<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 24, 1998
TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-21589 56-1930728
(Commission File Number) (IRS Employer Identification No.)
4 University Place, 4611 University Drive, Durham, North Carolina 27707
(Address of principal executive offices) (Zip Code)
(919) 493-5980
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS.
On December 24, 1998, Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), completed a private placement of 170,000 newly
issued shares of Series A Preferred Stock (the "Shares") pursuant to certain
Purchase Agreements, dated as of December 22, 1998 (the "Agreements"). The
consideration received by the Company for the Shares was $17,000,000 in cash,
or a price of $100.00 per share. Net proceeds to the Company from the sale
of the Shares were approximately $15,800,000. Vector Securities
International, Inc. acted as placement agent for the financing.
Each Share will convert into ten shares of Common Stock of the Company
upon the earlier of receipt of stockholder approval to be voted upon at the
Annual Stockholders' Meeting for 1999 or December 24, 1999, the first
anniversary of the closing of the sale. The conversion ratio is subject to
adjustment as provided in the Certificate of Designations, Preferences and
Rights of the Series A Preferred Stock. The holders of the Shares remaining
outstanding after June 15, 1999 shall receive a dividend of $5.00 per Share
upon the conversion of the Shares into Common Stock. This dividend will be
payable, at the Company's option, in cash or Common Stock. The Company has
also agreed to file a resale registration statement with the Securities and
Exchange Commission (the "SEC") relating to the sale of the Common Stock
issuable upon conversion of the Shares within 30 days after the conversion
date.
The shares were offered and sold to selected accredited institutional
investors (the "Purchasers") pursuant to a claim of exemption under
Regulation D promulgated by the SEC or, alternatively, under Section 4(2) of
the Securities Act of 1933, as amended (the "Act"). The Company did not use
any general advertisement or solicitation in connection with the offer or
sale of the Shares to the Purchasers. Each Purchaser represented and
warranted, among other things, that it was purchasing the Shares for
investment only and not with a view to distribution and that it was an
"accredited investor" (as defined in Regulation D). Appropriate legends were
affixed to the certificates for the Shares. The Shares are restricted and
may not be transferred or sold, except as permitted by the Agreements and
pursuant to a registration of the Shares or an available exemption from
registration.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- ------------------------
<S> <C>
4.1 Certificate of Designations, Preferences and Rights
of the Series A Preferred Stock, as filed with the
Secretary of State of the State of Delaware.
10.1 Form of Purchase Agreements with respect to the
Series A Preferred Stock.
99.1 Press Release, dated December 28, 1998.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ James A. Klein, Jr.
---------------------------------
James A. Klein, Jr.
Chief Financial Officer and Treasurer
Date: December 28, 1998
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item
----
<S> <C>
4.1 Certificate of Designations, Preferences and Rights of the
Series A Preferred Stock, as filed with the Secretary of State
of the State of Delaware.
10.1 Form of Purchase Agreements with respect to the Series A
Preferred Stock.
99.1 Press Release, dated December 28, 1998.
</TABLE>
<PAGE>
Exhibit 4.1
- -----------
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
of the
SERIES A PREFERRED STOCK
of
TRIANGLE PHARMACEUTICALS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
__________________________________
Triangle Pharmaceuticals, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Corporation as
required by Section 151 of the General Corporation Law at a meeting duly held
on December 16, 1998:
"RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the
Corporation's Second Restated Certificate of Incorporation, the Board of
Directors hereby creates a series of the Preferred Stock, par value $0.001
per share (the "Preferred Stock"), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Series A Preferred Stock:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock") and
the number of shares constituting the Series A Preferred Stock shall be One
Hundred Seventy Thousand (170,000) shares. Such number of shares may be
increased or decreased by resolution of the Board of Directors.
2. DIVIDEND RIGHTS. Subject to the rights of series of Preferred
Stock which may from time to time come into existence, the holders
("Holders") of Series A Preferred Stock that remain outstanding after June
15, 1999, shall be entitled to receive, upon conversion of such shares or, if
earlier, upon (i) the closing of a merger, consolidation or other transaction
described in Section 3.e. below or (ii) the occurrence of a liquidation,
dissolution or winding up described in Section 5 below, dividends at a rate
of $5.00 per share of Series A Preferred Stock per annum. Such dividends
shall be non-cumulative and shall be payable, at the discretion of the
Corporation, in cash or shares of the Corporation's Common Stock, par value
$0.001 per share (the "Common Stock"). Any shares of Common Stock issued by
the Corporation in payment of
<PAGE>
the dividend will be valued based on the average closing bid price of the
Common Stock on the market that the Board of Directors of the Corporation
determines is the primary trading market for the Common Stock for the ten
trading days ending three trading days prior to the date such dividend is
paid.
3. CONVERSION.
a. AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically convert into ten (10) shares of Common Stock of the
Corporation (the "Conversion Rate") upon the earlier of (i) the date the
stockholders of the Corporation (not including any votes cast by the Holders)
first approve the terms of the issuance and sale of the Series A Preferred
Stock or (ii) the first anniversary of the date upon which such share was
issued.
b. ADJUSTMENTS TO CONVERSION RATE FOR STOCK DIVIDENDS,
DISTRIBUTIONS, COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event
that the Corporation, at any time after the date upon which any shares of
Series A Preferred Stock were first issued, shall declare or pay, without
consideration, any dividend or other distribution on the Common Stock payable
in Common Stock or in any right to acquire Common Stock for no consideration,
or shall effect a subdivision of the outstanding shares of Common Stock into
a greater number of shares of Common Stock (by stock split, reclassification
or otherwise than by payment of a dividend or other distribution in Common
Stock or in any securities or rights to acquire Common Stock), or in the
event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Conversion Rate for the Series A Preferred
Stock in effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or increased, as
appropriate. In the event that the Corporation shall declare or pay, without
consideration, any dividend or other distribution on the Common Stock payable
in any right to acquire Common Stock for no consideration, then the
Corporation shall be deemed to have made a dividend or other distribution
payable in Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire Common Stock.
c. ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If
the Common Stock issuable upon conversion of the Series A Preferred Stock
shall be changed into the same or a different number of shares of any other
class or classes of stock, securities or assets, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for in subsection 3.b. above or a merger,
consolidation or disposition of assets provided for in subsection 3.e.
