Registration No. 333-_____
As filed with the Securities and Exchange Commission on January 11, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1009366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 American Road
Morris Plains, New Jersey 07950
(973) 605-8200
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive
offices)
Dr. David M. Goldenberg
Chairman and Chief Executive Officer
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
(973) 605-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of all communications,
including all communications
sent to the agent for
service, should be sent to:
Peter H. Ehrenberg, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 10024
(973) 597-2500
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------------
Title of Each Class of Amount of Shares to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered (1)(2) Offering Price Per Aggregate Registration Fee
Share(3) Offering Price(3)
- --------------------------- ---------------------- ------------------ ----------------- ----------------
<C> <S> <S> <S> <S>
Common Stock, $.01 par
value per share 2,575,000 $ 12.25 $ 31,543,750 $ 8,328
</TABLE>
(1) Consists of (a) 2,500,000 shares of common stock available for resale by
purchasers under a Common Stock Purchase Agreement, dated as of December 14,
1999, by and among the Registrant and such purchasers (the "Purchase Agreement")
and (b) 75,000 shares of common stock issuable upon the exercise of a warrant
granted by the registrant (the "Warrant").
(2) Plus an indeterminate number of shares of common stock issuable in
connection with the anti-dilutions provisions of the Purchase Agreement and the
Warrant.
(3) Pursuant to Rule 457(c), the proposed maximum offering price per share and
proposed maximum aggregate offering price have been calculated on the basis of
the average of the high and low sale prices of the registrant's common stock as
reported on The Nasdaq National Market on January 7, 2000.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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The information in this Prospectus is subject to completion and may be changed.
The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission (of which this
Prospectus is a part) is effective. This Prospectus is not an offer to sell
these securities, and is not soliciting an offer to buy these securities, in any
state where such offer or sale is not permitted
PROSPECTUS
IMMUNOMEDICS, INC.
2,575,000 Shares of Common Stock
The Issuer
Immunomedics. Inc.
300 American Road
Morris Plains, New Jersey 07950
(973) 605-8200
The Selling Stockholders
One selling stockholder is offering to sell 75,000 shares of common
stock that it may acquire upon exercise of a warrant that we issued to that
stockholder in its capacity as our financial advisor. The other selling
stockholders are offering to sell 2,500,000 shares of common stock that we
issued to them on December 14, 1999 pursuant to a Common Stock Purchase
Agreement. Additional information concerning our agreements with the selling
stockholders is set forth under the captions "Immunomedics Agreement with
Financial Advisor" and "Immunomedics - December 1999 Financing."
Trading Symbol
Nasdaq National Market - "IMMU"
The closing sale price of a share of our common stock on Nasdaq on
_________, 2000 was $_____.
The Offering
The selling stockholders may sell shares of our common stock from time
to time on the Nasdaq National Market at the prevailing market price or in
private, negotiated transactions. The shares will be sold at prices determined
by the selling stockholders. We will not receive any part of the proceeds from
the sale. We are paying the expenses in connection with the registration of the
shares with the SEC. The selling stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with the sale of shares
of our common stock.
A purchase of shares involves a high degree of risk. You should
purchase shares only if you can afford a complete loss of your investment. See
"Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
_________, 2000
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TABLE OF CONTENTS
Risk Factors:
We Have a History of Operating Losses and May Never Become
Profitable.................................................... 4
We May Not Be Able to Successfully Develop a Market for Our Approved
Products...................................................... 4
We May Not Receive Approval to Sell LeukoScan in the United States
in a Timely Manner............................................ 4
We May Not Be Able to Bring to Market the Products We Are Currently
Developing or Sustain Their Sales After Approval.............. 4
If We Do Not Obtain Additional Capital, We May Be Required to Curtail
Our Operations................................................ 5
Our Limited Marketing and Sales Experience and Capability Could
Impact Our Ability to Successfully Sell Our Current Products.. 5
We May Have to Rely on Partners to Help Us Market and Sell Our
Products Under Development.................................... 5
We Could Be Temporarily Unable to Sell Our Products If Our Agreements
with our Distributors Were Terminated......................... 5
We Could Be Temporarily Unable to Sell Our Products If Our Agreement
with our End Stage Manufacturer Was Terminated................ 6
Our Internal Manufacturing Capability May Limit What We Can Sell. 6
We May Be Unable to Continue to Use Mouse Fluids for Future Products
Which Could Require Us to Make Expensive and Time Consuming
Changes to Our Products in Development........................ 6
Our Product Development Is Dependent Upon Our Continued Relationship
with The Center for Molecular Medicine and Immunology......... 6
Certain Potential Conflicts of Interest Exist with The Center for
