<PAGE>
As filed with the Securities and Exchange Commission on September 3, 1996
Registration No. 333 - 9681
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
MGI PHARMA, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1364647
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 300 E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
(612) 935-7335
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
Charles N. Blitzer, President and Chief Executive Officer
MGI PHARMA, INC.
Suite 300 E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
(612) 935-7335
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
COPIES TO:
TIMOTHY S. HEARN ROBERT A. SCHWED
DORSEY & WHITNEY LLP REBOUL, MacMURRAY, HEWITT, MAYNARD & KRISTOL
220 SOUTH SIXTH STREET 45 ROCKFELLER PLAZA
MINNEAPOLIS, MINNESOTA 55402 NEW YORK, NEW YORK 10111
(612) 340-2600 (212) 841-5700
--------------------
Approximate date of commencement of proposed sale to the public: AS SOON
AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
P R O S P E C T U S
[LOGO]
800,000 SHARES OF COMMON STOCK MINIMUM
1,200,000 SHARES OF COMMON STOCK MAXIMUM
----------------
All of the shares of Common Stock offered hereby (the "Shares") are being
sold by MGI PHARMA, INC. (the "Company").
The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "MOGN." On August 29, 1996, the last sale price for the Common
Stock as reported by Nasdaq was $5 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================
Price to Commissions Proceeds to
Public and Fees(1) Company (2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share ............ $ $ $
- -------------------------------------------------------------------------------
Total Minimum
(800,000 Shares).... $ $ $
- -------------------------------------------------------------------------------
Total Maximum
(1,200,000 Shares)... $ $ $
- -------------------------------------------------------------------------------
===============================================================================
</TABLE>
(1) The Shares are being offered by the Company principally to selected
institutional and accredited investors. T. R. Winston Capital, Inc. (the
"Placement Agent") has been retained to act, on a best efforts basis, as
placement agent for the Company in connection with this transaction. The
Company has agreed (i) to pay the Placement Agent a commission equal to 6%
of the Price to Public of the Shares sold (or $ per Share), (ii) to
reimburse the Placement Agent for certain expenses and (iii) to indemnify
the Placement Agent against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(2) The offering of Shares will terminate on September 10, 1996 (the
"Termination Date"). Prior to the Termination Date, all investor funds
will promptly be placed in escrow with First Trust National Association,
as escrow agent (the "Escrow Agent"), in an escrow account established for
the benefit of the investors. In the event that investor funds are not
received in the full amount necessary to satisfy the minimum requirements
of this offering on or before the Termination Date, all funds deposited in
the Escrow Agent account will promptly be returned to the investors. See
"Plan of Distribution."
(3) Before deducting estimated expenses of $123,000 payable by the Company.
T.R. WINSTON CAPITAL, INC.
The date of this Prospectus is , 1996
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are hereby incorporated by reference
in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996; and
(c) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on October 25, 1982, as amended by
Form 8 filed on on July 20, 1987, including any amendment or report for the
purpose of updating such description filed subsequent to the date of this
Prospectus and prior to the termination of the offering described herein.
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of the offering of the Shares being made hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained
herein or in a document incorporated by reference or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Such requests
should be directed to James V. Adam, Vice President, Chief Financial Officer,
MGI PHARMA, INC., Suite 300 E, Opus Center, 9900 Bren Road East, Minnetonka,
Minnesota 55343-9667, telephone: (612) 935-7335.
___________________
IN CONNECTION WITH THIS OFFERING, THE PLACEMENT AGENT MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR FLORIDA RESIDENTS THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND
ACQUIRED BY, THE PURCHASER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE
FLORIDA SECURITIES AND INVESTOR PROTECTION ACT. THE SECURITIES HAVE NOT BEEN
REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL PURCHASERS
WHO ARE FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE
WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH
PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT.
___________________
Salagen(R) is a registered trademark of MGI PHARMA, INC. DIDRONEL(R) is
a registered trademark of Proctor & Gamble Pharmaceuticals, Inc.
2
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and the financial
statements (including the notes thereto) incorporated herein by reference.
Prospective investors should consider carefully the information discussed
under "Risk Factors."
THE COMPANY
MGI PHARMA, INC. (the "Company") is a pharmaceutical company that
acquires, develops and markets innovative and differentiated therapeutic
specialty products for niche markets of unmet medical need. The Company is
primarily focused on products that treat cancer or improve the quality of
life for cancer patients. It is currently marketing its oncology products to
physicians throughout the United States, with sales made to pharmaceutical
wholesalers for distribution to the ultimate consumers of the Company's
products. See "The Company" and "Recent Developments."
THE OFFERING
Common Stock Being Offered......... 800,000 shares minimum up to 1,200,000
shares maximum of Common Stock (the
"Shares"). All funds paid by investors
for the Shares will be held in an escrow
account at First Trust National
Association until the closing of the
offering, at which time the funds held in
escrow will be released to the Company.
If less than 800,000 Shares are
subscribed for by the Termination Date,
all funds held in the escrow account will
be returned to investors. See "Plan of
Distribution."
Common Stock Outstanding:
Before the Offering........... 12,822,971 shares of Common Stock(1)
After the Offering:
Assuming Sale of Minimum.... 13,622,971 shares of Common Stock
Assuming Sale of Maximum.... 14,022,971 shares of Common Stock
Offering Price per Share........... $
Use of Proceeds.................... To finance the development and marketing
of the Company's products and the
acquisition or license of additional
products, and for working capital and
other general corporate purposes. See
"Use of Proceeds."
Nasdaq National Market Symbol...... MOGN
____________
(1) Based on the number of shares outstanding as of August 29, 1996. Excludes
up to 956,561 shares of Common Stock issuable upon the exercise of
options outstanding as of August 29, 1996.
- -------------------------------------------------------------------------------
3
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree
of risk. In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors
relating to the business of the Company before making an investment. This
Prospectus, including the information incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act. Actual results
could differ significantly from those projected in the forward-looking
statements as a result, in part, of the risk factors set forth below.
LACK OF PROFITABLE OPERATIONS
The Company's revenues have not been sufficient to offset all the
expenses involved in operating a pharmaceutical company including research,
development and production. The Company had net losses of $2,614,000 for
1995 and $2,058,000 for the six months ended June 30, 1996. At June 30, 1996
the Company had an accumulated deficit of $67,895,000. To the extent the
Company is unable to achieve profitability, its ability to continue its
operations will depend upon its ability to secure additional funds from other
sources. Revenue may display significant variations due to the impact of new
contract and licensing arrangements, the completion or termination of those
contracts and arrangements and the timing and amounts of milestone payments.
The Company's profitability will be dependent on its success in developing,
obtaining regulatory approvals for and effectively marketing its products.
There can be no assurance as to whether the Company will be able to achieve
and sustain profitability.
DEPENDENCE ON SALES OF SALAGEN TABLETS
The Company derives substantially all of its product revenues from the
sale of Salagen(R) Tablets. For the six month period ended June 30, 1996,
U.S. sales of Salagen Tablets were $2,581,000, representing 89% of total
product sales for the period. In 1995, U.S. sales of Salagen Tablets were
$3,693,000, representing 80% of 1995 product sales. Accordingly, any factor
adversely affecting Salagen Tablets sales could have a material adverse
effect on the Company's business, financial condition and results of
operations. Although Salagen Tablets was awarded orphan drug status by the
U.S. Food and Drug Administration (the "FDA") as a treatment of xerostomia
induced by radiation therapy, the seven years of market exclusivity provided
by Orphan designation expires in April 2001. Moreover, the Company
anticipates that sales of its other product, DIDRONEL(R) I.V. Infusion, which
represented 10% and 17% of product sales for the first six months of 1996 and
for 1995, respectively, will continue to decline in the future due to the
introduction of competitive products.
DEPENDENCE ON LICENSE AND ACQUISITION STRATEGY
The Company has adopted a license and acquisition strategy to build its
product pipeline and expects to increase its sales over time through a series
of strategic acquisitions of new pharmaceutical product opportunities which
the Company can develop and market. The Company's strategy for growth is
dependent upon its continued ability to identify and acquire new
pharmaceutical products targeted at niche markets which can be promoted
through the Company's existing marketing and distribution channels. Because
the Company does not engage in proprietary research and development of new
products, it must rely upon the willingness of others to sell or license
pharmaceutical product opportunities to the Company. Other companies,
including those with substantially greater financial, marketing and sales
resources, are competing with the Company to acquire such products. There can
be no assurance that the Company will be able to acquire rights to additional
products on acceptable terms, if at all. The failure of the Company to
acquire additional products or to promote or market
4
<PAGE>
commercially successful products would have a material adverse effect on the
Company's future business, financial condition and results of operations.
Further, the marketing strategy, distribution channels and levels and bases
of competition with respect to newly acquired products may be different than
those of the Company's current products and there can be no assurance that
the Company will be able to compete favorably in those product categories.
UNCERTAINTY OF STRATEGIC ALLIANCES
The Company's strategy for the exploitation of foreign markets for its
products is to enter into strategic alliances with various multinational and
foreign pharmaceutical companies. The Company has entered into alliances
with various companies related to the marketing of Salagen Tablets and the
development of the acylfulvenes. Revenues from strategic alliances consist
of milestone payments and royalty payments. Licensing revenue from strategic
alliances was $7,718,094 for 1995 and $1,021,268 for the six months ended
June 30, 1996, comprising 58% and 23%, respectively, of total revenues.
Future licensing revenues will likely fluctuate from quarter to quarter and
year to year depending on the achievement of milestones by the Company's
partners, the amount of royalty generating activities, and the timing of
initiating additional licensing relationships. Additionally, royalties are
based on sales in local currencies and, therefore, the U.S. Dollar value of
such royalties will fluctuate with currency exchange rates. Absent revenue
from initiation of additional licensing relationships, 1996 licensing revenue
is expected to decline from 1995 amounts, given the high level of initiation
and milestone payments realized in 1995. Although the Company believes that
its partners in these alliances have an economic motivation to perform their
contractual responsibilities, the amount and timing of resources to be
devoted to these activities are not within the control of the Company.
Moreover, the terms of these alliances generally provide that they may be
terminated prior to their expiration under circumstances that may also be
outside the control of the Company. The early termination of one or more of
these strategic alliances could adversely affect the Company's business,
financial condition and results of operations. There can also be no
assurance that the Company will be able to negotiate additional strategic
alliances on acceptable terms or that such alliances will be successful.
UNCERTAINTY OF ACCESS TO CAPITAL
The Company may need to raise additional funds to acquire or license
additional products, to fund operating losses until such time as the Company
achieves sustained profitability, to support the marketing and sales of
additional products and to obtain working capital which may be needed from
time to time. The Company may seek additional funding through public and
private financing, including equity financing. Adequate funds for these
purposes, whether through the financial markets or from other sources, may
not be available when needed or on terms acceptable to the Company.
Insufficient funds may cause the Company to delay, scale back, or abandon
some or all of its product acquisition and licensing programs or marketing.
DEPENDENCE ON SOLE SUPPLIER
The Company relies on E. Merck Fine Chemicals Division as its sole
supplier of pilocarpine hydrochloride, the active ingredient necessary for
the manufacture of Salagen Tablets. The Company believes that E. Merck Fine
Chemicals Division accounts for a substantial majority of the worldwide
supply of Good Manufacturing Practices ("GMP") grade pilocarpine
hydrochloride, and that there is no other producer of pilocarpine
hydrochloride which accounts for a significant portion of the worldwide
supply. The processing facility and raw material requirements for the
production of pilocarpine hydrochloride present significant barriers to entry
of new producers in this market. Although the Company believes that it would
be able to procure adequate supplies of pilocarpine hydrochloride on a timely
basis from an alternate source, the Company has not identified any such
alternate source and
5
<PAGE>
disruptions in supplies would have a material adverse effect on the Company's
business, financial condition and results of operations.
RELIANCE ON THIRD PARTY MANUFACTURERS
The Company does not have any manufacturing facilities and is currently
relying on two third party manufacturers for the production of Salagen
Tablets. The Company intends to continue to rely on others to manufacture
its products, including any products that it may acquire, and has no plans to
establish any manufacturing operations. The manufacture of the Company's
products are subject to GMP regulations prescribed by the FDA or other
standards prescribed by the appropriate regulatory agency in the country of
use. There can be no assurance that the Company's current manufacturers will
comply with all applicable regulatory standards, or that the Company would be
able to identify an alternative third party manufacturer on terms acceptable
to the Company or on any terms.
INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE
The manufacture and sale of pharmaceuticals is highly competitive.
Many of the Company's competitors are large well-known pharmaceutical
companies which have considerably greater financial, sales, marketing and
technical resources than those of the Company. Additionally, many of the
Company's present and potential competitors have research and development
capabilities that may allow such competitors to develop new or improved
products that may compete with the Company's products. The pharmaceutical
industry is characterized by rapid product development and technological
change. The Company's pharmaceuticals could be rendered obsolete or
uneconomical by the development of new pharmaceuticals to treat the
conditions addressed by the Company's products, or as the result of
technological advances affecting the cost of production. There can be no
assurance that the Company will be able to compete effectively, that
additional competitors will not enter the market, or that competition will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively with other companies will
depend, in part, on its ability to maintain the proprietary nature of its
products. The Company was awarded orphan drug status for Salagen Tablets as
a treatment for xerostomia induced by radiation therapy. Orphan designation
provides seven years market exclusivity after product registration. The
Company holds an exclusive license on three U.S. patents and one allowed U.S.
patent application covering MGI 114 and other analogs in the Company's family
of acylfulvenes, a new class of potential anti-cancer compounds.
