh
- ----------------------------------
Larry G. Stambaugh
/s/ Dale Sander
- ----------------------------------
Dale Sander
/s/ Kurt Gehlsen
- ----------------------------------
Kurt Gehlsen
<PAGE>
MAXIM PHARMACEUTICALS, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
Page
1. Agreement To Sell And Purchase. . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of Shares. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Closing, Delivery And Payment.. . . . . . . . . . . . . . . . . . . . . 2
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery and Settlement. . . . . . . . . . . . . . . . . . . . . . 2
3. Representations And Warranties Of The Company.. . . . . . . . . . . . . 2
3.1 Organization, Good Standing and Qualification. . . . . . . . . . . 2
3.2 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Capitalization; Voting Rights. . . . . . . . . . . . . . . . . . . 2
3.4 Authorization; Binding Obligations.. . . . . . . . . . . . . . . . 3
3.5 SEC Filings; Financial Statements. . . . . . . . . . . . . . . . . 3
3.6 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Patents and Trademarks.. . . . . . . . . . . . . . . . . . . . . . 5
3.9 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 6
3.10 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Compliance with Laws; Permits. . . . . . . . . . . . . . . . . . . 7
3.13 Offering Valid.. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Other Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Disclosure.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Offering of Shares.. . . . . . . . . . . . . . . . . . . . . . . . 8
4. Representations And Warranties Of The Purchasers. . . . . . . . . . . . 8
4.1 Requisite Power and Authority. . . . . . . . . . . . . . . . . . . 9
4.2 Investment Representations.. . . . . . . . . . . . . . . . . . . . 9
4.3 Additional Regulation S Representations. . . . . . . . . . . . . .10
5. Conditions To Closing.. . . . . . . . . . . . . . . . . . . . . . . . .11
5.1 Conditions to Purchasers' Obligations at the Closing.. . . . . . .11
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
5.2 Conditions to Obligations of the Company.. . . . . . . . . . . . .12
6. Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
6.1 Registration Requirements. . . . . . . . . . . . . . . . . . . . .13
6.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .14
6.3 Transfer of Conversion Shares After Registration.. . . . . . . . .16
6.4 Additional Purchaser Covenants.. . . . . . . . . . . . . . . . . .16
6.5 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
7. Co-Sale Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
8. Rights of First Refusal . . . . . . . . . . . . . . . . . . . . . . . .19
9. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.1 Dividend Gross-Up Payment. . . . . . . . . . . . . . . . . . . . .21
9.2 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .21
9.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.4 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . .21
9.5 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . .21
9.6 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.7 Amendment and Waiver.. . . . . . . . . . . . . . . . . . . . . . .21
9.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
9.9 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
9.10 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . .22
9.11 Titles and Subtitles.. . . . . . . . . . . . . . . . . . . . . . .22
9.12 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . .22
9.13 Pronouns.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
9.14 California Corporate Securities Law. . . . . . . . . . . . . . . .22
ii.
<PAGE>
Schedule of Purchasers Exhibit A-1
Distribution List Exhibit A-2
Certificate of Designations Exhibit B
Form of Legal Opinion Exhibit C
Registration Statement Questionnaire Exhibit D
iii.
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A-1
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK INTO
NAME AND ADDRESS SHARES OF WHICH THE SERIES A PREFERRED
SERIES A IS CONVERTIBLE (AT THE AGGREGATE
PREFERRED INITIAL CONVERSION PRICE PURCHASE PRICE
- ----------------- -------- --------- ---------------------------- --------------
<S> <C> <C> <C> <C>
Alfred Berg 105,957 1,059,570 $10,304,318.25
85 London Wall
London EC2M 7BU
United Kingdom
</TABLE>
iv.
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A-2
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK INTO
NAME AND ADDRESS WHICH THE SERIES A PREFERRED IS
SHARES OF SERIES A CONVERTIBLE (AT THE INITIAL AGGREGATE
PREFERRED CONVERSION PRICE PURCHASE PRICE
- -------------------------------------- ------------------ ------------------------------- --------------
<S> <C> <C> <C>
Livforsakrings AB Skandia 20,565 205,650 $1,999,946.25
SE-103 50 Stockholm
Sweden
Dunross & Co. AB 4,113 41,130 $399,989.25
Vasagatan 40
SE-411 37 Gothemburg
Sweden
E. Ohman J:or Fondkommission AB 1,234 12,340 $120,006.50
Kapitalforvaltning
P.O. Box 7415
SE-103 91 Stockholm
Sweden
Svenska Handelsbanken S.A. Luxembourg 4,628 46,280 $450,073.00
P.O. Box 678
L-2016 Luxembourg
Luxembourg
SEB Lakemedelsfond 8,740 87,400 $849,965.00
ST S6
SE-106 40 Stockholm
Sweden
SEB Luxembourg 1,543 15,430 $150,056.75
16 Boulevard Royal
P.O. Box 487
L-2014 Luxembourg
Luxembourg
Kenth Petersson 987 9,870 $95,985.75
Heleneborgsgatan 20
SE-117 32 Stockholm
Sweden
Health Cap KB 12,299 122,990 $1,196,077.75
Sturegatan 32
SE-114 36 Stockholm
Sweden
Forsakringsbolaget SPP Omsesidigt 10,283 102,830 $1,000,021.75
SE-103 73 Stockholm
Sweden
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK INTO
NAME AND ADDRESS WHICH THE SERIES A PREFERRED IS
SHARES OF SERIES A CONVERTIBLE (AT THE INITIAL AGGREGATE
PREFERRED CONVERSION PRICE) PURCHASE PRICE
- -------------------------------------- ------------------ ------------------------------- --------------
<S> <C> <C> <C>
493 4,930 $47,944.25
Unibank S.A.
P.O. Box 562
L-2015 Luxembourg
Luxembourg
5:e AP Fonden 30,848 308,480 $2,999,968.00
P.O. Box 1639
SE-111 86 Stockholm
Sweden
Forenade Liv Omsesidigt
Gruppfors-kringsbolag 3,291 32,910 $320,049.75
Forenade Liv Gruppfors-kringsbolag AB 1,337 13,370 $130,023.25
Forenade Liv Kollaktivavtalsfors-krings AB 2,056 20,560 $199,946.00
c/o Forenade Liv, Finansenheten
SE-103 72 Stockholm
Sweden
Skogs-och Lantarbetsgivareforbundet 2,056 20,560 $199,946.00
P.O. Box 16006
SE-103 21 Stockholm
Sweden
Mikael Hellberg 154 1,540 $14,976.50
Bergsstigen 103
SE-138 33 Alta
Sweden
Alexander Lindstrom 493 4,930 $47,944.25
Lundagatan 36, uppg 10
SE-117 27 Stockholm
Sweden
Carl Henrik Permert 308 3,080 $29,953.00
Setterwallsvagen 6
SE-131 36 Nacka
Sweden
SEB Private Bank 164 1,640 $15,949.00
P.O. Box 487
L-2014 Luxembourg
Luxembourg
------------------ ------------------------------- --------------
TOTAL: 105,957 1,059,570 $10,304,318.25
------------------ ------------------------------- --------------
------------------ ------------------------------- --------------
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Maxim Pharmaceuticals, Inc.:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus.
KPMG LLP
San Diego, California
August 5, 1999