Molecular Medicine and Immunology Which Could Affect Our
Operations.................................................... 6
We May Not Be Able to Obtain Government Regulatory Approval in a
Timely Manner to Market and Sell Our Products or Approval May Be
Withdrawn..................................................... 7
Our Business Involves the Use of Hazardous Materials............. 7
We Must Maintain Our Manufacturing Facilities in Accordance With
Government Regulatory Requirements............................ 7
We Have Agreed to Certain Covenants in our 1999 Financing Which Place
Restrictions on the Operation of our Business................. 7
Changes to Health Care Reimbursement Could Adversely Affect Our
Operations.................................................... 8
The Loss of Key Employees Could Adversely Affect our Operations.. 8
We Face Substantial Competition in the Biotechnology Field and
May Not Be Able to Successfully Compete....................... 8
Our Products May Be Rendered Obsolete By Rapid Technological
Change........................................................ 8
If We Are Unable to Protect Our Intellectual Property Rights, We
Could Lose Our Competitive Advantage.......................... 9
Our Products May Infringe Third Party Intellectual Property
Rights........................................................ 9
Our Operations Could Suffer If We Are Unsuccessful in Our Pending
Infringement Claims Concerning Our CEA Antibodies............. 9
Product Liability Claims in Excess of the Amount of Our Insurance
Would Adversely Affect Our Financial Condition................ 9
Our Principal Stockholder Can Influence Most Matters Requiring
Approval By Our Stockholders.................................. 10
Resales of Shares Held By Our Directors and Executive Officers May
Lower the Market Price of Our Common Stock.................... 10
Our Stock Price Has Been Volatile................................ 10
Potential Loss of Our Nasdaq Listing Could Make it More Difficult to
Sell our Shares and Affect Our Liquidity...................... 10
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Stockholders Could Be Adversely Affected By Our Anti-Takeover
Provisions.................................................... 10
Our Operations Could Be Affected By Year 2000 Issues............. 11
Stockholders Should Not Expect that We Will Pay Dividends........ 11
Special Note Regarding Forward-Looking Statements................ 11
Where You Can Find More Information......................................... 12
Immunomedics:
Description of Our Business...................................... 13
December 1999 Financing.......................................... 15
Agreement with Financial Advisor................................. 16
Use of Proceeds............................................................. 16
Selling Stockholders........................................................ 17
Plan of Distribution:
Manner of Sales; Broker-Dealer Compensation...................... 18
Filing of a Post-Effective Amendment In Certain Instances........ 19
Certain Persons May Be Deemed to Be Underwriters................. 19
Regulation M..................................................... 20
Indemnification and Other Matters................................ 20
Legal Matters............................................................... 20
Experts..................................................................... 20
You should rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone to
provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of such document. The selling stockholders are
not making an offer of our shares in any state where the offer is not permitted.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. As a
result, you should be able to sustain a complete loss of your investment. In
addition to the other information in this prospectus, you should carefully
consider the following factors before purchasing any of our common stock.
We Have a History of Operating Losses and May Never Become Profitable
We have had significant operating losses since our formation in 1982
and have not earned a profit since our inception. These operating losses and
failure to be profitable have been due mainly to the significant amount of money
that we have had to spend on research and development. As of September 30, 1999,
we had an accumulated deficit of approximately $101,600,000. We expect to
continue to experience operating losses until such time, if at all, that we are
able to generate sufficient revenues from sales of CEA-Scan(r), LeukoScan(r)
and/or our other potential products.
We May Not Be Able to Successfully Develop a Market for Our Approved Products
CEA-Scan and LeukoScan are the only products which we are licensed to
market and sell. To date, we have received only limited revenues from the sale
of these products. We cannot assure you that these products or any of our
proposed products will achieve market acceptance or generate significant sales.
We May Not Receive Approval to Sell LeukoScan in the United States in a Timely
Manner
We have not yet received approval from the FDA to market and sell
LeukoScan in the United States and cannot assure you as to when, if ever, that
we will obtain approval. In addition, the FDA could impose conditions on its
approval, which could significantly affect the commercial viability of the
product or could require us to undertake significant additional studies or
otherwise expend additional significant funds. If we do not receive approval to
market and sell LeukoScan in the United States in the near future or if the FDA
imposes significant conditions or restrictions, our business and operations
could be significantly and adversely affected.