There can be no assurance that the Company will be able to obtain
patents for any future products or that any current or future issued or
licensed patents or know-how will afford protection against competitors with
similar technologies or processes, or that any patents will not be infringed
upon or designed around by others. In addition, there can be no assurance
that others will not independently develop proprietary technologies and
processes which are the same as or substantially equivalent to those of the
Company. The Company could also incur substantial costs in defending itself
in suits brought against it based on such patents or in bringing suits to
protect such patents or patents licensed by the Company against infringement.
Additionally, the Company protects its proprietary technology and processes
in part by confidentiality agreements with its collaborative partners,
employees and consultants. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach, or that the Company's trade secrets will not otherwise become known
or independently discovered by competitors.
6
<PAGE>
FLUCTUATIONS IN OPERATING RESULTS
The Company's results of operations may vary from period to period due
to a variety of factors including continuing demand for the Company's
products, the introduction of new products, the continued stream of licensing
and royalty revenues, expenditures incurred to acquire or license and promote
additional pharmaceuticals, interruptions in or availability of supply by
third-party manufacturers, the introduction of new products by the Company or
its competitors, changes in sales and marketing expenditures and general
economic and industry conditions which affect customer demand. Because the
Company's operating expenses are based on anticipated sales levels variations
in the timing of recognition of revenue could cause significant fluctuations
from period to period and may result in unanticipated earnings shortfalls or
losses. There can be no assurance that the Company will be successful in
maintaining or improving its profitability or avoiding losses in any future
period.
GOVERNMENT REGULATION
Government regulation in the United States and abroad is a significant
factor in the development, production, and marketing of the Company's
products. Prior to marketing, each of the Company's products must undergo an
extensive testing and regulatory approval process conducted by the FDA and by
comparable agencies in other countries. The testing and approval process can
take several years and require the expenditure of substantial resources, and
there can be no assurance that any product that the Company may develop will
be approved by the FDA or any foreign regulatory authority in a timely
manner, if at all. Generally, only a very small percentage of newly
discovered pharmaceutical compounds that enter preclinical development are
approved for sale.
The Company depends on external laboratories and medical institutions to
conduct its preclinical and clinical testing in compliance with clinical and
laboratory practices required by the FDA. The data obtained from preclinical
and clinical testing are subject to varying interpretations that could delay,
limit or prevent regulatory approval. In addition, delays or rejection may
be encountered based upon changes in FDA personnel or policy for drug
approval during the period of development and by changes in the requirements
for regulatory review of each submitted New Drug Application ("NDA").
Moreover, even if the FDA approves the marketing application of a product,
such approval may entail commercially unacceptable limitations on the uses,
or "indications," for which a product may be marketed, and further studies
may be required to provide additional data on product safety or
effectiveness. The FDA also requires post-marketing adverse event
surveillance programs to monitor the product's side effects.
An FDA approved product and its manufacturer are subject to continual
regulatory review and the later discovery of previously unknown problems with
a product or manufacturer may result in restrictions or sanctions on such
product or manufacturer, including the withdrawal of such product from the
market. Most changes in the manufacturing procedures used by the Company for
any of the Company's approved products and any change in manufacturer will
require the approval of the FDA prior to their implementation which could
have an adverse effect upon the Company's ability to continue the
commercialization or sale of a product.
In certain countries, the sales price of a product must also be approved
after marketing approval is granted. No assurance can be given that
satisfactory prices can be obtained in foreign markets even if marketing
approval is granted by foreign regulatory authorities.
7
<PAGE>
UNCERTAINTIES RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT
The profitability of the Company will depend in part on the availability
of adequate reimbursement for the Company's products from third-party payors,
such as government entities, private health insurers and managed care
organizations. Third-party payors are increasingly challenging the pricing
of medical services and products. Although the Company currently has no
problem with third-party reimbursement, there can be no assurance that
reimbursement will be available in the future for the Company's new or
existing products, or that such third-party reimbursement will be adequate.
If adequate reimbursement levels are not provided by government entities and
other third-party payors for the Company's products, the Company's business,
financial condition and results of operations would be materially adversely
affected. Further, a number of legislative and regulatory proposals aimed at
changing the nation's health care system have been proposed in recent years.
While the Company cannot predict whether any such proposals will be adopted,
or the effect that any such proposal may have on its business, such
proposals, if enacted, could have a material adverse effect on the Company's
business, financial condition and results of operations.
POTENTIAL PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE
The Company faces an inherent risk of exposure to product liability
claims in the event that the use of its product is alleged to have resulted
in adverse effects. Such risk exists even with respect to those products that
are manufactured in regulated and licensed facilities or otherwise possess
regulatory approval for commercial sale. While the Company has taken, and
continues to take, what it believes are appropriate precautions, there can be
no assurance that it will avoid significant product liability exposure. The
Company currently has product liability insurance in the amount of $10
million per occurrence and in the aggregate for the year. Although to date
the Company has not been the subject of any product liability claims, there
can be no assurance that such insurance will be sufficient to cover potential
claims. Further, there can be no assurance that adequate insurance coverage
will be available in the future on commercially reasonable terms, if at all,
or that a product liability claim would not materially adversely affect the
Company's business, financial condition and results of operations.
RISK OF PRODUCT RECALL
Product recalls may be issued at the discretion of the Company, the
FDA, the U. S. Federal Trade Commission or other government agencies having
regulatory authority for product sales, and may occur due to disputed
labeling claims, manufacturing issues, quality defects or other reasons.
Although none of the Company's products have been the subject of a recall,
no assurance can be given that product recalls will not occur in the future.
Any product recall could materially adversely affect the Company's business,
financial condition and results of operations.
DEPENDENCE UPON CERTAIN KEY MANAGEMENT
The future success of the Company is largely dependent upon the
leadership of Charles N. Blitzer, the Company's President and Chief Executive
Officer. Should Mr. Blitzer cease to be affiliated with the Company, the
Company's strategic direction and performance could be materially adversely
affected. The Company is also dependent upon a number of other key management
personnel. The loss of the services of one or more key employees, or the
inability of the Company to attract and retain skilled management and
marketing and sales personnel in the future, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
8
<PAGE>
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock, like that of the
securities of other small pharmaceutical companies, has fluctuated
significantly in recent years and is likely to fluctuate in the future. From
time to time the market for securities has also experienced significant price
and volume fluctuations that are unrelated to the operating performance of
such companies. In addition, announcements by the Company or others
regarding commercial products, patents or proprietary rights, the progress of
clinical trials or government regulation, public concern as to the safety of
drugs, the issuance of securities analysts' reports and general market
conditions may each have a significant effect on the market price of the
Common Stock. Fluctuations in financial performance from period to period
also may have a significant impact on the market price of the Common Stock.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the minimum number of
Shares are estimated to be $3,637,000 ($5,517,000 if the maximum number of
Shares are sold), assuming a public offering price of $5 per Share and after
deducting commissions to the Placement Agent and estimated offering expenses.
The Company intends to use the net proceeds to finance the development
and marketing of its current products and for working capital and other
general corporate purposes. The Company also may use a portion of the net
proceeds to acquire or license products and technologies complementing the
Company's current business, although it has no present definitive agreement
or letter of intent with respect to any such acquisition.
Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds of this offering in short-term, interest
bearing, investment-grade securities.
DILUTION
As of June 30, 1996, the net tangible book value of the Company was
$15,172,000, or $1.18 per share of Common Stock. "Net tangible book value"
per share of Common Stock represents the total amount of tangible assets of
the Company, less the total amount of liabilities of the Company, divided by
the number of shares of Common Stock outstanding. Upon completion of this
offering at an assumed offering price of $5 per share, and after deducting
the Placement Agent's commissions and estimated offering expenses, the pro
forma net tangible book value of the Company as of June 30, 1996, would have
been $18,809,000, or $1.38 per share of Common Stock if the minimum number of
Shares was sold ($20,689,000 and $1.48 per share of Common Stock,
respectively, if the maximum number of Shares was sold). This represents an
immediate increase in net tangible book value of approximately $.20 per share
to existing shareholders and immediate dilution of $3.62 per share if the
minimum number of Shares are sold to purchasers in this offering ($.30 and
$3.52, respectively, if the maximum number of Shares are sold). "Dilution"
per share represents the difference between the price to be paid by the new
investors and the net tangible book value per share at June 30, 1996, as
adjusted for the offering.
9
<PAGE>
THE COMPANY
MGI PHARMA, INC. (the "Company") is a pharmaceutical company that
acquires, develops and markets innovative and differentiated therapeutic
specialty products for niche markets of unmet medical need. The Company is
primarily focused on products that treat cancer or improve the quality of
life for cancer patients. It is currently marketing its oncology products to
physicians throughout the United States, with sales made to pharmaceutical
wholesalers for distribution to the ultimate consumers of the Company's
products.
Substantially all of the Company's sales revenue is derived from the
sales of Salagen Tablets (pilocarpine hydrochloride). Salagen Tablets, which
the Company began marketing in April 1994 treat radiation-induced dry mouth
in head and neck cancer patients. In 1996, the Company expects to submit a
supplemental NDA to the FDA for Salagen Tablets as a treatment for xerostomia
(dry mouth) resulting from Sjogren's syndrome, a chronic autoimmune system
disease experienced by many patients with rheumatoid arthritis and other
autoimmune diseases.
The Company's business strategy focuses on niche medical markets,
particularly the oncology market, because it believes such markets can be
reached effectively by a relatively small sales force. In the United States,
the number of physicians in a particular subspecialty is usually relatively
small and such physician specialists tend to be located near major
metropolitan areas. Furthermore, the Company believes that current trends in
pharmaceutical detailing will continue to reduce the number of pharmaceutical
sales targets as decisions relating to use of prescription drugs become more
centralized.
The Company attempts to reduce the risk of product failure by acquiring
products that are past the initial discovery stage. Such products have
usually already passed, or have a higher than average chance of passing,
preliminary toxicity testing and have demonstrated some efficacy in animals
or humans. The Company believes that acquiring products that meet such
requirements may allow it to reduce product development time frames, reduce
the research rejection rate due to safety and toxicity concerns, and achieve
a higher probability of product effectiveness. The Company believes there are
a number of compounds that meet these requirements available for licensing
from universities and other research organizations such as biotechnology
companies and other pharmaceutical companies.
The Company's development efforts are currently focused on the
acylfulvenes, a new class of potential anticancer compounds. The acylfulvenes
are chemically modified versions of natural substances produced by the
Omphalotus illudens mushroom. They utilize a mechanism of tumor-killing
action that is distinct from other chemotherapeutic drugs and appear to be
absorbed more quickly by tumor cells than by healthy tissue. In September
1995, the Company filed an Investigative New Drug application with the FDA
for MGI 114, the initial acylfulvene analog to be taken into human clinical
development from the acylfulvene family. In December 1995, Phase I human
clinical studies using MGI 114 began. MGI 114 is an early-stage developmental
drug compound at the very beginning of human testing. There can be no
assurance that MGI 114 or any other acylfulvene analog will ultimately be
determined to be safe and effective for human use.
The Company actively pursues strategic alliances throughout the world
both to market and develop its products. The Company has entered into
agreements with various partners who will market Salagen Tablets in Europe,
Japan, Canada, Israel and Taiwan, following regulatory approval the various
countries. Currently, Salagen Tablets have been approved in the United
Kingdom, France, Ireland, Israel and Greece. In 1995, the Company executed a
development and marketing agreement for the acylfulvenes in Japan with
Dainippon Pharmaceuticals, a major Japanese pharmaceutical company.
10
<PAGE>
The Company was incorporated in Minnesota on November 14, 1979. Its
principal executive offices are located at 9900 Bren Road East, Suite 300E,
Minnetonka, Minnesota 55343, and its phone number is (612) 935-7335.
RECENT DEVELOPMENTS
In January 1996, Chiron Therapeutics BV, a unit of Chiron Corporation,
the Company's European marketing partner for Salagen Tablets, obtained
regulatory approval and was issued a license to sell Salagen Tablets in
France, Ireland and Greece. Marketing of the Salagen Tablet began in Ireland
in 1996 and is expected to begin later this year in France and Greece when
pricing approval is received from these countries.
In April 1996, Charles N. Blitzer was appointed President and Chief
Executive Officer of the Company to replace Dr. Kenneth F. Tempero, who
retired. From 1992 to April of this year, Mr. Blitzer was the President and
Chief Executive Officer of Oncologix, Inc., a pharmaceutical company focused
on cancer related products. From 1977 to 1991, Mr. Blitzer held a variety of
management positions with Marion Merrell Dow, Inc. and Marion Laboratories,
Inc.