below), the Conversion Rate then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series A Preferred Stock shall be convertible into, and
provision shall be made to ensure that each of the Holders will thereafter
have the right to acquire and receive, in lieu of the number of shares of
Common Stock which the Holders would otherwise have been entitled to receive,
a number of shares of such other class or classes of stock, securities or
assets equivalent to the number of shares of Common Stock that would have
been subject to receipt by the Holders upon conversion of the Series A
Preferred Stock immediately before that change.
d. DIVIDENDS AND DISTRIBUTIONS. In the event that the
Corporation, at any time after the date upon which any shares of Series A
Preferred Stock were first issued, shall pay
2
<PAGE>
any dividend or make any other distribution to holders of its Common Stock of
any cash, evidence of indebtedness or other property (including any rights or
warrants to purchase any securities of the Corporation) of any nature
whatsoever (other than a dividend or other distribution provided for in
subsection 3.b. above, a reclassification or reorganization provided for in
subsection 3.c. above or a merger, consolidation or disposition of assets
provided for in subsection 3.e. below), the Corporation shall at the same
time pay or distribute to the Holders the cash, evidence of indebtedness or
other property the Holders would have been entitled to receive if the shares
of Series A Preferred Stock held by such Holders had been converted into
Common Stock immediately prior to the record date for such dividend or
distribution.
e. MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. If the
Corporation shall merge, consolidate or effect a share exchange with another
entity, or shall sell, transfer or otherwise dispose of all or substantially
all of its assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of
common stock or other securities of the successor or acquiring entity, or
property of any nature is to be received by or distributed to the holders of
Common Stock of the Corporation, then the Holders shall be entitled to
receive in respect of the Common Stock issuable upon conversion of this
Series A Preferred Stock, the amount of cash, shares of common stock, other
securities or other property that such Holders would have been entitled to
receive if such Holders had converted this Series A Preferred Stock in full
immediately prior to the occurrence of such merger, consolidation, share
exchange or disposition of assets. In the case of any such merger,
consolidation, share exchange or disposition of assets, the successor or
acquiring entity (and any affiliate thereof issuing securities) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Series A Preferred Stock to be performed
and observed by the Corporation and all of the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board and reasonably acceptable to the
Holders of a majority of the outstanding shares of Series A Preferred Stock)
in order to provide for adjustments of the Series A Preferred Stock issuable
upon conversion of this Series A Preferred Stock that shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 3.
The foregoing provisions shall similarly apply to successive mergers,
consolidations, share exchanges and dispositions of assets.
f. OTHER ACTION AFFECTING COMMON STOCK. If at any time or
from time to time the Corporation shall take any action affecting its Common
Stock, other than any action described in this Section 3, then, unless such
action will not have an adverse effect upon the Holders' rights, the number
of shares of Common Stock issuable upon conversion of this Series A Preferred
Stock shall be adjusted in such manner and at such time as the Board shall in
good faith determine (such determination to be reasonably acceptable to the
Holders of a majority of the then outstanding shares of Series A Preferred
Stock) to be equitable in the circumstances.
g. NO FRACTIONAL SHARES. No fractional shares shall be
issued upon conversion of the Series A Preferred Stock, and the Corporation
shall pay cash in an amount equal to the value of the fractional share of
Common Stock to which any Holder would otherwise be entitled. Whether or not
fractional shares are issuable upon such conversion for any Holder shall be
determined on the basis of the total number of shares of Series A Preferred
Stock held by such Holder that are at the time being converted into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
3
<PAGE>
h. NOTICE OF CERTAIN CORPORATE ACTION. If the Corporation
shall propose:
(i) to pay any dividend to the holders of its Common
Stock or to make any other distribution to the holders of its Common Stock;
(ii) to offer to the holders of its Common Stock rights
to subscribe for or to purchase any additional shares of Common Stock or any
options or Securities convertible into or exercisable for Common Stock;
(iii) to effect any reorganization or reclassification of
its Common Stock;
(iv) to effect any consolidation, merger or share
exchange or any sale, transfer or other disposition of all or substantially
all of its assets; or
(v) to effect the liquidation, dissolution or winding
up of the Corporation, then, in each such case, the Corporation shall give to
the Holders a notice of such proposed action, which shall specify the date on
which such dividend, distribution or rights offer, reclassification,
issuance, reorganization, consolidation, merger, share exchange, sale,
transfer, disposition, liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of Common Stock,
if any such date is to be fixed, and shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of
such action on the Common Stock, and the number of shares of Common Stock
that are issuable upon conversion of shares of Series A Preferred Stock after
giving effect to any adjustment that will be required as a result of such
action. Such notice shall be so given no less than ten (10) calendar days
prior to the date of the taking of such proposed action. The Corporation
shall also provide to the Holders copies of all materials it gives to the
holders of Common Stock in connection with any solicitation of votes or
consents at the same time it gives such materials pursuant to this subsection
3.h. to the holders of Common Stock. Except as required by law, failure to
give any such notice, or provide copies of such materials, or any defect
therein, shall not affect the validity of the proceedings, actions or events
taken in connection therewith, including but not limited to any of the
actions described in clauses (i) through (v) hereof.
i. NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out
of all the provisions of this Section 3 and in the taking of all such action
as may be necessary or appropriate in order to protect the conversion rights
of the Holders under this Section 3 against impairment.
4. COVENANTS. The Corporation shall not, without the affirmative
consent or approval of the Holders of the majority of the outstanding shares
of Series A Preferred Stock:
a. in any manner authorize, issue or sell any shares of
Series A Preferred Stock other than in connection with the transactions
approved by the Board of Directors of the Corporation on December 16, 1998;
4
<PAGE>
b. amend, repeal or modify any provision of this Certificate
of Designations (including reclassifying, canceling or in any manner altering
or changing the terms, designations, powers, preferences or relative,
optional or other special rights, or qualifications, limitations or
restrictions applicable thereto, of the Series A Preferred Stock); or
c. redeem any shares of Common Stock, unless (i) such offer
to redeem such shares is also made to the Holders or (ii) such offer is to
redeem shares of Common Stock issued to employees, consultants, officers or
directors of the Corporation and for which the Corporation has a repurchase
right upon cessation of service.
5. LIQUIDATION. In the event of any liquidation, dissolution or
winding up of this Corporation, either voluntary or involuntary, the Holders
shall be entitled to receive, on an as-converted to Common Stock basis based
on the Conversion Rate at the time in effect for the Series A Preferred Stock
as set forth in Section 3 above, with the holders of Common Stock, a pro rata
share of the assets of the Corporation legally available for distribution.
6. REDEMPTION. The Holders shall have no right to demand that
the Corporation redeem their shares of Series A Preferred Stock.