We May Not Be Able to Bring to Market the Products We Are Currently Developing
or Sustain Their Sales After Approval
Before any of our products that we are currently developing can be
marketed and sold, we must undertake substantial research and development. All
new products face a high degree of uncertainty, including the following:
* We may not receive regulatory approval to perform human clinical trials for
the products we currently have planned or we may be unable to successfully
complete our ongoing clinical trials.
* The results from preclinical studies and clinical trials may not be
indicative of results that will be obtained in later-stage testing.
* We may be unable to timely recruit a sufficient number of patients for our
clinical trials. Delays in planned patient enrollment may result in
increased costs and delays.
* We may be unable to obtain approval from the FDA and comparable foreign
authorities because we are unable to demonstrate that the product is safe
and effective for the intended use, or obtaining regulatory approval may
take significantly more time and cost significantly more money than we
currently anticipate.
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* We may discover that the product has undesirable or unintended side effects
or other characteristics that make it impossible or impracticable for us to
continue development or which may limit the product's commercial use.
* We do not expect that any new product which is currently in research and
development will be commercially available for at least several years.
* We may be unable to produce the product in commercial quantities at
reasonable cost.
* We may be unable to successfully market the product or to find an
appropriate corporate partner, if necessary, to assist us in the marketing
of the product.
* The product may not gain satisfactory market acceptance.
* The product may be superceded by another product commercialized for the
same indication or may infringe patents issued to others, which would
prevent us from marketing and selling the product.
* After approval, the product may be recalled or withdrawn at any time as a
result of regulatory issues, including those concerning safety and
efficacy.
If we are unable to continue to develop products that we can successfully
market, our business, financial condition and results of operations will be
significantly and adversely affected.
If We Do Not Obtain Additional Capital, We May Be Required to Curtail Our
Operations
Without a significant increase in product revenues or other infusion of
capital during our current fiscal year which ends June 30, 2000, we will be
required to significantly reduce our operating expenses, including the amount of
resources devoted to marketing and sales, product development and clinical
trials, which could have a significant and adverse effect on us. We cannot
assure you that any additional financing will be available to us at all or on
terms we find acceptable or that the terms of any financing will not cause
substantial dilution to our existing stockholders.
Our Limited Marketing and Sales Experience and Capability Could Impact Our
Ability to Successfully Sell Our Current Products
We are relying, in substantial part, on our own limited sales and
marketing organization to market CEA- Scan and LeukoScan. We cannot assure you
that we can successfully maintain and continue to build our sales force. If we
are unable to continue to build and maintain our sales force, our financial
condition and operating results may be significantly and adversely affected.
We May Have to Rely on Partners to Help Us Market and Sell Our Products Under
Development
The marketing and sale of our proposed products may be dependent upon
our entering into arrangements with corporate partners. We cannot assure you
that we will be successful in forming these relationships or that these
relationships, even if formed, will be successful.
We Could Be Temporarily Unable to Sell Our Products If Our Agreements with our
Distributors Were Terminated
We currently do not have the resources to internally develop and
maintain the operating procedures required by the FDA and comparable foreign
regulatory authorities to oversee distribution of our products. As a result, we
have entered into arrangements with third parties to perform this function for
the foreseeable future. If these agreements are terminated, we will be required
to enter into arrangements with other government approved third parties in order
to be able to distribute our products.
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We will be unable to continue to distribute our products until an acceptable
alternative is identified. If we were even only temporarily unable to distribute
our products, our business could be significantly and adversely effected.
We Could Be Temporarily Unable to Sell Our Products If Our Agreement with our
End Stage Manufacturer Was Terminated
We rely on a single third party to perform certain end-stage portions
of the manufacturing process for CEA-Scan and LeukoScan which we are unable or
do not have the resources to perform. If this third party were to become
unavailable, we would be unable to complete the manufacturing process until we
entered into an agreement with another qualified entity. We cannot assure you
that we will be able to negotiate an agreement with another entity on terms we
consider acceptable, if at all. Even if we were able to do so, any substantial
delay in our ability to manufacture our products could significantly and
adversely affect our operations.