In April 1996, the U.S. Patent and Trademark Office notified the Company
that it will grant two patents covering MGI 114 and additional acylfulvene
analogs. In June 1996, one of the patents was issued to the University of
California, from which the Company holds an exclusive license, covering MGI
114 and certain other acylfulvene analogs. These patents complement two
previously issued U.S. patents covering a method of using MGI 114 and other
acylfulvene analogs to inhibit certain tumor cell growth. The Company also
has licensed, pending or granted foreign patents on MGI 114 and its analogs
in over 30 countries worldwide. Patent applications covering an even broader
base of acylfulvene analogs compounds are pending in the United States.
In July 1996, the Company received approval from the Israeli Ministry of
Health to market Salagen Tablets in that nation. This approval covers both
the use of Salagen Tablets for the treatment of the symptoms of xerostomia
(dry mouth) caused by radiation therapy for cancer of the neck and head, and
for the symptoms of Sjogren's Syndrome, an autoimmune disease that causes
disabling dry eyes and dry mouth. Israel is the first nation to approve
Salagen Tablets for treating symptoms associated with Sjogren's Syndrome.
In July 1996, the Decision Network Committee of the National Cancer
Institute ("NCI") voted in favor of funding and conducting human clinical
trials of MGI 114, pending execution of a clinical trials agreement. Assuming
a clinical trials agreement is entered into by NCI and the Company, the
institute will sponsor and oversee clinical research within its network of
more than 50 designated cancer centers located across the United States. The
Company will provide MGI 114 for these studies.
PLAN OF DISTRIBUTION
The Shares are being offered for sale by the Company principally to
selected institutional and accredited investors. T.R. Winston Capital, Inc.
(the "Placement Agent") has been retained to act as the exclusive agent for
the Company in connection with such offers and sales on a best efforts basis.
The closing of the offering is conditional on the sale of the minimum amount
of Shares prior to the Termination Date. The Placement Agent is not obligated
to and does not intend itself to take (or purchase) any of the Shares offered
hereby. It is anticipated that the Placement Agent will obtain indications of
interest from potential investors for the amount of the offering and that
effectiveness of the Registration Statement will not be requested and no
investor funds will be accepted until indications of interest have been
received for at least the minimum number of Shares. Confirmations and
definitive prospectuses will be distributed to all investors at the time of
pricing, informing investors of the closing date, which will be on or
about , 1996. No investor funds will be accepted
11
<PAGE>
prior to effectiveness of the Registration Statement. Prior to the closing
date, all investor funds will promptly be placed in escrow with First Trust
National Association as escrow agent (the "Escrow Agent"), in an escrow
account established for the benefit of the investors. The Escrow Agent will
invest such funds in accordance with Rule 15c2-4 promulgated under the
Exchange Act. Prior to the closing date, the Escrow Agent will advise the
Company that payment for the purchase of the Shares has been affirmed by the
investors and that the investors have deposited the requisite funds in the
escrow account at the Escrow Agent. Upon receipt of such notice, the Company
will deposit with the Depository Trust Company the Shares to be credited to
the respective accounts of the investors. Investor funds, together with
interest thereon, if any, will be collected by the Company through the
facilities of the Escrow Agent on the scheduled closing date. The offering
will not continue after the closing date. In the event that investor funds
are not received for the minimum number of Shares prior to the Termination
Date, all funds deposited in the escrow account will promptly be returned.
The Company has agreed (i) to pay the Placement Agent a commission equal to
6% of the purchase price of the Shares, (ii) to indemnify the Placement Agent
against certain liabilities, including liabilities under the Securities Act,
and (iii) to reimburse the Placement Agent for certain of its out-of-pocket
expenses incurred in connection with the offering.
Certain officers and the directors of the Company have agreed that they
will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable for,
or any rights to purchase or acquire, Common Stock for a period of 90 days
after the date of this Prospectus, except in connection with a Company-
sponsored employee stock plan or with the prior written consent of the
Placement Agent.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain legal
matters relating to the offering will be passed upon for the Placement Agent
by Reboul, MacMurray, Hewitt, Maynard & Kristol, New York, New York.
EXPERTS
The consolidated financial statements and schedule of MGI PHARMA, INC.,
incorporated by reference herein, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as set forth in their reports
thereon incorporated by reference herein. Such consolidated financial
statements and schedule are incorporated by reference herein in reliance upon
such reports given upon the authority of such firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and CitiCorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a Web site
12
<PAGE>
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at the
address "http://www.sec.gov". The Common Stock of the Company is traded on
the Nasdaq National Market. Reports, proxy statements and other information
concerning the Company may be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement (of
which this Prospectus is a part) on Form S-3 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement.
13
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE PLACEMENT
AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, OR AN OFFER
OR SOLICITATION IN ANY JURISDICTION TO A PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE OFFERING BY THE
COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
_____________________
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Incorporation of Certain Documents
by Reference................................... 2
Prospectus Summary.................................. 3
Risk Factors........................................ 4
Use of Proceeds..................................... 9
Dilution............................................ 9
The Company......................................... 10
Recent Developments................................. 11
Plan of Distribution................................ 11
Legal Matters....................................... 12
Experts............................................. 12
Available Information............................... 12
</TABLE>
[LOGO]
800,000 SHARES MINIMUM
1,200,000 SHARES MAXIMUM
COMMON STOCK
________________________
PROSPECTUS
, 1996
________________________
T.R. WINSTON CAPITAL, INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<S> <C>
SEC Registration Fee.............................. $ 2,302
NASD Fee.......................................... 1,168
Nasdaq Listing Fee................................ 17,500
Accounting Fees and Expenses...................... 15,000*
Legal Fees and Expenses........................... 40,000*
Blue Sky Fees and Expenses........................ 5,000*
Transfer Agent Fees............................... 1,000*
Escrow Agent Fees................................. 5,000*
Placement Agent Expense Reimbursement............. 30,000*
Miscellaneous..................................... 6,030*
--------
Total...................................... $123,000
========
</TABLE>
- -------------------
* Estimates
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 302A.521, subd. 2, of the Minnesota Statutes requires the
Company to indemnify a person made or threatened to be made a party to a
proceeding by reason of the former or present official capacity of the person
with respect to the Company, against judgments, penalties, fines, including,
without limitation, excise taxes assessed against the person with respect to
an employee benefit plan, settlements, and reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in connection with
the proceeding with respect to the same acts or omissions if such person (1)
has not been indemnified by another organization or employee benefit plan for
the same judgments, penalties or fines; (2) acted in good faith; (3) received
no improper personal benefit, and statutory procedure has been followed in the
case of any conflict of interest by a director; (4) in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and
(5) in the case of acts or omissions occurring in the person's performance in
the official capacity of director or, for a person not a director, in the
official capacity of officer, board committee member or employee, reasonably
believed that the conduct was in the best interests of the Company, or, in the
case of performance by a director, officer or employee of the Company was
serving at the request of the Company or whose duties involved service as a
director, officer, partner, trustee, employee or agent of another organization
or employee benefit plan, reasonably believed that the conduct was not opposed
to the best interests of the Company. In addition, Section 302A.521, subd. 3,
requires payment by the Company, upon written request, of reasonable expenses
in advance of final disposition of the proceeding in certain instances. A
decision as to required indemnification is made, depending on certain
circumstances, by a disinterested majority of the Board of Directors present
at a meeting at which a disinterested quorum is present, by a designated
committee of the Board, by special legal counsel, by the shareholders, or by a
court.
Pursuant to Article IX of the Company's Restated Bylaws, the Company
shall indemnify such persons, for such expenses and liabilities, in such
manner, under such circumstances, and to such extent as permitted by Minnesota
Statutes, Section 302A.521, as now enacted or hereafter amended. The Company
has also purchased director and officer liability insurance for up to $2
million dollars in claims made.
Pursuant to Article X of the Company's Articles of Incorporation,
directors of the Company will not be personally liable for monetary damages
for breach of fiduciary duty as directors, except liability
II-1
<PAGE>
(i) for any breach of the duty of loyalty to the Company or its shareholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of the law; (iii) under Sections 302A.559 or
80A.23 of the Minnesota Statutes; (iv) for any transaction from which the
director derives an improper personal benefit; or (v) for any act or omission
occurring prior to the date when the Articles of Incorporation became effective.
ITEM 16. EXHIBITS.
1.1 Form of Placement Agency Agreement.
1.2 Form of Subscription Agreement.
5.1 Opinion of Dorsey & Whitney LLP regarding legality.
10.1 Form of Escrow Agreement.
23.1 Consent of KPMG Peat Marwick LLP. *
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1 to
this Registration Statement).
24.1 Powers of Attorney. *
_____________________
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) 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.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that, in the opinion of the Securities and
II-2
<PAGE>
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Minneapolis, State of Minnesota on the 30th day of August, 1996.
MGI PHARMA, INC.
By /s/ Charles N. Blitzer
---------------------------------
Charles N. Blitzer, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed on the date indicated by or on behalf of the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Charles N. Blitzer President, Chief Executive August 30, 1996
- ------------------------ Officer and Director
Charles N. Blitzer (principal executive officer)
/s/ James V. Adam Vice President, Chief Financial August 30, 1996
- ------------------------ Officer (principal financial
James V. Adam and accounting officer)
* Director August 30, 1996
- ------------------------
Frederick W. Armstrong
* Director August 30, 1996
- ------------------------
Charles E. Austin
* Director August 30, 1996
- ------------------------
Hugh E. Miller
* Director August 30, 1996
- ------------------------
Robert W. Powell, Jr.
* Director August 30, 1996
- ------------------------
Lee J. Schroeder
*By Charles N. Blitzer
--------------------------------------
Charles N. Blitzer, attorney-in-fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ---------
1.1 Form of Placement Agency Agreement.
1.2 Form of Subscription Agreement.
5.1 Opinion of Dorsey & Whitney LLP regarding
legality.
10.1 Form of Escrow Agreement.
23.1 Consent of KPMG Peat Marwick LLP. *
23.2 Consent of Dorsey & Whitney LLP (included in
Exhibit 5.1 to this Registration Statement).
24.1 Powers of Attorney. *
__________________
* Previously filed.
<PAGE>
Exhibit 1.1
MGI PHARMA, INC.
(a Minnesota corporation)
800,000 Shares of Common Stock Minimum
1,200,000 Shares of Common Stock Maximum
PLACEMENT AGREEMENT
-------------------
September , 1996
T.R. Winston Capital, Inc.
376 Main Street
Bedminster, New Jersey 07921
Ladies and Gentlemen:
MGI Pharma, Inc., a Minnesota corporation (the "Company"), hereby
confirms its agreement with T.R. Winston Capital, Inc. (the "Placement Agent")
with respect to the offering (the "Offering") by the Company to the public of an
aggregate minimum 800,000 and up to an aggregate maximum 1,200,000 shares of
common stock, $.01 par value, of the Company ("Common Stock") and the engagement
by the Company of the Placement Agent in connection therewith to act as the
Company's exclusive placement agent. The minimum 800,000 shares of Common Stock
(the "Minimum Shares") and the maximum up to 1,200,000 shares of Common Stock
(the "Maximum Shares") to be placed by the Placement Agent are collectively
hereinafter called the "Shares." The Company understands that the Placement
Agent is acting on a "best efforts" basis in connection with the Offering and
that the Minimum Shares will be sold on an "all or none" basis, such that no
Shares will be sold unless all the Minimum Shares are sold.
You have advised us that you desire to act as the Company's agent (and
not as principal) in connection with the Offering.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-09681) covering the registration of the Shares under the Securities Act of
1933, as amended (the "Act"), including a related preliminary prospectus, and
either (A) has prepared and proposes to file, prior to the effective date of
such registration statement (the "Effective Date"), an
1
<PAGE>
amendment to such registration statement, including a final prospectus, or (B)
if the Company has elected to rely upon Rule 430A ("Rule 430A") of the rules and
regulations of the Commission under the Act (the "Regulations"), will prepare
and file a prospectus, in accordance with the provisions of Rule 430A and Rule
424(b) ("Rule 424(b)") of the Regulations promptly after execution and delivery
of this Agreement. The information, if any, included in such prospectus that was
omitted from the prospectus included in such registration statement at the time
it becomes effective but that is deemed pursuant to Rule 430A(b) to be part of
such registration statement at the time it becomes effective is referred to
herein as the "Rule 430A Information." Each prospectus used before the time such
registration statement becomes effective, and any prospectus that omits the Rule
430A Information that is used after such effectiveness and prior to the
execution and delivery of this Agreement is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto, as
amended at the time it becomes effective and including, if applicable, the Rule
430A Information is herein called the "Registration Statement." The prospectus
included in the Registration Statement at the time it becomes effective is
herein called the "Prospectus" except that if the final prospectus first
furnished to the Placement Agent after the execution of this Agreement for use
in connection with the Offering of the Shares differs from the prospectus
included in the Registration Statement at the time it becomes effective (whether
or not such prospectus is required to be filed pursuant to Rule 424(b)), the
term "Prospectus" shall refer to the final prospectus first furnished to the
Placement Agent for such use.