7. VOTING RIGHTS.
a. Each holder of shares of Series A Preferred Stock shall
be entitled to the right to the number of votes equal to the number obtained
by dividing $100.00 by the closing bid price of the Common Stock on the
Nasdaq National Market on the date on which the Series A Preferred Stock is
issued, and shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of the Corporation. Fractional votes shall not,
however, be permitted and any fractional voting rights resulting from the
above formula (after aggregating all shares into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded down
to the nearest whole number.
b. Except as otherwise provided herein or by law, the
Holders and the holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
c. Except as required by law or this Certificate of
Designations, Holders shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action."
[Remainder Of This Page Intentionally Left Blank]
5
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations, Preferences
and Rights of the Series A Preferred Stock is executed on behalf of the
Corporation by its Vice President, Business Development and Secretary this
22nd day of December, 1998.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Chris A. Rallis
-----------------------------------------
Chris A. Rallis,
Vice President, Business Development and
Secretary
6
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the __ day of December, 1998, by and between
Triangle Pharmaceuticals, Inc. (the "Company"), a corporation organized under
the laws of the State of Delaware, with its principal offices at 4 University
Place, 4611 University Drive, Durham, North Carolina 27707, and the purchaser
whose name and address is set forth on the signature page hereof (the
"Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SHARES. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to
170,000 shares (the "Shares") of the Series A Preferred Stock, par value $0.001
per share (the "Preferred Stock"), of the Company. Subject to adjustments
pursuant to the terms of the Certificate of Designations, Preferences and Rights
of the Preferred Stock (the "Certificate"), substantially in the form attached
hereto as Exhibit A, to be filed by the Company with the Secretary of State of
the State of Delaware on or prior to the Closing Date (as defined in Section 3),
each share of Preferred Stock shall be convertible into 10 shares (the
"Underlying Shares") of common stock, par value $0.001 per share, of the Company
(the "Common Stock") and shall possess such other rights and preferences as are
set forth in the Certificate.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SHARES. At the Closing (as
defined in Section 3), the Company will sell to the Purchaser, and the Purchaser
will buy from the Company, upon the terms and conditions hereinafter set forth,
the number of Shares (at the purchase price) shown below:
<TABLE>
<CAPTION>
Price Per
Number to Be Share In Aggregate
Purchased Dollars Price
------------ --------- ---------
<S> <C> <C>
</TABLE>
The Company proposes to enter into this same form of purchase agreement
with certain other investors (the "Other Purchasers") and expects to complete
sales of the Shares to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the "Purchasers," and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the "Agreements." The term "Placement
Agent" shall mean Vector Securities International, Inc.
SECTION 3. DELIVERY OF THE SHARES AT THE CLOSING. The completion of the
purchase and sale of the Shares (the "Closing") shall occur as soon as
practicable and as agreed
<PAGE>
by the parties hereto following receipt of evidence satisfactory to the
Company and the Purchaser that the Certificate has been filed with and
accepted by the Secretary of State of the State of Delaware, at a place and
time (the "Closing Date") to be agreed upon by the Company, and the Placement
Agent and of which the Purchasers will be notified by facsimile transmission
or otherwise.
At the Closing, the Company shall deliver to the Purchaser one or more
stock certificates registered in the name of the Purchaser, or in such
nominee name(s) as designated by the Purchaser in writing, representing the
number of Shares set forth in Section 2 above. The name(s) in which the
stock certificates are to be registered are set forth in the Stock
Certificate Questionnaire attached hereto as part of Appendix I. The
Company's obligation to complete the purchase and sale of the Shares and
deliver such stock certificate(s) to the Purchaser at the Closing shall be
subject to the following conditions, any one or more of which may be waived
by the Company: (a) receipt by the Company of same-day funds in the full
amount of the purchase price for the Shares being purchased hereunder; (b)
completion of the purchases and sales under the Agreements with all of the
Other Purchasers; (c) the accuracy of the representations and warranties made
by the Purchasers and the fulfillment of those undertakings of the Purchasers
to be fulfilled prior to the Closing; and (d) receipt of evidence
satisfactory to it that the Certificate has been filed with and accepted by
the Secretary of State of the State of Delaware. The Purchaser's obligation
to accept delivery of such stock certificate(s) and to pay for the Shares
evidenced thereby shall be subject to the following conditions: (a) the
accuracy in all material respects of the representations and warranties made
by the Company herein and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing; and (b) receipt
of evidence satisfactory to it that the Certificate has been filed with and
accepted by the Secretary of State of the State of Delaware. The Purchaser's
obligations hereunder are expressly not conditioned on the purchase by any or
all of the Other Purchasers of the Shares that they have agreed to purchase
from the Company.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents and warrants to, and covenants with, the Purchaser as
follows:
4.1. ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and the Company and
each of its subsidiaries is qualified to do business as a foreign corporation in
each jurisdiction in which qualification is required, except where failure to so
qualify would not have a Material Adverse Effect (as defined herein) on the
Company.
4.2. AUTHORIZED CAPITAL STOCK. Except as disclosed in or contemplated by
the disclosure documents, as described in Section 4.19 hereof, distributed on
December 18, 1998 to potential purchasers of the Company's Preferred Stock (the
"Offering Materials"), the Company had, at September 30, 1998, (a) 24,071,255
shares of Common Stock outstanding (excluding, as of September 30, 1998, (i)
2,252,406 shares of Common Stock issuable upon the exercise of outstanding
options (at a weighted average price of $10.85 per share) under the Company's
1996
-2-
<PAGE>
Stock Incentive Plan, as amended (the "1996 Plan"); (ii) an aggregate of
846,345 additional shares of Common Stock reserved for future option grants
or stock issuances under the 1996 Plan and the Company's Employee Stock
Purchase Plan; (iii) 46,000 shares of Common Stock issuable upon the exercise
of outstanding warrants (at a weighted average exercise price of $2.23 per
share); (iv) up to 2,100,000 shares of Common Stock issuable upon the
achievement of certain developmental milestones relating to the Company's
compounds; and (v) additional shares of Common Stock available for issuance
in 1999, 2000 and 2001 as a result of automatic annual increases in the
number of shares available for issuance under the 1996 Plan) and (b) no
shares of preferred stock issued or outstanding.
The issued and outstanding shares of the Company's Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and conform in all material
respects to the description thereof contained in the Offering Materials.
Except as disclosed or contemplated by in the Offering Materials (including
the issuance of options under the 1996 Plan and the issuance of shares of
Common Stock pursuant to the Company's Employee Stock Purchase Plan after
September 30, 1998), and the 4,800,000 shares of Common Stock the Company has
agreed to issue and sell pursuant to Stock Purchase Agreements dated December
10, 1998, the Company does not have outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock, any shares of capital stock of
any subsidiary or any such options, rights, convertible securities or
obligations. The description of the Company's stock, stock bonus and other
stock plans or arrangements and the options or other rights granted and
exercised thereunder, set forth in the Offering Materials accurately and
fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
4.3. ISSUANCE, SALE AND DELIVERY OF THE SHARES. The Shares have been
duly authorized and, when issued, delivered and paid for in the manner set
forth in this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, and will be entitled to the rights and benefits described
in the Certificate. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Shares by the
Company pursuant to these Agreements or as a result of the issuance of the
Underlying Shares upon the conversion of the Shares. No stockholder of the
Company has any right (which has not been waived or has not expired by reason
of lapse of time following notification of the Company's intent to file a
registration statement on behalf of the Purchasers pursuant to Section 7.1
hereof (the "Registration Statement")) to require the Company to register the
sale of any securities owned by such stockholder under the Securities Act of
1933, as amended (the "Securities Act"), in the Registration Statement. No
further approval or authority of the stockholders or the Board of Directors
of the Company will be required for the issuance and sale of the Shares to be
sold by the Company as contemplated herein. The Underlying Shares of Common
Stock have been duly reserved for issuance upon the conversion of the Shares
and the Underlying Shares, when issued and delivered in accordance with the
terms of the Certificate, will be duly and validly issued,
-3-
<PAGE>
fully paid and nonassessable.
4.4. DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company has full legal right, corporate power and authority to enter into the
Agreements and perform the transactions contemplated hereby. The Agreements
have been duly authorized, executed and delivered by the Company. The making
and performance of the Agreements by the Company and the consummation of the
transactions herein contemplated will not violate any provision of the
organizational documents of the Company or any of its subsidiaries and will
not result in the creation of any lien, charge, security interest or
encumbrance upon any assets of the Company pursuant to the terms or
provisions of, or will not conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time or
both, a default under any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of their respective properties may be bound or
affected and in each case which would have, a material adverse effect on the
condition (financial or otherwise), properties, business, prospects or
results of operations of the Company and its subsidiaries, taken as a whole
(a "Material Adverse Effect") or, to the Company's knowledge, any statute or
any authorization, judgment, decree, order, rule or regulation of any court
or any regulatory body, administrative agency or other governmental body
applicable to the Company or any of its subsidiaries or any of their
respective properties. No consent, approval, authorization or other order of
any court, regulatory body, administrative agency or other governmental body
is required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, except for
compliance with the Blue Sky laws and federal securities laws applicable to
the offering of the Shares and the filing of the Certificate with the
Secretary of State of the State of Delaware. Upon their execution and
delivery, and assuming the valid execution thereof by the respective
Purchasers, the Agreements will constitute valid and binding obligations of
the Company, enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except
as the indemnification agreements of the Company in Section 7.3 hereof may be
legally unenforceable.
4.5. ACCOUNTANTS. PricewaterhouseCoopers LLP, who have expressed their
opinion with respect to the consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
are independent accountants as required by the Securities Act and the rules
and regulations promulgated thereunder (the "Rules and Regulations").
4.6. NO DEFAULTS. Except as disclosed in the Offering Materials, and
except as to defaults, violations and breaches which individually or in the
aggregate would not be material to the Company and its subsidiary, taken as
whole, neither the Company nor any of its subsidiaries is in violation or
default of any provision of its certificate of incorporation or bylaws, or other
organizational documents, or in breach of or default with respect to any
provision of any
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agreement, judgment, decree, order, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which it is a
party or by which it or any of its properties are bound; and there does not
exist any state of fact which, with notice or lapse of time or both, would
constitute an event of default on the part of the Company or any of its
subsidiaries as defined in such documents, except such defaults which
individually or in the aggregate would not be material to the Company and its
subsidiary, taken as a whole.
4.7. CONTRACTS. The contracts described in, or filed as exhibits to
the Offering Materials, that are material to the Company and its
subsidiaries, taken as a whole, are in full force and effect on the date
hereof; and neither the Company nor any of its subsidiaries, nor, to the
Company's knowledge, any other party is in breach of or default under any of
such contracts which would have a Material Adverse Effect.
4.8. NO ACTIONS. Except as disclosed in the Offering Materials, there
are no legal or governmental actions, suits or proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its
subsidiaries is or may be a part or of which property owned or leased by the
Company or any of its subsidiaries is or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
individually or in the aggregate, might prevent or might reasonably be
expected to materially and adversely affect the transactions contemplated by
this Agreement or result in a material adverse change in the condition
(financial or otherwise), properties, business, prospects or results of
operations of the Company and its subsidiaries, taken as a whole (a "Material
Adverse Change"); and no labor disturbance by the employees of the Company or
any of its subsidiaries exists, to the Company's knowledge, or is imminent
which might reasonably be expected to have a Material Adverse Effect. Except
as disclosed in the Offering Materials, neither the Company nor any of its
subsidiaries is party to or subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
4.9. PROPERTIES. Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned by them
in the consolidated financial statements included in the Offering Materials,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such consolidated financial
statements, or (ii) those which are not material in amount and do not
adversely affect the use made and promised to be made of such property by the
Company or its subsidiaries. Each of the Company and its subsidiaries holds
its leased properties under valid and binding leases, with such exceptions as
are not materially significant in relation to their respective businesses.
Except as disclosed in the Offering Materials, each of the Company and its
subsidiaries owns or leases all such properties as are necessary to its
operations as now conducted.
4.10. NO MATERIAL CHANGE. Since September 30, 1998 and except as
described in or specifically contemplated by the Offering Materials, (i) neither
the Company nor its subsidiaries has incurred any material liabilities or
obligations, indirect or contingent, or entered into any material verbal or
written agreement or other transaction which is not in the ordinary
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course of business or which could reasonably be expected to result in a
material reduction in the future earnings of the Company or its subsidiaries;
(ii) neither the Company nor its subsidiaries has sustained any material loss
or interference with its businesses or properties from fire, flood,
windstorm, accident or other calamity not covered by insurance; (iii) neither
the Company nor its subsidiaries has paid or declared any dividends or other
distributions with respect to its capital stock and neither the Company nor
its subsidiaries is in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the
capital stock of the Company other than (a) the sale of the Shares hereunder
and shares or options issued pursuant to employee equity incentive plans or
purchase plans approved by the Company's Board of Directors and (b) the
Company's agreement to issue and sell 4,800,000 shares of Common Stock
pursuant to the Stock Purchase agreements dated December 10, 1998; (v) there
has not been any increase in indebtedness material to the Company (other than
in the ordinary course of business); and (vi) except for the operating losses
and negative cash flow the Company has continued to incur, there has not been
a Material Adverse Change.