Section 1. Representations and Warranties. (a) The Company represents
and warrants to and agrees with the Placement Agent as follows:
(i) On the date that any Preliminary Prospectus was filed with the
Commission, the date that the Prospectus is first filed with the Commission
pursuant to Rule 424(b) (if required), at the time the Registration
Statement becomes effective, and if the Company has elected to rely upon
Rule 430A, on the date of this Agreement, and on the effective or issue
date of each amendment or supplement to the Registration Statement or the
Prospectus, and at the Closing Date referred to below (A) the Registration
Statement and any amendments and supplements thereto did or will comply in
all material respects with the requirements of the Act and the Regulations;
(B) neither the Registration Statement nor any amendment or supplement
thereto will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and (C) neither the Prospectus nor
any amendment or supple-
2
<PAGE>
ment thereto will include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, this representation and warranty does not
apply to statements or omissions from the Registration Statement or the
Prospectus or any amendments or supplements thereto made in reliance upon
and in conformity with information furnished or confirmed in writing to the
Company by or on behalf of the Placement Agent expressly for use in the
Registration Statement or the Prospectus or any amendments or supplements
thereto. The Registration Statement became effective at , .m. on
, 1996. The Company has not distributed any offering material in
connection with the Offering or the sale of the Shares other than the
Registration Statement, the Preliminary Prospectus, the Prospectus and the
documents incorporated by reference therein.
(ii) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Minnesota with
corporate power and authority, and all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from and
declarations and filings with, all federal, state, local and other
governmental authorities and all courts and other tribunals, to own, lease,
license and operate its properties and assets and to conduct its business
as described in the Registration Statement and the Prospectus; and the
Company is duly qualified as a foreign corporation to transact business and
is in good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company (a "Material Adverse Effect").
(iii) The Company does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital stock or securities
convertible into capital stock or any other equity or long-term debt
securities of any other corporation or (ii) any participating interest in
any partnership, joint venture or other non-corporate business enterprise.
Complete and correct copies of the articles of incorporation and of the by-
laws of the Company have been delivered to the Placement Agent and no
changes therein
3
<PAGE>
will be made subsequent to the date hereof and prior to the Closing Date.
(iv) The authorized capital stock of the Company consists of (i)
30,000,000 shares of Common Stock, (ii) 10,000,000 shares of Preferred
Stock, $.10 par value, of the Company (the "Preferred Stock"), and (iii)
338,000 shares of Cumulative Preferred Stock, $.10 par value, of the
Company (the "Cumulative Preferred Stock"), of which [12,822,971] shares of
Common Stock and no shares of Preferred Stock or Convertible Preferred
Stock are outstanding. All the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of any preemptive or
other similar rights of any stockholder of the Company.
(v) The issuance and sale of the Shares have been duly authorized by
the Company and, when issued and delivered by the Company upon payment
therefor will be validly issued, fully paid and non-assessable; and such
Shares will not be subject to any preemptive or other similar rights of any
stockholder of the Company.
(vi) Except as disclosed in the Prospectus, there are no outstanding
options, warrants or other rights calling for issuance of, and no
commitments, obligations, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company.
(vii) The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the
Escrow Agreement (as hereinafter defined), and this Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
execution and delivery by the Placement Agent, this Agreement is the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium and other
similar laws from time to time in effect and to general principles of
equity. The Escrow Agreement has been duly authorized and validly executed
and delivered by the Company and is a legal, valid and binding agreement
upon the Company, enforceable against the Company in accordance with its
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium and other
4
<PAGE>
similar laws from time to time in effect and to general principles of
equity.
(viii) KPMG Peat Marwick LLP, who are reporting upon the audited
financial statements included in the Registration Statement, are
independent public accountants with respect to the Company as required by
the Act and the Regulations.
(ix) The consolidated financial statements of the Company included in
the Registration Statement and the Prospectus, together with the related
schedule and notes, present fairly, in accordance with generally accepted
accounting principles ("GAAP"), the financial position of the Company as of
the dates indicated and the results of operations, stockholders' equity and
cash flows of the Company for the periods specified. Such financial
statements have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved. The financial statement
schedule included in the Registration Statement presents fairly in
accordance with GAAP the information required to be stated therein and has
been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. No other financial
statements are required by Form S-3 or otherwise to be included in the
Registration Statement or the Prospectus.
(x) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general and specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded value for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xi) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, other than as set forth in or
contemplated by the Registration Statement and the Prospectus, the Company
has not (i) issued any securities or incurred any liability or obligation,
primary or contingent, for borrowed money, (ii) entered into any
transaction not in the ordinary course of business, (iii) declared or paid
any dividend on its capital
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stock or (iv) experienced any adverse change or development which may have
a Material Adverse Effect.
(xii) The Company is not in violation of its charter or by-laws or in
violation or breach of or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties or assets is subject, except for
such violations, breaches and defaults that would not in the aggregate have
a Material Adverse Effect and each such material contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument is in full force and effect and is the legal, valid
and binding obligation of the parties thereto and is enforceable as to them
in accordance with its terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium and other similar laws from
time to time in effect and to general principles of equity. No consent of
any party to any contract, instrument, lease, license, arrangement or
understanding to which the Company is a party, or to which any of its
properties or assets are subject, is required for the execution, delivery
or performance of this Agreement, the Escrow Agreement or the Subscription
Agreement, except such as have been obtained. The execution, delivery and
performance of this Agreement, the Escrow Agreement and the Subscription
Agreement, the issuance, sale and delivery of the Shares, the application
of the proceeds from the Offering of the Shares by the Company as described
under the caption "Use of Proceeds" in the Prospectus, the consummation of
the transactions contemplated by this Agreement and the Registration
Statement and compliance by the Company with the foregoing have been duly
authorized by all necessary corporate action on the part of the Company and
do not and will not result in any violation of the charter or by-laws of
the Company and do not and will not conflict with, or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien or encumbrance
upon any property or assets of the Company under (A) any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which the Company is a party or by
which it is bound or to which its properties or assets are subject, or (B)
any applicable law, statute, rule, regulation, judgment, order, writ,
injunction or decree of any government,
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governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties, assets or
operations.
(xiii) No filing, authorization, approval, consent, license, order,
registration or qualification of or with any government, governmental
instrumentality or court domestic or foreign, is necessary in connection
with the due authorization, execution, delivery and performance of this
Agreement, the Escrow Agreement or the Subscription Agreement by the
Company or the issuance, offering, sale and delivery of the Shares at the
Closing Date or the consummation by the Company of the transactions
contemplated in this Agreement and the Registration Statement except such
as have been obtained or made, such as may be required under the securities
or blue sky laws of the various states and, if the Registration Statement
is not effective under the Act as of the date hereof, such as may be
required under the Act.
(xiv) There is no action, suit or proceeding before or by any
government, governmental instrumentality or court, domestic or foreign, now
pending or, to the knowledge of the Company, threatened against or
affecting the Company that is required to be disclosed in the Registration
Statement or Prospectus and is not so disclosed or that, if determined
adversely to the Company, individually or in the aggregate, might be
expected to have a Material Adverse Effect.
(xv) There are no contracts or documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not so described or filed.
All such contracts to which the Company is a party have been duly
authorized, executed and delivered by the Company, constitute and binding
agreements of the Company and are enforceable against the Company in
accordance with their respective terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium and other
similar laws from time to time in effect and to general principles of
equity.
(xvi) The Company is in compliance with, and has not received any
notice of any outstanding violation of, all laws, ordinances, rules,
regulations, judgments, decrees, orders and statutes applicable to it and
its operations except where any failure by the Company to comply with any
such law, regulation, ordinance, rule, judgment, decree, order or statute
would
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not have, individually or in the aggregate, a Material Adverse Effect.
(xvii) The Company has good and marketable title to all properties and
assets owned by it, free and clear of all liens, encumbrances or
restrictions, except such as (A) are described in the Prospectus or (B)
would not have a Material Adverse Effect; all of the leases under which the
Company holds properties described in the Prospectus, are in full force and
effect and the Company has not received any notice of any claim of any sort
that has been asserted by anyone adverse to the rights of the Company under
any of the leases mentioned above or affecting or questioning the rights of
the Company to the continued possession of the leased premises under any
such lease, which claims, in the aggregate, might be expected to have a
Material Adverse Effect.
(xviii) The Company owns or possesses all foreign and domestic
governmental licenses, permits, certificates, consents, orders, approvals
and other authorizations (collectively, "Governmental Licenses") necessary
to own or lease, as the case may be, and to operate its properties and to
conduct its business as presently conducted, except where the failure to
own or possess such Governmental Licenses would not have a Material Adverse
Effect; all the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would
not have a Material Adverse Effect and the Company has not received any
notice of proceedings relating to revocation or modification of any such
Governmental Licenses that, singly or in the aggregate, might be expected
to have a Material Adverse Effect.
(xix) The Company owns or possesses, or can acquire on reasonable
terms, adequate foreign and domestic patents, patent rights, licenses,
trademarks, service marks, trade names, inventions, copyrights and know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures)
(collectively, "intellectual property") necessary to conduct its business
as presently conducted and the Company has not infringed upon or received
any notice of any infringement of or conflict with asserted rights of
others with respect to any intellectual property which would render any
intellectual property invalid or inadequate to protect the interest of the
Company therein and which infringement or conflict, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
To
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the knowledge of the Company, there is no infringement by others upon he
rights of the Company with respect to any intellectual property. To the
knowledge of the Company, there is no intellectual property of others which
has had, or may in the future have a Material Adverse Effect.
(xx) The Company is in compliance with all Environmental Laws (as
defined below) except to the extent that failure to comply with such
Environmental Laws would not have a Material Adverse Effect. The Company
is not (i) the subject of any pending or, to its knowledge, threatened
federal, state or local investigation evaluating whether any remedial
action by the Company is needed to respond to a release of any Hazardous
Materials (as defined below) into the environment, resulting from the
Company's business operations or ownership or possession of any of its
properties or assets or (ii) in contravention of any Environmental Laws
that, in the case of (i) or (ii), might be expected to have a Material
Adverse Effect. The Company has not received any notice or claim, nor are
there pending or, to the knowledge of the Company, threatened lawsuits
against it, with respect to violations of an Environmental Law or in
connection with any release of any Hazardous Material into the environment
that, in the aggregate, if the subject of any unfavorable decision, ruling
or finding could reasonably be expected to have a Material Adverse Effect.
As used herein, "Environmental Laws" means any foreign, federal, state or
local law or regulation applicable to the Company's business operations or
ownership or possession of any of its properties or assets and relating to
environmental matters, and "Hazardous Materials" means those substances
that are regulated by or form the basis of liability under any
Environmental Laws.
(xxi) No labor dispute exists between the Company and its employees or,
to the knowledge of the Company, is imminent that could reasonably be
expected to have a Material Adverse Effect; and the Company is in
compliance with all applicable federal, state, and local laws relating to
the payment of wages to employees (including, without limitation, the Fair
Labor Standards Act, as amended), except insofar as the failure to comply
with such laws could not reasonably be expected to have a Material Adverse
Effect.
(xxii) The Company has fulfilled its obligations under the minimum
funding standards of Section 302 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and the regulations and published
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interpretations thereunder with respect to each "pension plan" (as defined
in ERISA and such regulations and published interpretations) in which
employees of the Company are eligible to participate and each such plan is
in compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations and
has not incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the ordinary course)
or to any such plan under Title IV of ERISA.
(xxiii) Neither the Company nor, to its knowledge, any of its affiliates
has taken or will take, directly or indirectly, any action designed to, or
that could reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock in violation of Rule 10b-6
under the Securities Exchange Act of 1934, as amended (the "Exchange Act");
and neither the Company nor any of its affiliates has distributed or will
distribute any prospectus (as such term is defined in the Act and the
Regulations) in connection with the Offering and sale of the Shares other
than any preliminary prospectus filed with the Commission or the Prospectus
or other material permitted by the Act or the Regulations.
(xxiv) The Company is insured by insurers against such losses and risks
and in such amounts as are disclosed in the Prospectus; and the Company has
no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a cost that would not have a Material Adverse Effect.
(xxv) All United States federal income tax returns of the Company
required by law to be filed have been filed and all taxes shown by such
returns or otherwise assessed, which are due and payable, have been paid,
except for such taxes or tax assessments, if any, as are being contested in
good faith and as to which adequate reserves have been provided. All other
tax returns (including franchise and income tax returns) of the Company
required to be filed pursuant to applicable foreign, state or local law
have been filed, except insofar as the failure to file such returns would
not have a Material Adverse Effect; and all taxes shown on such returns or
otherwise assessed which are due and payable have been paid, except for
such taxes or tax assessments, if any, as are being contested in good faith
and as to which adequate reserves have been provided. The charges,
accruals and reserves on the
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books of the Company in respect of any income and corporate franchise tax
liability for any years not finally determined or with respect to which the
applicable statute of limitations has not expired are believed by the
Company to be adequate to meet any assessments or reassessments for
additional income or corporate franchise tax for any years not finally
determined.
(xxvi) The Company is not an "investment company" or an "affiliated
person of," or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined under the Investment Company Act of
1940, as amended (the "Investment Company Act").