4.11. INTELLECTUAL PROPERTY. Except as disclosed in or specifically
contemplated by the Offering Materials, (i) the Company and its subsidiaries
own or have obtained valid and enforceable licenses or options for the
inventions, patent applications, patents, trademarks (both registered and
unregistered), tradenames, copyrights and trade secrets necessary for the
conduct of the Company's and its subsidiaries' respective businesses as
currently conducted and as the Offering Materials indicate the Company and
its subsidiaries contemplate conducting (collectively, the "Intellectual
Property"); and (ii) to the Company's knowledge (for each of the following
subsections (a) through (e)): (a) there are no third parties who have any
ownership rights to any Intellectual Property that is owned by, or has been
licensed to, the Company or its subsidiaries for the product indications
described in the Offering Materials that would preclude the Company or its
subsidiaries from conducting their respective businesses as currently
conducted and as the Offering Materials indicate the Company and its
subsidiaries contemplate conducting, except for the ownership rights of the
owners of the Intellectual Property licensed or optioned by the Company or
its subsidiaries; (b) there are currently no sales of any products that would
constitute an infringement by third parties of any Intellectual Property
owned, licensed or optioned by the Company or its subsidiaries; (c) there is
no pending or threatened action, suit, proceeding or claim by others
challenging the rights of the Company or its subsidiaries in or to any
Intellectual Property owned, licensed or optioned by the Company or its
subsidiaries, other than non-material claims; (d) there is no pending or
threatened action, suit, proceeding or claim by others challenging the
validity or scope of any Intellectual Property owned, licensed or optioned by
the Company or its subsidiaries, other than non-material claims; and (e)
there is no pending or threatened action, suit, proceeding or claim by others
that the Company or its subsidiaries infringe or otherwise violate any
patent, trademark, copyright, trade secret or other proprietary right of
others, other than non-material claims.
4.12. COMPLIANCE. Neither the Company nor any of its subsidiaries has
been advised, or has reason to believe, that it is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and
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regulations; except where failure to be so in compliance would not have a
Material Adverse Effect.
4.13. TAXES. Each of the Company and its subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and neither the Company nor
its subsidiaries has knowledge of a tax deficiency which has been or might be
asserted or threatened against it which could have a Material Adverse Effect.
4.14. TRANSFER TAXES. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection
with the sale and transfer of the Shares to be sold to the Purchaser
hereunder will be, or will have been, fully paid or provided for by the
Company and all laws imposing such taxes will be or will have been fully
complied with.
4.15. INVESTMENT COMPANY. The Company is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940,
as amended.
4.16. OFFERING MATERIALS. The Company has not distributed and will not
distribute prior to the Closing Date any offering material related to the
offering and sale of the Shares other than the term sheet, the Agreements and
the Offering Materials or any amendment or supplement thereto. The Company
has not in the past nor will it hereafter take any action independent of the
Placement Agent to sell, offer for sale or solicit offers to buy any
securities of the Company which would bring the offer, issuance or sale of
the Shares, as contemplated by this Agreement, within the provisions of
Section 5 of the Securities Act, unless such offer, issuance or sale was or
shall be within the exemptions of Section 4 of the Securities Act.
4.17. INSURANCE. Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts that the Company reasonably
believes is adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the
Company or its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.
4.18. CONTRIBUTIONS. Neither the Company at any time since its
incorporation nor its subsidiaries at any time since they were acquired by
the Company has, directly or indirectly, (i) made any unlawful contribution
to any candidate for public office, or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by
the laws of the United States or any jurisdiction thereof.
4.19. OFFERING MATERIALS. The Company represents and warrants that the
information contained in the following documents, which the Placement Agent has
furnished to
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the Purchaser, or will furnish prior to the Closing, is or will be true and
correct in all material respects and does not omit a material fact necessary
to make the statements therein not misleading as of their respective final
dates:
(a) the Company's Current Reports on Form 8-K filed with the Commission on
September 11, 1997, November 12, 1997 and April 2, 1998;
(b) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (without exhibits);
(c) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998;
(d) the Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders; and
(e) a Summary of the Company's Business and Risks dated December 15, 1998.
4.20. LEGAL OPINION. Prior to the Closing, Brobeck, Phleger & Harrison
LLP, counsel to the Company, will deliver its legal opinion to the Placement
Agent reasonably satisfactory to the Placement Agent and counsel to the
Placement Agent. Such opinion shall also state that each of the Purchasers
may rely thereon as though it were addressed directly to such Purchaser.
4.21. INTELLECTUAL PROPERTY OPINION. If requested by the Placement
Agent, prior to the Closing, King & Spalding, patent counsel for the Company,
will deliver its legal opinion to the Placement Agent reasonably satisfactory
to the Placement Agent and counsel to the Placement Agent. Such opinion
shall state that each of the Purchasers may rely thereon as though it were
addressed directly to such Purchaser.
4.22. CERTIFICATE. At the Closing, the Company will deliver to
Purchaser a certificate executed by the Chairman of the Board or President
and the chief financial or accounting officer of the Company, dated the
Closing Date, in form and substance reasonably satisfactory to the
Purchasers, to the effect that the representations and warranties of the
Company set forth in this Section 4 are true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, and the
Company has complied with all the agreements and satisfied all the conditions
herein on its part to be performed or satisfied on or prior to such Closing
Date.