(xxvii) The Company has obtained the written agreements of the holders
of certain of its outstanding securities on the date hereof, in the forms
previously furnished to the Placement Agent, that, for a period of 90 days
from the Closing Date, such parties will not, without the prior written
consent of the Placement Agent, directly or indirectly, sell, offer to
sell, grant any option for the sale of, or otherwise dispose of, or
exercise any registration rights with respect to, any shares of Common
Stock or securities or rights convertible into or exercisable or
exchangeable for Common Stock, other than in connection with any Company-
sponsored employee stock plan.
(xxviii) There are no holders of securities (debt or equity) of the
Company or holders of rights (including, without limitation, preemptive
rights), warrants or options to obtain securities of the Company who have
the right to request the Company to register securities held by them under
the Act, other than holders who have waived such rights or will not have
such rights for the 90-day period after the date hereof, and have waived
their rights with respect to the inclusion of their securities in the
Registration Statement.
(xxix) There are no business relationships or related party
transactions of the nature described in Item 404 of Regulation S-K
involving the Company and any person described in such Item that are
required to be disclosed in the Prospectus that have not been so disclosed.
(xxx) Neither the Company nor any director, officer, agent, employee or
other person associated with the Company, in such capacity, or acting on
behalf of, the Company has, directly or indirectly: used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
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expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended (the
"1977 Act"); or made any bribe, rebate, payoff, influence payment. kickback
or other unlawful payment. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply in all respects
with the 1977 Act.
(xxxi) Except as set forth in the Prospectus, the Company has not
incurred any liability for a fee, commission, or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(xxxii) Except as previously disclosed to the Placement Agent, no
officer or director of the Company has any affiliation or association with
the National Association of Securities Dealers, Inc. (the "NASD") or any
member thereof and, to the knowledge of the Company, none of its
stockholders beneficially owning 5% or more of the outstanding shares of
Common Stock has any such affiliation or association.
(xxxiii) The Company's Registration Statement pursuant to Section 12(g)
of the Exchange Act has been declared effective. The Company has filed with
the Commission all annual reports, quarterly reports, current reports,
proxies and all other materials required to be filed by it; all such
filings contained all the material information required by the rules of the
Commission to be included in such filings; and no such filing contained an
untrue statement of any material fact or omitted to state any material fact
required to be stated in it or necessary in order to make the statements
made in it, in light of the circumstances under which they were made, not
misleading. All requirements for use by the Company of Form S-3 with
respect to the Offering have been satisfied.
(xxxiv) The Common Stock is currently listed on the Nasdaq National
Market and, at the Closing Date, all appropriate actions will have been
taken to include the Shares on the Nasdaq National Market.
(b) Any certificate signed by any officer of the Company and delivered
to the Placement Agent or to Reboul, MacMurray, Hewitt, Maynard & Kristol as
counsel for the Placement Agent ("Reboul MacMurray") at or prior to the Closing
Date pursuant to this Agreement or the transactions contemplated hereby shall be
deemed a representation and warranty by the Company to the Placement Agent as to
the matters covered thereby.
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<PAGE>
Section 2. Agreement to Act as Placement Agent; Sale and Delivery of
the Shares; Closing.
(a) (i) On the basis of representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby appoints the Placement Agent its agent and grants the Placement Agent the
exclusive right to offer and sell the Shares, on a best efforts basis, for the
account and risk of the Company. The Placement Agent accepts such appointment
and agrees to use its best efforts as placement agent to offer and sell the
number of Shares contemplated by this Agreement at the price stated in the
Prospectus. (ii) The Company hereby agrees to pay to the Placement Agent on the
Closing Date a fee equal to 6% of the aggregate offering price (as set forth on
the cover page of the Prospectus) of the Shares sold pursuant to the Offering.
(b) Concurrently with the execution hereof, the Company , Placement
Agent and First Bank National Association, as Escrow Agent (the "Escrow Agent"),
have entered into an Escrow Agreement, substantially in the form filed as an
exhibit to the Registration Statement (the "Escrow Agreement"). Each
prospective purchaser of Shares will be required to complete, execute, and
deliver to the Placement Agent (with copies to the Company) a subscription
agreement substantially in the form filed as an exhibit to the Registration
Statement (the "Subscription Agreement"). Prior to or concurrently with the
delivery to the Placement Agent of any Subscription Agreement by any purchaser,
funds sufficient to purchase the Shares subscribed for shall be wired to an
escrow account to be maintained pursuant to the Escrow Agreement. Except as
provided in the first sentence of subparagraph (c) below, the Company shall not
be entitled to reject, without the Placement Agent's consent, any Subscription
Agreement tendered to it prior to the Closing Date unless (i) the Subscription
Agreement is not properly completed after the Placement Agent and the Company
have given the subscriber an opportunity to cure the defect or payment in full
for the Shares subscribed for is not made in accordance with such Subscription
Agreement or (ii) the subscriber submitting such Subscription Agreement is a
resident of a jurisdiction in which the Offering is not registered, qualified,
or exempt from such registration or qualification.
(c) All subscriptions for Shares will be conditioned upon the
acceptance by the Company of Subscription Agreements for at least the Minimum
Shares (the "Minimum Subscriptions"). If Minimum Subscriptions are not tendered
to and accepted by the Company on or before September 10, 1996, this Agreement
shall, subject to the provisions of Section 9 hereof, terminate. If at least
the Minimum Subscriptions are tendered to and accepted by the Company and the
total purchase price for Shares subscribed for has been received by the Escrow
Agent on or before September
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10, 1996, a closing will be held at the offices of counsel to the Placement
Agent at a mutually agreed upon date and time as soon as practicable, but in no
event later than three business days after the delivery of the last of such
subscriptions (the "Closing Date"), and shall be subject to each of the
conditions precedent to closing provided for in this Agreement.
(d) Prior to the Closing Date, all cash payments of purchasers
received (unless and until returned to the purchasers pursuant hereto) will be
placed in a segregated escrow account with the Escrow Agent for the purchasers'
benefit, pursuant to the Escrow Agreement.
(e) The purchase price paid by any prospective purchaser whose
subscription is rejected, or is returned because the conditions to closing were
not satisfied, shall be returned to such prospective purchaser, including
interest thereon.
(f) If subscriptions for more than the Maximum Shares are received,
the Placement Agent, in its sole and absolute discretion, may allocate the
Shares among all the subscribers in such manner as it shall see fit.
(g) On the Closing Date, the Escrow Agent will release the escrowed
funds to the Company and the Company will deposit with the Depository Trust
Company the Shares to be credited to the respective accounts of each purchaser.
Section 3. Certain Covenants of the Company. The Company covenants
with the Placement Agent as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and, if the Company elects to rely upon Rule 430A
and subject to Section 3(b), will comply with the requirements of Rule 430A and
will notify the Placement Agent promptly, (i) when the Registration Statement,
or any post-effective amendment to the Registration Statement, shall have become
effective, or any supplement to the Prospectus or any amended Prospectus shall
have been filed, (ii) of the receipt of any comments from the Commission, (iii)
of any request by the Commission to amend the Registration Statement, to amend
or supplement any Prospectus or for additional information and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or Prospectus, or of the suspension of the qualification
of the Shares for offering or sale in any jurisdiction, or of the institution or
threatening of any proceedings for any of such purposes. The Company will make
every reasonable effort to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued, to
obtain the lifting thereof at the earliest possible
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<PAGE>
moment. The Company will provide the Placement Agent with copies of the
Prospectus, in such number as the Placement Agent may reasonably request, and
file or transmit for filing with the Commission such Prospectus in accordance
with Rule 424(b) by the close of business in New York on the business day
immediately succeeding the date of this Agreement.
(b) The Company will not at any time file an amendment or supplement
to the Registration Statement, or file or make any amendment or supplement (i)
if the Company has not elected to rely upon Rule 430A, to the Prospectus or (ii)
if the Company has elected to rely upon Rule 430A, to the Prospectus included in
the Registration Statement at the time it becomes effective or to the Prospectus
unless such filing shall comply with the Act and the Regulations and unless the
Placement Agent shall have previously been advised of such filing and furnished
with a copy thereof, and the Placement Agent and its counsel shall have approved
such filing.
(c) The Company has furnished or will furnish to the Placement Agent
and its counsel, without charge, two signed copies of the Registration Statement
as originally filed and of all amendments thereto (including exhibits filed
therewith), whether filed before or after the Registration Statement becomes
effective, and copies of all exhibits and documents filed therewith, and signed
copies of all accountants consents and certificates of experts, if any, and has
furnished or will furnish to the Placement Agent one conformed copy of the
Registration Statement as originally filed and each amendment thereto.
(d) The Company will deliver to the Placement Agent, without charge,
from time to time until the Effective Date (or, if the Company has elected to
rely upon Rule 430A, until the time this Agreement is executed and delivered),
as many copies of each preliminary prospectus as the Placement Agent may
reasonably request, and the Company hereby consents to the use of such copies
for purposes permitted by the Act. The Company will deliver to the Placement
Agent, without charge, as soon as the Registration Statement shall have become
effective (or, if the Company has elected to rely upon Rule 430A, as soon as
practicable after this Agreement has been executed and delivered) and thereafter
from time to time as requested during the period when the Prospectus is required
to be delivered under the Act, such number of copies of the Prospectus (as
supplemented or amended) as the Placement Agent may reasonably request.
(e) During the time when a prospectus relating to the Shares is
required to be delivered hereunder or under the Act or the Regulations, the
Company will comply with all requirements imposed upon it by the Act so far as
necessary to permit the continuance of sales of, or dealings in, the Shares. If
at any time when a prospectus is required by the Act or the Regulations
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<PAGE>
to be delivered in connection with the Shares, any event shall occur or
condition exist as a result of which it is necessary, in the reasonable opinion
of counsel for the Company, to amend the Registration Statement or amend or
supplement any Prospectus, the Company will promptly notify the Placement Agent
and prepare and file with the Commission, subject to Section 3(b), at the
Company's expense, such amendment or supplement as may be necessary to correct
such untrue statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements.
(f) Prior to the sale of the Shares to the purchasers, the Company
will use its best efforts, in cooperation with the Placement Agent to qualify
the Shares for offering and sale under the applicable securities laws of such
states and other jurisdictions as the Placement Agent may designate and to
maintain such qualifications in effect for a period of not less than one year
from the Effective Date; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. Subject
to the foregoing, the Company will file such statements and reports as may be
required by the laws of each jurisdiction in which the Shares have been
qualified as above provided.
(g) The Company will make generally available to its security holders
as soon as practicable, but not later than 45 days after the close of the period
covered thereby, an earnings statement of the Company, which need not be audited
but shall be in reasonable detail (in form complying with the provisions of Rule
158 of the Regulations), covering a period of 12 months beginning after the
Effective Date but not later than the first day of the Company's fiscal quarter
next following such Effective Date.
(h) The Company will use the net proceeds received by it from the sale
of the Shares in the manner specified in the Prospectus under the caption "Use
of Proceeds."
(i) The Company will use its best efforts to effect the quotation of
the Shares on the Nasdaq National Market and maintain the quotation of the
shares of Common Stock on the Nasdaq National Market.
(j) If the Company has elected to rely upon Rule 430A, it will take
such steps as it deems necessary to ascertain promptly whether the forms of
prospectus transmitted for filing under Rule 424(b) were received for filing by
the Commission and, in the event that they were not, it will promptly file such
prospectus.
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(k) The Company will not at any time, directly or indirectly, take any
action intended, or which might reasonably be expected, to cause or result in,
or which will constitute, stabilization of the price of the Shares to facilitate
the sale or resale of the Shares.
(l) For a period of five years after the Closing Date, the Company
will furnish to the Placement Agent copies of all annual reports, quarterly
reports and current reports filed with the Commission on Forms 10-K, 10-Q and 8-
K, or such other similar forms as may be designated by the Commission, and such
other documents, reports and information relating to the Company's business or
finances as shall be furnished by the Company to its stockholders generally.
(m) The Company has complied, and will comply, with all of the
provisions of Florida H.B. 1771, as codified in sec. 517.075 Florida Statutes,
1987, as amended, and all regulations promulgated thereunder relating to issuers
or their affiliates doing business with the government of Cuba or with any
person or affiliate located in Cuba.
(n) The Company, during the period when the Prospectus is required to
be delivered under the Act or the Exchange Act, will file all documents required
to be filed with the Commission pursuant to Sections 13, 14 or 15 of the
Exchange Act within the time periods required by the Exchange Act and the
Exchange Act Regulations.
(o) Prior to the Closing Date, the Company will not (i) issue any
press release or other communication, directly or indirectly, or (ii) hold any
press conferences with respect to the Company, the financial condition, results
of operations of the Company or the Offering, without giving the Placement Agent
prior notice thereof.
(p) From the date of this Agreement through the Closing Date, the
Company will not engage any other party to act as placement agent, underwriter,
investment advisor or in any other capacity in connection with any issuance or
sale, whether in a private placement or public offering pursuant to the Act, of
any securities of the Company.
(q) Within a reasonable period after the Closing Date, the Company
shall deliver to the Placement Agent, without charge, three sets of bound
volumes of the Registration Statement and all related materials to the
individuals designated by the Placement Agent or counsel to the Placement Agent.
Section 4. Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company will pay all expenses
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incident to the performance of the obligations of the Company under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits), as
originally filed and as amended, the preliminary prospectus and the Prospectus
and any amendments or supplements thereto, and the cost of furnishing copies
thereof to the Placement Agent, (ii) the copying or printing and binding, as
applicable, and distribution of this Agreement, the certificates for the Shares,
if applicable, and the bound volumes referred to in Section 3(q) above, and the
(iii) the issuance, sale, transfer and delivery of the Shares, including any
capital duties, stamp duties and stock or other transfer taxes payable thereon,
(iv) the fees and disbursements of the Company's counsel and accountants, (v)
the qualification of the Shares under the applicable securities laws in
accordance with Section 3(f), including any filing fees in connection therewith,
and the preparation and printing of preliminary, supplemental and final surveys
of state securities or blue sky laws (the "Blue Sky Survey") and any filing fee
related to the review of the Offering by the NASD and reasonable, actual,
accountable fees and disbursements of Reboul MacMurray in connection with the
Blue Sky Survey (which fees and disbursements of Reboul MacMurray shall not
exceed $5,000), (vi) the fees and expenses of any transfer agent or registrar
for the Shares and of the Escrow Agent, and (vii) the fees and expenses incurred
in connection with applying for and maintaining the quotation of the Shares on
the Nasdaq National Market. In addition, the Company shall reimburse the
Placement Agent for (x) all reasonable advertising, travel and other out-of-
pocket expenses (not including the fees and disbursements of Reboul MacMurray)
incurred in connection with the engagement hereunder, and (y) all reasonable,
actual, accountable fees and disbursements of Reboul MacMurray, in addition to
the fees and disbursements referred to in clause (v) above, up to a maximum of
$25,000; PROVIDED, HOWEVER, that (a) prior approval from the Company shall be
required for travel, advertising and other out-of-pocket expenses referred to in
clause (x) above in excess of $5,000 in the aggregate, and (b) in the event the
transactions contemplated by this Agreement are not consummated and this
Agreement is terminated, the maximum reimbursement by the Company to the
Placement Agent for actual accountable fees and disbursements referred to in
clause (y) above shall be $15,000 provided further, however, that if the cause
of such non-consummation is a breach by the Company of its representations and
warranties contained in Section 1(a)(i), (ix), (xxxi) or (xxviii) hereto or its
covenant set forth in Section 3(a) hereto, then the Placement Agent shall be
entitled to maximum reimbursement of fees and disbursements referred to in
clause (y) above of $35,000.
Section 5. Conditions of Placement Agent's Obligations. The Placement
Agent's obligations hereunder are subject to the following conditions:
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(a) (i) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date of this Agreement or, with the Placement
Agent's written consent, at a later time and date and all filings required by
Rule 424 and Rule 430A shall have been made; (ii) at the Closing Date no stop
order suspending the effectiveness of the Registration Statement or preventing
the use of the Prospectus shall have been issued under the Act and no
proceedings for that purpose shall have been instituted or shall be pending or,
to the knowledge of the Placement Agent or the knowledge of the Company, shall
have been threatened by the Commission or any other governmental authority,
(iii) any request on the part of the Commission or any other governmental
authority for additional information shall have been complied with to the
satisfaction of such governmental authority and Reboul MacMurray; and (iv) after
the date hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
the Placement Agent and the Placement Agent did not object thereto in good
faith, and the Placement Agent shall have received certificates, dated the
Closing Date and signed by the President and Chief Executive Officer and the
Chief Financial Officer of the Company (who may, as to proceedings threatened,
rely upon the best of their information), to the effect of clauses (ii) and
(iii).
(b) At the Closing Date, the Placement Agent shall have received a
signed opinion of Dorsey & Whitney LLP, counsel for the Company, dated as of the
Closing Date, in form and substance reasonably satisfactory to Reboul MacMurray,
to the effect set forth in Exhibit A hereto.
(c) At the Closing Date, (i) the Registration Statement and the
Prospectus, as they may then be amended or supplemented, shall conform in all
material respects to the requirements of the Act and the Regulations, the
Company shall have complied in all material respects with Rule 430A (if it shall
have elected to rely thereon), the Registration Statement, as it may then be
amended or supplemented, shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements in the Registration Statement not misleading, and the
Prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements in the Prospectus, in
light of the circumstances under which they were made, not misleading; (ii)
there shall not have been, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any Material Adverse
Effect, or any development involving a prospective Material Adverse Effect,
whether or not arising in the ordinary course of business (other than as set
forth in or contemplated by the Registration Statement or the Prospectus); and
(iii) no action, suit or proceeding at law or in equity shall be pending or, to
the knowledge of the Company, threatened against the Company or
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<PAGE>
any of its officers or directors in their respective capacities as such, that
would be required to be set forth in the Prospectus other than as set forth
therein and no proceedings shall be pending or, to the knowledge of the Company,
threatened against the Company or any of its officers or directors in their
respective capacities as such, before or by any federal, state or other
commission, board or administrative agency that could reasonably be expected to
have a Material Adverse Effect, other than as set forth in the Prospectus.
(d) At the Closing Date (i) (x) each of the representations and
warranties of the Company contained herein shall be true and correct in all
material respects, as if made on the Closing Date, and (y) all agreements and
covenants herein contained to be performed on the part of the Company and all
conditions herein contained to be fulfilled or complied with on the part of the
Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with; and (ii) the Placement Agent shall have received a
certificate of the President and Chief Executive Officer and the Chief Financial
Officer of the Company, dated as of the Closing Date, to that effect.
(e) At the time that this Agreement is executed by the Company, or, if
the Company elects to rely on Rule 430A, on the date of the Prospectus, the
Placement Agent shall have received from KPMG Peat Marwick LLP a letter, dated
the date of its delivery (the "Original Letter"), addressed and in form and
substance satisfactory to the Placement Agent, confirming that they are
independent public accountants with respect to the Company within the meaning of
the Act and the applicable Regulations, and stating in effect that, except as
set forth in such letter:
(i) in their opinion, the audited financial statements and any
supplementary financial information and schedules included in the
Registration Statement and the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations;
(ii) on the basis of procedures (but not an examination in accordance
with GAAP) consisting of a reading of the unaudited financial statements,
the latest available interim financial statements and the minutes of all
meetings of the stockholders and directors of the Company and each
committee of the board of directors of the Company, inquiries of certain
officials of the Company responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in such letter
to a date not more than five days prior to the date of the Original Letter,
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<PAGE>
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements and schedules of the Company
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations, or are not fairly presented in conformity with GAAP applied on
a basis substantially consistent with the basis for the audited financial
statements included in the Prospectus; (B) any other unaudited income
statement data and balance sheet items included in the Prospectus do not
agree with the corresponding items in the unaudited financial statements
from which such data and items were derived, and any such unaudited data
and items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited financial statements
included in the Prospectus; (C) the unaudited financial statements which
were not included in the Prospectus but from which were derived any
unaudited financial statements referred to in clause (A) and any unaudited
income statement data and balance sheet items included in the Prospectus
and referred to in clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial statements included in
the Prospectus; (D) as of a specified date not more than five days prior to
the date of the Original Letter, there have been any changes in the capital
stock of the Company or any increase in the long-term debt of the Company,
or any decreases in net current assets or net assets or other items
specified by the Placement Agent, or any increases in any items specified
by the Placement Agent, in each case as compared with amounts shown in the
latest balance sheet included in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in the Original Letter; and
(E) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause (D),
there were any decreases in revenues or in other items specified by the
Placement Agent, or any increases in the total or per share amounts of net
loss or in other items specified by the Placement Agent, in each case as
compared with the comparable period of the preceding year and with any
other period or corresponding length specified by the Placement Agent,
except in each case for decreases or increases which are described in the
Original Letter; and
(iii) in addition to the examination referred to in their reports
included in the Prospectus and the procedures referred to in clause (ii)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with GAAP with respect to certain
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<PAGE>
amounts, percentages and financial information specified by the Placement
Agent, which are derived from the general accounting, financial or other
records of the Company which appear in the Prospectus or in Part II of, or
in exhibits or schedules to, the Registration Statement, and have compared
such amounts, percentages and financial information with such accounting,
financial and other records and have found them to be in agreement.
(f) At the Closing Date, the Placement Agent shall have received from
KPMG Peat Marwick LLP a letter, in form and substance satisfactory to the
Placement Agent and dated as of the Closing Date, and to the effect that they
reaffirm the statements made in the letter furnished pursuant to Section 5(e),
except that the specified date referred to shall be a date not more than five
days prior to the Closing Date. In the event the Company relies on Rule 430A
and the final Prospectus furnished to the Placement Agent in connection with the
offering of the Shares differs from the Prospectus included in the Registration
Statement at the time of effectiveness, such letter shall update the procedures
referred to in clauses 5(e)(ii) and (iii) above.
(g) At the Closing Date, the Placement Agent shall have received a
certificate, dated the date of the Closing Date, of the Chief Executive Officer
and the Chief Financial Officer of the Company, in form and substance
satisfactory to the Placement Agent, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of such
certificate, neither the Registration Statement nor the Prospectus contains
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 not misleading and (B) since the Effective Date no event has
occurred as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or misleading
an any material respect.
(ii) No stop order suspending the effectiveness of the Registration
Statement or of any part thereof has been issued and no proceedings for
that purpose have been instituted or are contemplated by the Commission.
(iii) Subsequent to the date of the most recent financial statements
in the Prospectus, there has been no Material Adverse Effect, except as set
forth in or contemplated by the Prospectus.
(h) All proceedings taken in connection with the issuance, sale,
transfer and delivery of the Shares shall be
22
<PAGE>
satisfactory in form and substance to the Placement Agent and its counsel, and
prior to, or simultaneously with, the sale of the Shares, all of the necessary
consents or approvals to consummate the transactions contemplated herein and in
the Prospectus shall have been obtained and shall be in full force and effect;
and there shall not be pending or, to the knowledge of the Company, threatened
legal or governmental proceedings with respect to any such consents or approvals
or such transactions.
(i) All the Shares shall have been duly approved for quotation on the
Nasdaq National Market on the date of this Agreement, subject only to official
notice of issuance thereof.
(j) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to the Placement Agent's participation in the
Offering.
(k) The Minimum Subscriptions shall have been tendered to the Company
in accordance with the terms hereof.
(l) The "lock-up" agreements between the Company and the holders of
certain of the outstanding shares of Common Stock of the Company or securities
convertible into or exercisable or exchangeable for such Common Stock, delivered
to the Placement Agent on or before the date hereof, shall be in full force and
effect at the Closing Date.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by the Placement Agent upon notice to the Company at
any time at or prior to the Closing Date, and such termination shall be without
liability of any party to any other party except as provided in Section 4
herein. Notwithstanding any such termination, the provisions of Sections 6 and 7
herein shall remain in effect.
Section 6. Indemnification. (a) The Company agrees to indemnify and
hold harmless the Placement Agent, its officers, directors and each person, if
any, who controls the Placement Agent within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever as and when incurred, arising out of, based upon or in
connection with, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements
23
<PAGE>
therein not misleading or arising out of an untrue statement or alleged
untrue statement of a material fact in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel chosen by the Placement Agent) reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished or confirmed in writing to the Company by
the Placement Agent expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto).
(b) The Placement Agent severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule
24
<PAGE>
430A Information, if applicable, or any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); provided, however, that the obligation of the Placement Agent to
provide indemnity under the provisions of this Section 6(b) shall be limited to
the gross proceeds of the Offering.
(c) Each indemnified party shall give notice as promptly as
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by the Placement Agent and, in the case of parties indemnified pursuant
to Section 6(b) above, counsel to the indemnified parties shall be selected by
the Company. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for the fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdictions arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature
25
<PAGE>
contemplated by Section 6(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
Section 7. Contribution. If the indemnification provided for in
Section 6 is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the PlacementAgent on the other hand in connection with the Offering
or (ii) if the allocation provided by clause (i) 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 also the relative fault of the
Company on the one hand, and of the Placement Agent on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Placement Agent on the other hand in connection with the Offering pursuant to
this Agreement shall be deemed to be in the same respective proportions as (x)
the total proceeds from the Offering (net of commissions but before deducting
expenses) received by the Company and (y) the commissions received by the
Placement Agent, in each case as set forth on the cover of the Prospectus.
The relative fault of the Company, on the one hand, and the Placement
Agent, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Placement Agent and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Placement Agent agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses
26
<PAGE>
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any 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 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and each officer and director of the Placement Agent shall have the
same rights to contribution as the Placement Agent, and each director of the
Company, each officer of the Company who signed the Registration Statement and
each person who controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
the Company.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities and agreements of the
Company contained in this Agreement or contained in certificates of officers of
the Company submitted pursuant hereto, will remain operative and in full force
and effect regardless of any investigation made by or on behalf of the Company
or the Placement Agent or controlling person and will survive delivery of the
Shares to the purchasers.
Section 9. Effectiveness and Termination of Agreement. (a) This
Agreement shall become effective upon its execution.