4.23. STOCKHOLDER APPROVAL. The Company covenants and agrees that it will
(i) include in its proxy statement for its 1999 Annual Meeting of Stockholders a
proposal seeking stockholder approval of the terms of the issuance and sale of
the Shares pursuant to the Agreements and (ii) note in the proposal that the
Company's Board of Directors unanimously
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recommends that stockholders approve the terms of the issuance and sale of
the Shares pursuant to the Agreements.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
(a) The Purchaser represents and warrants to, and covenants with, the Company
that: (i) the Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Shares; (ii) the Purchaser is
acquiring the number of Shares set forth in Section 2 above in the ordinary
course of its business and for its own account for investment (as defined for
purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the
regulations thereunder) only and with no present intention of distributing any
of such Shares (or the Underlying Shares) or any arrangement or understanding
with any other persons regarding the distribution of such Shares (or the
Underlying Shares); (iii) the Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares or
Underlying Shares except in compliance with the Securities Act and the Rules and
Regulations; (iv) the Purchaser has completed or caused to be completed the
Stock Certificate Questionnaire, attached hereto as Appendix I, and the answers
thereto are true and correct as of the date hereof; (v) the Purchaser will
complete and deliver, or cause to be completed and delivered, to the Company
within 10 days after the date the Shares are converted into Underlying Shares,
the Registration Statement Questionnaire, attached hereto as Appendix I, for use
in preparation of the Registration Statement, and the answers thereto will be
true and correct as of the date of the Questionnaire is delivered to the Company
and as of the effective date of the Registration Statement; (vi) the Purchaser
has, in connection with its decision to purchase the number of Shares set forth
in Section 2 above, (a) relied solely upon the Offering Materials and the
representations and warranties of the Company contained herein and (b) had a
reasonable opportunity to ask questions of, and receive answers from, the
Company concerning the Company and the offering of the Shares; (vii) the
Purchaser acknowledges that the price and terms of the Preferred Stock offered
hereby have been determined by negotiation based in part on the market price for
the Common Stock, and that it does not necessarily bear any relationship to the
assets, book value or potential performance of the Company or any other
recognized criteria of value; and (viii) the Purchaser is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act.
(b) The Purchaser hereby covenants with the Company not to (1) make any
sale of the Shares except in compliance with the Securities Act and the Rules
and Regulations, and the Purchaser acknowledges and agrees that the Shares are
not transferable on the books of the Company unless the certificate submitted to
the transfer agent evidencing the Shares is accompanied by an opinion of
counsel, satisfactory in form and substance to the Company, to the effect that
the Shares have been sold in compliance with the Securities Act and the Rules
and Regulations and any applicable state securities or Blue Sky laws, and (2)
make any sale of the Underlying Shares without satisfying the prospectus
delivery requirement under the Securities
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Act, and the Purchaser acknowledges and agrees that the Underlying Shares are
not transferable on the books of the Company unless the certificate submitted
to the transfer agent evidencing the Underlying Shares is accompanied by a
separate officer's certificate: (i) in the form of Appendix II hereto, (ii)
executed by an officer of, or other authorized person designated by, the
Purchaser and (iii) to the effect that (A) the Underlying Shares have been
sold in accordance with the Registration Statement, the Securities Act and
the Rules and Regulations and any applicable state securities or Blue Sky
laws and (B) the requirement of delivering a current prospectus has been
satisfied. The Purchaser acknowledges that there may occasionally be times
when the Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. The Purchaser hereby
covenants that it will not sell any Underlying Shares pursuant to said
prospectus during the period commencing at the time at which the Company
gives the Purchaser written notice of the suspension of the use of said
prospectus and ending at the time the Company gives the Purchaser written
notice that the Purchaser may thereafter effect sales pursuant to said
prospectus. The Purchaser further covenants to notify the Company promptly
of the sale of all of its Underlying Shares.
(c) The Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
and contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except
as the indemnification agreements of the Purchaser in Section 7.3 hereof may
be legally unenforceable.
SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares being purchased and the payment
therefor.
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SECTION 7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.
7.1. REGISTRATION PROCEDURES AND EXPENSES. The Company shall,
following the conversion of the Shares into Common Stock, which shall occur
upon the earlier of either (i) receipt of approval by the Company's
stockholders of the terms of the issuance and sale of the Shares, upon such
approval the Shares shall be converted into shares of Common Stock or (ii)
the one-year anniversary of the Closing Date, upon which the Shares shall
automatically be converted into shares of Common Stock (the earlier to occur
of such dates, the "Conversion Date"):
(a) as soon as practicable, but in no event later than 30 days following
the Conversion Date, file with the Commission the Registration
Statement on Form S-3 relating to the sale of the Underlying Shares by
the Purchaser from time to time through the automated quotation system
of the Nasdaq National Market or the facilities of any national
securities exchange on which the Common Stock is then traded or in
privately-negotiated transactions;
(b) use its reasonable efforts, subject to receipt of necessary
information from the Purchasers, to cause the Commission to notify the
Company of the Commission's willingness to declare the Registration
Statement effective within 60 days after the Registration Statement is
filed by the Company;
(c) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement
effective until the earlier of (i) twenty-four months after the
Closing Date or (ii) the date on which the Underlying Shares may be
resold by the Purchasers without registration by reason of Rule 144(k)
under the Securities Act or any other rule of similar effect;
(d) furnish to the Purchaser with respect to the Underlying Shares
registered under the Registration Statement (and to each underwriter,
if any, of such Underlying Shares) such reasonable number of copies of
prospectuses and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition
of all or any of the Underlying Shares by the Purchaser; PROVIDED,
HOWEVER, that the obligation of the Company to deliver copies of
prospectuses to the Purchaser shall be subject to the receipt by the
Company of reasonable assurances from the Purchaser that the Purchaser
will comply with the applicable provisions of the Securities Act and
of such other securities or blue sky laws as may be applicable in
connection with any use of such prospectuses;
(e) file documents required of the Company for normal Blue Sky clearance
in
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states specified in writing by the Purchaser; PROVIDED, HOWEVER,
that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented; and
(f) bear all expenses in connection with the procedures in paragraphs (a)
through (e) of this Section 7.1 and the registration of the Underlying
Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Purchaser or the
Other Purchasers or underwriting discounts, brokerage fees and
commissions incurred by the Purchaser or the Other Purchasers, if any.
7.2. TRANSFER OF UNDERLYING SHARES AFTER REGISTRATION. The Purchaser
agrees that it will not effect any disposition of the Underlying Shares or
its right to purchase the Underlying Shares that would constitute a sale
within the meaning of the Securities Act, except as contemplated in the
Registration Statement referred to in Section 7.1, and that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding the Purchaser or its Plan of Distribution.
7.3. INDEMNIFICATION. For the purpose of this Section 7.3:
(i) the term "Purchaser/Affiliate" shall include the Purchaser and any
affiliate of such Purchaser; and
(ii) the term "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1.