(b) The Placement Agent may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Date (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Prospectus, any event or occurrence having
or resulting in a Material Adverse Effect, whether or not arising in the
ordinary course of business, (ii) if, in the judgment of the Placement Agent,
market conditions are not suitable to effect the offering of the Shares
including, but not limited to, as a result of there having occurred any material
adverse change in the financial markets in the United States or the
international financial markets as a result of any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to have, in
the judgment of the Placement Agent a material adverse effect on the market for
27
<PAGE>
the Company's securities, (iii) if trading in any securities of the Company has
been suspended or limited by the Commission or the Nasdaq National Market or if
trading generally on either the American Stock Exchange or the New York Stock
Exchange or in the over-the-counter market has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the NASD or any other governmental authority or (iv) if
a banking moratorium has been declared by Federal, Minnesota or New York
authorities.
(c) The obligations of the parties under this Agreement shall
automatically be terminated in the event that the Escrow Agent has not received
from each subscriber for Shares, by the close of business on the Closing Date,
funds sufficient to purchase the such Shares.
(d) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
as provided in Section 4; and, provided, further, that the provisions of
Sections 1, 4, 6, 7, 8, 9 and 11 shall survive such termination and remain in
full force and effect.
Section 10. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication
(notices transmitted by telecopier to be promptly confirmed in writing).
Notices to the Placement Agent shall be directed to you at 376 Main Street,
Bedminster, New Jersey 07921, attention John W. Galuchie, Jr., with a copy to
Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York,
New York 10011, attention of Robert A. Schwed, Esq.; notices to the Company
shall be directed to the Company at Suite 300 E, Opus Center, 9900 Bren Road
East, Minnetonka, Minnesota 55343, attention Charles N. Blitzer, with a copy to
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402,
attention of Timothy S. Hearn, Esq.
Section 11. Parties. This Agreement is made solely for the benefit of
the Placement Agent and the Company and, to the extent expressed, any person
controlling the Company or the Placement Agent, and the directors of the
Company, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors and assigns and no other person
shall acquire or have any right under or by virtue of this Agreement.
SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF MINNESOTA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS. SPECIFIED TIMES OF THE DAY REFER TO NEW YORK CITY TIME.
28
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Section 13. Counterparts. This Agreement may be executed in one or
more counterparts and, when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument will become a binding agreement between the Company and the
Placement Agent in accordance with its terms.
Very truly yours,
MGI PHARMA, INC.
By: _______________________________
Name:
Title:
T.R. WINSTON CAPITAL, INC.
By: ________________________________
Name:
Title:
29
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EXHIBIT 1.2
SUBSCRIPTION AGREEMENT
MGI Pharma, Inc.
Suite 300 E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343-9667
Facsimile Number (612) 935-0468
Attn: James V. Adam, CFO
Gentlemen:
The undersigned (the "Subscriber") hereby subscribes for and agrees to
purchase shares (the "Shares") of Common Stock, $.01 par value ("Common Stock"),
of MGI Pharma, Inc., a Minnesota corporation (the "Company"), at a per share
price of $ ________ in the amount set forth on the Signature Page to this
Subscription Agreement (the "Signature Page") and on the terms set forth in the
Prospectus dated ____________, 1996 (the "Prospectus"), which is part of
Securities and Exchange Commission Registration Statement No. 333-09681 (the
"Registration Statement"), and in this Subscription Agreement.
The Subscriber represents and warrants to the Company and covenants and
agrees with it as follows:
1. Payment Escrow. (a) The Company and T. R. Winston Capital, Inc. (the
"Placement Agent") have entered into an Escrow Agreement (the "Escrow
Agreement") with First Trust National Association (the "Escrow Agent"), and the
Escrow Agent has established an escrow account (the "Escrow Account"). The
Subscriber shall forthwith cause the full amount of the subscription price to be
wire transferred to the Escrow Account as follows:
ABA# 091000022
FIRST BANK NA/CTR BBK =
FIRST TRUST COMPANY
AC 180121167365
BNF = CORPORATE TRUST
AC 47300017 / OBI = 33-351240
Subscriber Name:
------------------------------
<PAGE>
The Subscriber shall (i) include the Subscriber's name in the wire transfer
instructions; and (ii) request from the bank or other financial institution that
is originating the transfer, the federal wire number with respect to the
subscription and retain that number for future reference. The Subscriber shall
cause this Agreement, appropriately executed and completed, to be mailed or
otherwise delivered to T. R. Winston Capital, Inc., 376 Main Street, Bedminster,
New Jersey 07921, Attention: Mr. Joseph P. von Meister. Upon payment of the
subscription price, the Subscriber shall also send a copy of the completed
signature page of this Agreement via facsimile to the Company, Attn: James V.
Adam, at the facsimile number set forth above. The subscription price may not
be paid by check.
(b) If the Company has received notice from the Escrow Agent that, on or
before September 10, 1996, the proceeds of the sale of at least 800,000 shares
of Common Stock (the "Minimum Shares") have been deposited in the Escrow Account
and the Escrow Agent has been notified by the Company and the Placement Agent
that the Company has accepted subscription agreements for the Minimum Shares and
that the other conditions for a closing of all the shares subject to the
Offering have been met, the Escrow Agent will release the subscription price of
the Shares to the Company. Thereupon, the Company will deposit with the
Depository Trust Company the Shares to be credited to the account of the
Subscriber. If the subscription price of the Shares is not released to the
Company, the Escrow Agent will return such funds (including interest thereon) to
the Subscriber, by wire transfer.
2. Irrevocability; Rejection or Acceptance of the Subscription by the
Company. This Subscription Agreement is irrevocable by the Subscriber. The
Company and the Placement Agent may accept or reject this Subscription Agreement
in whole or in part at any time. If the Subscription Agreement is rejected in
whole, the Company will promptly cause the Escrow Agent to return the entire
amount paid by the Subscriber in connection with this Subscription Agreement,
including interest thereon, by wire transfer. If the Subscription Agreement is
rejected in part, the Company will promptly cause the Escrow Agent to return the
amount paid by the Subscriber in connection with the portion of this
Subscription Agreement that is rejected, including interest thereon, by wire
transfer. Unless and until the Company accepts this Subscription Agreement and
the Company receives payment in full for the Shares upon release of the funds
therefor from the Escrow Agent, the Subscriber will not become a holder of the
Shares subscribed for hereunder and such Shares will not be considered issued to
the Subscriber.
3. Prospectus. The Subscriber has received and reviewed the Prospectus.
4. Subscriber's Representations. The Subscriber (and with respect to
clause (a) below, each signatory executing this Subscription Agreement in a
representative or fiduciary capacity on behalf of any Subscriber) represents and
warrants that: (a) if such signatory is executing this Subscription Agreement
in a representative or fiduciary capacity, such signatory has full power and
authority to execute and deliver this Subscription Agreement in such capacity
and on behalf of his, her or its principal; and (b) this Subscription Agreement
constitutes a legal, valid and binding obligation of the Subscriber enforceable
against the Subscriber in accordance with its terms.
5. Miscellaneous. This Subscription Agreement sets forth the entire
agreement of the parties with respect to the subject matter hereof and it
supersedes and discharges all prior agreements (written and oral) and
negotiations and all contemporaneous oral agreements concerning such subject
matter. This Subscription Agreement may not be amended or terminated
2
<PAGE>
except by a writing signed by the party against whom any such amendment or
termination is sought. If the Subscriber is more than one person, the
obligation of the Subscriber shall be joint and several. This Subscription
Agreement is governed by the laws of the state of Minnesota.
FOR FLORIDA RESIDENTS
- ---------------------
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
SUBSCRIBER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA
SECURITIES AND INVESTOR PROTECTION ACT. THE SECURITIES HAVE NOT BEEN REGISTERED
UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL SUBSCRIBERS WHO ARE
FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH SUBSCRIBER TO THE
COMPANY, AN AGENT OF THE COMPANY, OR THE ESCROW AGENT.
3
<PAGE>
Upon payment of the subscription price by wire transfer, please do the
following:
1. This page should be sent via facsimile to the Company, Attention: James V.
Adam, to facsimile number (612) 935-0468.
2. Please mail the signed original of this page to Joseph P. von Meister, c/o
T. R. WINSTON, 376 Main Street, Bedminster, NJ 07921.
3. Please follow carefully all the other subscription instructions contained in
paragraph 1 of this Agreement.
Number of Shares subscribed for:
----------------------
Total Amount of Payment: $
--------------------------
SIGN AND DATE HERE:
SUBSCRIBER:
-------------------------------------------
(Print Name of Subscriber)
By:
----------------------------- -------------------
(Signature) (Date)
- ------------------------------------------------------
(Street) (City)
- ------------------------------------------------------
(State) (Zip Code)
- ------------------------------------------
(Taxpayer Identification Number)
DELIVERY INSTRUCTIONS (delivery of certificate will be effected via DTC)
BANK OR CUSTODIAN DTC #
---------------------- ---------
ACCOUNT NAME
-------------------------------------------
INTERNAL ACCOUNT NUMBER
--------------------------
(If delivery of shares to multiple accounts over which you have discretion,
please attach a schedule showing allocation, account name, social security
number, DTC Number, custodian or bank name, and internal account number.)
MGI PHARMA, INC.
By: ACCEPTED: Date , 1996
------------------------------ ----------------
Authorized Officer
4
<PAGE>
Exhibit 5.1
DORSEY & WHITNEY LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
MGI PHARMA, INC.
Suite 300 E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
Re: Registration Statement on Form S-3
File No. 333-9681
Ladies and Gentlemen:
We have acted as counsel to MGI PHARMA, INC., a Minnesota corporation (the
"Company"), in connection with a Registration Statement on Form S-3 (the
"Registration Statement") relating to the sale by the Company of up to 1,200,000
shares of common stock of the Company, par value $.01 per share (the "Common
Stock").
We have examined such documents and have reviewed such questions of law as
we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials. We have
also assumed that the Common Stock will be priced by the Pricing Committee
established by the authorizing
<PAGE>
MGI PHARMA, INC.
August 30, 1996
Page 2
resolutions adopted by the Company's Board of Directors in accordance with such
resolutions and will be issued and sold as described in the Registration
Statement.
Based on the foregoing, we are of the opinion that the shares of Common
Stock to be sold by the Company pursuant to the Registration Statement have been
duly authorized by all requisite corporate action and, upon issuance, delivery
and payment therefor as described in the Registration Statement, will be validly
issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the references to our firm under the heading
"Legal Matters" in the Prospectus constituting part of the Registration
Statement.
Dated: August 30, 1996
Very truly yours,
/s/ Dorsey & Whitney LLP
DORSEY & WHITNEY LLP
TSH
<PAGE>
Exhibit 10.1
Draft dated August 27, 1996
---------------------------
MGI PHARMA, INC.
T.R. WINSTON CAPITAL, INC.
ESCROW AGREEMENT
WITH
FIRST TRUST NATIONAL ASSOCIATION
ESCROW AGREEMENT, dated as of __________________, 1996 by and among
MGI PHARMA, INC. a Minnesota corporation (the "Company"), T.R. WINSTON CAPITAL,
INC., a New Jersey corporation (the "Placement Agent") and FIRST TRUST NATIONAL
ASSOCIATION, a national banking association incorporated under the laws of the
United States of America (the "Escrow Agent).
WHEREAS, the Company proposes to sell a minimum 800,000 (the "Minimum
Shares") and up to a maximum 1,200,000 shares (the "Maximum Shares" and,
together with the Minimum Shares, the "Shares") of its common stock, $.01 par
value (the "Common Stock"), in an offering (the "Offering") registered pursuant
to a Registration Statement (as amended, the "Registration Statement") filed by
the Company with the Securities and Exchange Commission, at an offering price
of $_________ per share;
WHEREAS, the Placement Agent has agreed to offer the Shares as the
agent of the Company on a "best efforts" basis, pursuant to the terms of the
Placement Agreement, dated as of the date hereof (the "Placement Agreement")
between the Company and the Placement Agent;
WHEREAS, the Company needs to provide for the safekeeping and
investment of the proceeds of the sale of the Shares until such time as the
Company accepts subscriptions for at least the Minimum Shares and up to the
Maximum Shares and the proceeds of the sale of the Shares are deposited with the
Escrow Agent or until such time as the Offering terminates and the Escrow Agent
is required to return such proceeds to the subscribers as provided for herein;
and
WHEREAS, with respect to all subscription payments received from
subscribers, the Company proposes to establish an escrow account with the Escrow
Agent at 180 East Fifth Street, St. Paul, Minnesota 55101.
NOW, THEREFORE, it is agreed as follows:
-1-
<PAGE>
1. Establishment of Escrow. The Escrow Agent hereby agrees to receive
and disburse the proceeds from the Offering and any interest earned thereon in
accordance herewith. Proceeds from the Offering shall be deposited with the
Escrow Agent in accordance with Rule 15c2-4 of the Rules and Regulations under
the Securities Exchange Act of 1934.
2. Deposit of Escrowed Property. The subscribers shall cause to be
wired to the Escrow Agent funds delivered in payment for Shares (the "Escrowed
Property"). Upon receipt of such funds, the Escrow Agent shall credit such funds
to an interest-bearing account (the "Escrow Account") held by the Escrow Agent.
The subscribers will not be entitled to pay for the Shares by check.
3. List of Subscribers. The Placement Agent shall furnish or cause to
be furnished to the Escrow Agent, at the time of deposit of funds pursuant to
Section 2, a list, substantially in the form of Exhibit A hereto, containing the
name of, the address of, the number of Shares subscribed for by, the wire
transfer instructions for, the subscription amount delivered to the Escrow Agent
by, and the social security number, if applicable, of, each subscriber whose
funds are being deposited, for each listed subscriber. The Escrow Agent shall
notify the Placement Agent and the Company of any discrepancy between the
subscription amounts set forth on any list delivered pursuant to this Section 3
and the subscription amounts received by the Escrow Agent and shall notify the
Placement Agent upon its receipt of funds directly from any subscriber. The
Escrow agent is authorized to revise such list to reflect the actual
subscription amounts received and the release of any subscription amounts
pursuant to Section 4.
4. Disbursement of Funds. (a) If the Escrow Agent shall receive a
notice, substantially in the form of Exhibit B hereto (an "Offering Termination
Notice"), from the Company and the Placement Agent, the Escrow Agent shall,
promptly after receipt of such Offering Termination Notice, pay to each
subscriber listed on the list held by the Escrow Agent pursuant to Section 3
whose total subscription amount shall not have been released pursuant to
paragraph (c) of this Section 4, in the manner set forth in paragraph (d) of
this Section 4, the remaining subscription amount, including interest thereon,
held by the Escrow Agent as set forth on such list held by the Escrow Agent.
(b) In the event that (i) the Minimum Shares have been subscribed for
and funds in respect thereof shall have been deposited with the Escrow Agent on
or before the Closing Date (as hereinafter defined) and (ii) no Offering
Termination Notice shall have been delivered to the Escrow Agent, the Company
and the Placement Agent may deliver to the Escrow Agent a joint notice,
substantially in the form of Exhibit C hereto (a "Closing
-2-
<PAGE>
Notice"), designating the date on which Shares are to be sold and delivered to
the subscribers thereof (a "Closing Date"), and identifying the subscribers and
the number of the Shares to be sold to each thereof on such Closing Date. The
Escrow Agent, after receipt of such Closing Notice shall pay to the Company or
its designees on such Closing Date, in federal or other immediately available
funds, in the manner specified by the Company and the Placement Agent in such
Closing Notice, an amount equal to the aggregate of the subscription amounts
paid by the subscribers identified in such Closing Notice for the Shares to be
sold on such Closing Date as set forth on the list held by the Escrow Agent
pursuant to Section 3, together with any and all interest on the Escrowed
Property.
(c) If at any time and from time to time prior to the release of any
subscriber's total subscription amount pursuant to paragraph (a) or (b) of this
Section 4 from escrow, the Company and the Placement Agent shall deliver to the
Escrow Agent a notice, substantially in the form of Exhibit D hereto (a
"Subscription Termination Notice"), to the effect that any or all of the
subscriptions of such subscriber have been rejected by the Company (a "Rejected
Subscription"), the Escrow Agent shall, promptly after receipt of such
Subscription Termination Notice pay to such subscriber, in the manner set forth
in paragraph (d) of this Section 4, the amount of such Rejected Subscription,
including interest thereon.
(d) For the purposes of this Section 4, any payment that the Escrow Agent
shall be required to make to any subscriber shall be made by wire transfer of
immediately available funds.
5. Notices. Any notices or other communication required or permitted to be
given hereunder shall be in writing and shall be (a) transmitted by facsimile,
(b) delivered by nationally recognized overnight courier, (c) delivered by hand
or (d) sent by mail, registered or certified, with proper postage prepaid, and
addressed as follows:
If to the Company, to:
MGI Pharma, Inc.
Suite 300 E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343-9667
Attention: James V. Adam
Chief Financial Officer
Phone: (612) 935-7335
Fax: (612) 935-0468
If to the Placement Agent, to:
-3-
<PAGE>
T. R. Winston Capital, Inc.
376 Main Street
Bedminster, New Jersey 07921
Attention: Mr. Joseph P. von Meister
Phone: (908) 234-0300
Fax: (908) 234-9355
If to the Escrow Agent, to:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Mr. Thomas Gronlund
Phone: (612) 244-0733
Fax: (612) 244-0712
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. All such
notices and communications, if mailed, shall be effective when deposited in the
mails, except that notices and communications to the Escrow Agent and notices of
changes of address shall not be effective until received.
6. Concerning the Escrow Agent. To induce the Escrow Agent to act
hereunder, it is further agreed by the Company and the Placement Agent that:
(a) The Escrow Agent shall not be under any duty to give the Escrowed
Property held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Escrow Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
(b) This Escrow Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Escrow Agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
(c) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Escrow Agreement. Without limiting the foregoing,
-4-
<PAGE>
the Escrow Agent shall in no event be liable in connection with its investment
or reinvestment of any cash held by it hereunder in good faith, in accordance
with the terms hereof, including, without limitation, any liability for any
delays (not resulting from gross negligence or willful misconduct) in the
investment or reinvestment of the Escrowed Property, or any loss of interest
incident to any such delays.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Property deposited hereunder but is serving as escrow holder only. Any payments
of income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The Company will provide the
Escrow Agent with appropriate forms for Tax I.D. number certification, or
non-resident alien certifications.
This paragraph (f) and paragraph (c) of this Section 6 shall survive
notwithstanding any termination of this Escrow Agreement or the resignation of
the Escrow Agent.
(g) The Escrow Agent makes no representations as to the validity,
value, genuineness or the collectibility of any security or other documents or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent (and any successor escrow agent) at any time may
be discharged from its duties and obligations hereunder by the delivery to it of
a notice of termination signed by both the Company and the Placement Agent or at
any time the
-5-
<PAGE>
Escrow Agent may resign by giving written notice to such effect to the Company
and the Placement Agent. Upon any such termination or resignation, the Escrow
Agent shall deliver the Escrowed Property to any successor escrow agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction if no such successor escrow agent is agreed upon, whereupon the
Escrow Agent shall be discharged of and from any and all further obligations
arising in connection with this Escrow Agreement. The termination or resignation
of the Escrow Agent shall take effect on the earlier of (i) the appointment of a
successor (including a court of competent jurisdiction) or (ii) the day that is
30 days after the date of delivery: (A) to the Escrow Agent of the other
parties' notice of termination or (B) to the other parties hereto of the Escrow
Agent's written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Property safe until
receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an enforceable order of a
court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
(k) In the event of any disagreement among or between the other
parties hereto and/or the subscribers for the Shares resulting in adverse claims
or demands being made in connection with Escrowed Property, or in the event that
the Escrow Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the Escrowed Property
until the Escrow Agent shall have received (i) a final and non-appealable order
of a court of competent jurisdiction directing delivery of the Escrowed Property
or (ii) a written agreement executed by the other parties hereto and consented
to by the subscribers directing delivery of the Escrowed Property, in which
event the Escrow Agent shall disburse the Escrowed Property in accordance with
such order or agreement. Any court order referred to in (i) above shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said court order is final and non-
appealable. The Escrow Agent shall act on such court order and legal opinions
without further question.
(1) As consideration for its agreement to act as Escrow Agent as
herein described, the Company agrees to pay the Escrow Agent fees determined in
accordance with the terms set forth on Exhibit E hereto (and made a part of this
Escrow Agreement as if herein set forth). In addition, the Company agrees to
-6-
<PAGE>
reimburse the Escrow Agent for all reasonable expenses, disbursements and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of its
counsel).
(m) The other parties hereto irrevocably (i) submit to the juris-
diction of any Minnesota or federal court sitting in Ramsey County, Minnesota in
any action or proceeding arising out of or relating to this Escrow Agreement,
(ii) agree that all claims with respect to such action or proceeding shall be
heard and determined in such Minnesota or federal court and (iii) waive, to the
fullest extent possible, the defense of an inconvenient forum. The other
parties hereby consent to and grant any such court jurisdiction over the persons
of such parties and over the subject matter of any such dispute and agree that
delivery or mailing of process or other papers in connection with any such
action or proceeding in the manner provided hereinabove, or in such other manner
as may be permitted by law, shall be valid and sufficient service thereof.
(n) No printed or other matter in any language (including, without
limitation, the Registration Statement, notices, reports and promotional
material) which mentions the Escrow Agent's name or the rights, powers, or
duties of the Escrow Agent shall be issued by the other parties hereto or on
such parties' behalf unless the Escrow Agent shall first have given its specific
written consent thereto. The Escrow Agent hereby consents to the use of its name
and the reference to the escrow arrangement in the Registration Statement and to
the filing of this Agreement and the subscription agreements with respect to the
Shares as exhibits to the Registration Statement.
7. Miscellaneous. (a) This Escrow Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors and assigns, heirs, administrators and representatives, and the
subscribers of the Shares and shall not be enforceable by or inure to the
benefit of any other third party except as provided in paragraph (i) of Section
6 with respect to the termination of, or resignation by, the Escrow Agent. No
party may assign any of its rights or obligations under this Escrow Agreement
without the written consent of the other parties.
(b) This Escrow Agreement shall be construed in accordance with and
governed by the internal law of the State of Minnesota (without reference to its
rules as to conflicts of law).
(c) This Escrow Agreement may only be modified by a writing signed by
all of the parties hereto and consented to by the subscribers of the Shares
adversely affected by such modifi-
-7-
<PAGE>
cations. No waiver hereunder shall be effective unless in a writing signed by
the party to be charged.
(d) This Escrow Agreement shall terminate upon the payment pursuant
to Section 4 of all amounts held in the Escrow Account.
(e) The section headings herein are for convenience only and shall
not affect the construction thereof. Unless otherwise indicated, references to
Sections are to Sections contained herein.
(f) This Escrow Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
MGI PHARMA, INC.
By:
------------------------------------
Name:
Title:
T.R. WINSTON CAPITAL, INC.
By:
------------------------------------
Name:
Title:
FIRST TRUST NATIONAL ASSOCIATION
By:
------------------------------------
Name:
Title:
-8-
<PAGE>
EXHIBIT A
SUMMARY OF CASH RECEIVED
FOR SUBSCRIPTION FOR SHARES
OF COMMON STOCK, $.01 PAR VALUE,
OF
MGI PHARMA, INC.
A-1
<PAGE>
EXHIBIT B
[Form of Offering Termination Notice]
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Mr. Thomas Gronlund
Dear Sirs:
Pursuant to Section 4(a) of the Escrow Agreement dated as of __________,
1996 (the "Escrow Agreement") among MGI Pharma, Inc. (the "Company"), T. R.
Winston Capital, Inc. (the "Placement Agent") and you, the Company and the
Placement Agent hereby notify you of the termination of the offering of the
Shares (as that term is defined in the Escrow Agreement) and direct you to make
payments to the subscribers and the Company provided for in Section 4(a) of the
Escrow Agreement.
Very truly yours,
MGI PHARMA, INC.
By:
-----------------------------
Name:
Title:
T. R. WINSTON CAPITAL, INC.
By:
-----------------------------
Name:
Title:
B-1
<PAGE>
EXHIBIT C
[Form of Closing Notice]
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Mr. Thomas Gronlund
Dear Sirs:
Pursuant to Section 4(b) of the Escrow Agreement dated as of ___________,
1996 (the "Escrow Agreement") among MGI Pharma, Inc. (the "Company"), T. R.
Winston Capital, Inc. and you, the Company hereby certifies that subscription
for the Minimum Shares (as that term is defined in the Escrow Agreement) have
been received and the Company will sell and deliver [__________] Shares to the
subscribers thereof at a closing to be held on [____________, 1996] (the
"Closing Date"). The names of the subscribers concerned, the number of Shares
subscribed for by each of such subscribers and the related subscription amounts
are set forth on the schedule annexed hereto.
We hereby request that the aggregate subscription amount be paid to is as
follows:
[To be inserted].
Very truly yours,
MGI PHARMA, INC.
By:
------------------------------
Name:
Title:
T. R. WINSTON CAPITAL, INC.
By:
------------------------------
Name:
Title:
C-1
<PAGE>
EXHIBIT D
[Form of Subscription Termination Notice]
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Mr. Thomas Gronlund
Dear Sirs:
Pursuant to Section 4(c) of the Escrow Agreement dated as of ____________,
1996 (the "Escrow Agreement") among MGI Pharma, Inc. (the "Company"), T.R.
Winston Capital, Inc. (the "Placement Agent") and you, the Company and the
Placement Agent hereby notify you that the subscriptions of the subscribers set
forth below have been rejected:
Rejected
Number of Shares of Subscrip-
Subscriber Name Rejected Subscription tion Amount
- --------------- --------------------- -----------
You are hereby directed to make payments to the aforementioned subscribers as
provided for in Section 4(c) of the Escrow Agreement.
Very truly yours,
MGI PHARMA, INC.
By:
----------------------------------------
Name:
Title:
T.R. WINSTON CAPITAL, INC.
By:
----------------------------------------
Name:
Title:
D-1
<PAGE>
EXHIBIT E
Escrow Agent Fee Schedule
Fees
----
<TABLE>
<S> <C>
Up to 25 Investors $1,500.00
Over 25 Investors $2,500.00
Charges
-------
Checks Disbursed $12.00 Each
Wires Disbursed $12.00 Each
Tax Reporting (if necessary) $5.00 Each
Out-of-Pocket Expense $50.00
</TABLE>
E-1