(a) The Company agrees to indemnify and hold harmless each of the
Purchasers and each person, if any, who controls any Purchaser within the
meaning of the Securities Act, against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchasers or such
controlling person may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, including the prospectus, financial statements and
schedules, and all other documents filed as a part thereof, as amended at the
time of effectiveness of the Registration Statement, including any
information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules
and Regulations, or the prospectus, in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, or filed as part of
the Registration Statement at the time of effectiveness if no Rule 424(b)
filing is required (the "Prospectus"), or any amendment or supplement
thereto, or arise out
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of or are based upon the omission or alleged omission to state in any of them
a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they
were made, not misleading, or arise out of or are based in whole or in part
on any inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder or under law, and will reimburse each Purchaser and
each such controlling person for any legal ad other expenses as such expenses
are reasonably incurred by such Purchaser or such controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company: by or on behalf of the
Purchaser expressly for use therein, or (ii) the failure of such Purchaser to
comply with the covenants and agreements contained in Sections 5(b) or 7.2
hereof respecting sale of the Underlying Shares, or (iii) the inaccuracy of
any representations made by such Purchaser herein or (iv) any statement or
omission 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 will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company
within the meaning of the Securities Act, against any losses, claims,
damages, liabilities or expenses to which the Company, each of its directors,
each of its officers who signed the Registration Statement or controlling
person may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Purchaser) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure to comply
with the covenants and agreements contained in Sections 5(b) or 7.2 hereof
respecting the sale of the Underlying Shares or (ii) the inaccuracy of any
representation made by such Purchaser herein or (iii) any untrue or alleged
untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of any Purchaser expressly for use therein, and will reimburse the Company,
each of its directors, each of its officers who signed the Registration
Statement or controlling person for any legal and other expense reasonably
incurred by the Company, each of its directors, each of it officers who
signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or
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action.
(c) Promptly after receipt by an indemnified party under this Section
7.3 of notice of the threat or commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 7.3 promptly notify the indemnifying
party in writing thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section 7.3 or to the extent it is not prejudiced
as a result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled
to participate in, and, to the extent that it may wish, jointly with all
other indemnifying parties similarly notified, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of
such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7.3 for any legal or other expenses subsequentlyincurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel, approved by
such indemnifying party in the case of paragraph (a), representing the
indemnified parties who are parties to such action) or (ii) the indemnified
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of action, in each of which cases the reasonable
fees and expenses of counsel shall be at the expense of the indemnifying
party.
(d) If the indemnification provided for in this Section 7.3 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) of this Section 7.3 in respect to any losses, claims, damages, liabilities
or expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Purchaser from the placement of the Preferred Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but the relative fault of the
Company and the Purchaser in
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<PAGE>
connection with the statements or omissions or inaccuracies in the
representations and warranties in this Agreement which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received
by the Company on the one hand and each Purchaser on the other shall be
deemed to be in the same proportion as the amount paid by such Purchaser to
the Company pursuant to this Agreement for the Shares purchased by such
Purchaser into which the Underlying Shares that were sold pursuant to the
Registration Statement were converted bears to the difference (the
"Difference") between the amount such Purchaser paid for the Shares purchased
by such Purchaser into which the Underlying Shares that were sold pursuant to
the Registration Statement were converted and the amount received by such
Purchaser from such sale of the Underlying Shares. The relative fault of
such Selling Stockholders and each Purchaser shall be determined by reference
to, among other things, whether the untrue or alleged statement o a material
fact or the omission or alleged omission to state a material fact or the
inaccurate or the alleged inaccurate representation and/or warranty relates
to information supplied by the Company or by such Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses referred
to above shall be deemed to include, subject to the limitations set forth in
paragraph (c) of this Section 7.3, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in paragraph (c) of
this Section 7.3 with respect to the notice of the threat or commencement of
any threat or action shall apply if a claim for contribution is to be made
under this paragraph (d); PROVIDED, HOWEVER, that no additional notice shall
be required with respect to any threat or action for which notice has been
given under paragraph (c) for purposes of indemnification. The Company and
each Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 7.3 were determined solely by pro rata allocation
(even if the Purchaser were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in this paragraph. Notwithstanding the provisions
of this Section 7.3, no Purchaser shall be required to contribute any amount
in excess of the amount by which the Difference exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Purchasers' obligations to contribute pursuant to this Section 7.3 are
several and not joint.
7.4. TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions
precedent imposed by Section 5 or this Section 7 upon the transferability of
the Shares and the Underlying Shares shall cease and terminate as to any
particular number of the Shares or Underlying Shares upon the passage of
twenty-four months from the Closing Date or at such time as an opinion of
counsel satisfactory in form and substance to the Company shall have been
rendered to the effect that such conditions are not necessary in order to
comply with the Securities Act.
7.5. INFORMATION AVAILABLE. So long as the Registration Statement is
effective covering the resale of Underlying Shares owned by the Purchaser, the
Company will furnish to
-15-
<PAGE>
the Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Stockholders, within 120 days after the end
of each fiscal year of the Company), one copy of (i) its Annual Report
to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants), (ii)
if not included in substance in the Annual Report to Stockholders, its
Annual Report on Form 10-K, (iii) if not included in substance in its
Quarterly Reports to Shareholders, its quarterly reports on Form 10-Q,
and (iv) a full copy of the particular Registration Statement covering
the Underlying Shares (the foregoing, in each case, excluding
exhibits);
(b) upon the reasonable request of the Purchaser, a reasonable number of
copies of the prospectuses to supply to any other party requiring such
prospectuses;
and the Company, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Underlying Shares subject to appropriate confidentiality
limitations.
SECTION 8. BROKER'S FEE. The Purchaser acknowledges that the Company
intends to pay to the Placement Agent a fee in respect of the sale of the Shares
to the Purchaser. Each of the parties hereto hereby represents that, on the
basis of any actions and agreements by it, there are no other brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchaser.
SECTION 9. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
(a) if to the Company, to:
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707
Attn: General Counsel
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<PAGE>
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street
Suite 1300
San Diego, California 92101
Attn: John A. Denniston, Esq.
or to such other person at such other place as the Company shall
designate to the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end of this
Agreement, or at such other address or addresses as may have been
furnished to the Company in writing.
SECTION 10. CHANGES. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.
SECTION 11. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 12. SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the federal
law of the United States of America.
SECTION 14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
TRIANGLE PHARMACEUTICALS, INC.
By
--------------------------------
Print or Type:
Name of Purchaser
(Individual or Institution):
--------------------------------
Name of Individual representing
Purchaser (if an Institution):
--------------------------------
Title of Individual representing
Purchaser (if an Institution):
--------------------------------
Signature by:
Individual Purchaser or Individual
representing Purchaser:
--------------------------------
Address:
---------------------
Telephone:
---------------------
Telecopier:
---------------------
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<PAGE>
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Purchase Agreement which follows)
A. Complete the following items on BOTH Purchase Agreements:
1. Page 18 - Signature:
(i) Name of Purchaser (Individual or Institution)
(ii) Name of Individual representing Purchaser (if an Institution)
(iii) Title of Individual representing Purchaser (if an Institution)
(iv) Signature of Individual Purchaser or Individual representing Purchaser
2. Appendix I - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire.
Appendix I - Registration Statement Questionnaire:
Provide the information requested by the Registration Statement
Questionnaire.
3. Return BOTH properly completed and signed Purchase Agreements
including the properly completed Appendix I to:
Vector Securities International, Inc.
Suite 350
1751 Lake Cook Road
Deerfield, Illinois 60015
Attn: Bernhard Hoffmann
B. Instructions regarding the transfer of funds for the purchase of Shares
will be sent by facsimile to the Purchaser by the Placement Agent at a
later date.
C. Upon conversion of the Shares into Underlying Shares, the Purchaser shall,
within 10 days, complete and deliver to the Company the Registration
Statement Questionnaire, attached hereto as Appendix I, for use by the
Company in preparation of the Registration Statement.
D. Upon the resale of the Underlying Shares by the Purchasers after the
Registration Statement covering the Underlying Shares is effective, as
described in the Purchase Agreement, the Purchaser:
(i) must deliver a current prospectus of the Company to the buyer
(prospectuses must be obtained from the Company at the
Purchaser's
<PAGE>
request); and
(ii) must send a letter in the form of Appendix II to the Company so
that the Underlying Shares may be properly transferred.
<PAGE>
APPENDIX I
(one of two)
TRIANGLE PHARMACEUTICALS, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be
registered in (this is the name that will appear
on your stock certificate(s)). You may use a
nominee name if appropriate: ------------------------
2. The relationship between the Purchaser of the
Shares and the Registered Holder listed
in response to item 1 above: ------------------------
3. The mailing address of the Registered Holder
listed in response to item 1 above: ------------------------
------------------------
------------------------
------------------------
4. The Social Security Number or Tax
Identification Number of the Registered
Holder listed in response to item 1 above: ------------------------
<PAGE>
APPENDIX I
(two of two)
TRIANGLE PHARMACEUTICALS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Shareholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares that you or your organization will
own immediately after Closing, including those Underlying Shares issued upon
conversion of the Shares purchased by you or your organization pursuant to this
Purchase Agreement and those shares of Common Stock purchased by you or your
organization through other transactions:
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
<PAGE>
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
_____________________________________________________________
[fill in official name of individual or institution] hereby
certifies that he/she [said institution] is the Purchaser of the shares
evidenced by the attached certificate, and as such, sold such shares on
_____________ in accordance with
[date]
Registration Statement number _____________________________________
[fill in the number of or otherwise
________________________________ and the requirement of delivering a
identify Registration Statement]
current prospectus by the Company has been complied with in connection
with such sale.
Print or Type:
Name of Purchaser
(Individual or
Institution):
-----------------------
Name of Individual
representing
Purchaser (if an
Institution)
-----------------------
Title of Individual
representing
Purchaser (if an
Institution):
-----------------------
Signature by:
Individual Purchaser
or Individual repre-
senting Purchaser:
-----------------------
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF THE PREFERRED STOCK
<PAGE>
Exhibit 99.1
- ------------
CONTACT:
Carolyn Underwood Douglas MacDougall
Vice President, Commercial Operations Priscilla Harlan
Triangle Pharmaceuticals, Inc. Feinstein Kean Partners Inc.
(919) 493-5980 (617) 577-8110
FOR IMMEDIATE RELEASE:
- ----------------------
TRIANGLE PHARMACEUTICALS ANNOUNCES
SALE OF PREFERRED STOCK
DURHAM, NC, DECEMBER 28, 1998 - Triangle Pharmaceuticals, Inc. (Nasdaq:
VIRS) today announced the sale of 170,000 shares of Preferred Stock to
selected institutional investors for $17 million. Vector Securities
International, Inc. served as placement agent for the financing.
Each share of Preferred Stock will convert into ten shares of Common Stock
upon the earlier of receipt of stockholder approval or the first anniversary
of the closing of the sale. The holders of the Preferred Stock remaining
outstanding after June 15, 1999 shall receive a dividend of $5.00 per share
upon the conversion of the Preferred Stock into Common Stock. This dividend
will be payable, at the Company's option, in cash or Common Stock. The
Company has also agreed to file a resale registration statement with the
Securities and Exchange Commission relating to the sale of the Common Stock
issuable upon conversion of the Preferred Stock within 30 days after the
conversion date.
The Company intends to use the net proceeds from the sale of the preferred
stock for general corporate purposes, including drug development programs
such as preclinical testing and clinical trials, the payment of license fees,
the costs of obtaining patent protection and other payments to licensors, the
potential acquisition of additional drug candidates, the development of a
commercial infrastructure, the development of computerized systems to support
clinical trials and working capital.
This sale is in addition to the 4.8 million shares of Common Stock which the
Company agreed to sell to other institutional and accredited investors,
previously announced in a press release dated December 15, 1998. The closing
of this earlier financing will occur concurrently with the declaration of
effectiveness of a resale registration statement relating to such shares.
<PAGE>
Triangle Pharmaceuticals, Inc., based in Durham, North Carolina, is engaged
in the development of new drug candidates primarily in the antiviral area,
with a particular focus on therapies for the human immunodeficiency virus,
including the acquired immunodeficiency syndrome, and hepatitis B virus.
Prior to their employment with the Company, members of the Company's
management team played instrumental roles in the identification, clinical
development and commercialization of several leading antiviral therapies.
More information about Triangle's portfolio, management and product
development strategy is available on the Triangle website at:
HTTP://WWW.TRIPHARM.COM.
Statements in this press release may constitute forward-looking statements
and are subject to numerous risks and uncertainties, including the failure to
successfully complete pivotal clinical trials, the Company's future capital
needs, the inability to commercialize FTC and DAPD due to other patent rights
held by third parties, the Company's ability to obtain additional funding,
patent protection and required regulatory approvals for its drug candidates,
the development of competitive products by others, the cost of coactive
therapy and the extent to which coactive therapy achieves market acceptance,
the Company's success in identifying new drug candidates, acquiring rights to
the candidates on favorable terms and developing any candidates to which the
Company acquires any rights, and these and other risks detailed from time to
time in the Company's filings with the Securities and Exchange Commission.
The actual results may differ materially from those projected in this press
release. The Company disclaims any obligation to update statements in this
press release.