Our Internal Manufacturing Capability May Limit What We Can Sell
If demand for our approved product increases significantly, we cannot
assure you that we will continue to have the capacity to manufacture commercial
quantities successfully. In addition, if any of our other products are approved
for marketing and sale, we cannot assure you that we will continue to have the
capacity and expertise to manufacture commercial quantities of multiple products
successfully or with acceptable profit margins. If we were even only temporarily
unable to manufacture sufficient quantities of our products to meet demand, our
business could be significantly and adversely effected.
We May Be Unable to Continue to Use Mouse Fluids for Future Products Which Could
Require Us to Make Expensive and Time Consuming Changes to Our Products in
Development
CEA-Scan and certain of our other imaging agents are derived from
ascites fluid produced in mice. Regulatory authorities, particularly in Europe,
have expressed concerns about the use of mice fluid for the production of
monoclonal antibodies. We cannot assure you that regulatory authorities will
agree that our quality control procedures will be adequate for future products.
While we are continuing our development efforts to produce certain of our
monoclonal antibodies using cell culture methods, this process constitutes a
substantial production change, which will require additional manufacturing
equipment and new regulatory approval. We cannot assure you that we will have
the resources to acquire the additional manufacturing equipment and resources or
that we will receive the required regulatory approval on a timely basis, if at
all. We also have contracted with a third party for the development and
production of certain humanized antibodies, but we cannot assure you that these
efforts will be successful.
Our Product Development Is Dependent Upon Our Continued Relationship with The
Center for Molecular Medicine and Immunology
The Center for Molecular Medicine and Immunology, a not-for-profit
cancer research center, performs pilot and pre-clinical trials in product areas
of importance to us. CMMI also conducts basic research and patient evaluations
in a number of areas of potential interest to us. If CMMI were no longer to
provide these services, we would have to make alternative arrangements with
third parties which could significantly delay and increase expenses associated
with pre-clinical testing and initial clinical trials.
Certain Potential Conflicts of Interest Exist with The Center for Molecular
Medicine and Immunology Which Could Affect Our Operations
Dr. David M. Goldenberg, our Chairman and Chief Executive Officer, is
the founder, President and a member of the Board of Trustees of CMMI. Dr.
Goldenberg devotes more of his time working for CMMI than for us.
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In addition, other key personnel currently have responsibilities both to CMMI
and us. As a result, the potential for conflict of interest exists and disputes
could arise over the allocation of research projects and ownership of
intellectual property rights.
We May Not Be Able to Obtain Government Regulatory Approval in a Timely Manner
to Market and Sell Our Products or Approval May Be Withdrawn
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of our
presently marketed and proposed products as well as our research and development
activities. All of our proposed products will require regulatory approval by
governmental agencies prior to commercialization and our products must undergo
rigorous preclinical and clinical testing and other premarket approval
procedures by the FDA and comparable foreign authorities. In addition, since
certain of our potential products involve the application of new technologies,
regulatory approvals may take longer than for products produced using more
conventional methods. Once we begin clinical trials for a new diagnostic or
therapeutic product, it may take five to ten years or more to receive the
required regulatory approval to commercialize that product and begin to market
it to the public. Various federal and, in some cases, state statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of these products. The lengthy process of
seeking these approvals, and the subsequent compliance with applicable statutes
and regulations, will require us to expend substantial resources. If we fail to
obtain or are otherwise substantially delayed in obtaining regulatory approvals,
our business and operations could be significantly and adversely affected.
In responding to a new drug application, or a biologic license
application, government regulators may grant marketing approvals, request
additional information or further research, or deny the application if it
determines that the application does not satisfy its regulatory approval
criteria. Approvals may not be granted on a timely basis, if at all, or if
granted may not cover all the clinical indications for which we are seeking
approval or may contain significant limitations in the form of warnings,
precautions or contraindications with respect to conditions of use. Even after
approval, we may be required to recall or withdraw a product as a result of
subsequently discovered safety or efficacy concerns.
Our Business Involves the Use of Hazardous Materials
In addition to laws and regulations enforced by the FDA, we are also
subject to regulation under various other foreign, federal, state or local laws
and regulations. Our research and development involves the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds. The
risk of accidental contamination or injury from these materials cannot be
completely eliminated. If an accident occurs, we could be held liable for any
damages that result and any liability could exceed our resources.
We Must Maintain Our Manufacturing Facilities in Accordance With Government
Regulatory Requirements
Our facilities are subject to inspection by the FDA and comparable
foreign authorities. A separate license is sometimes required for commercial
manufacture of any product. Failure to maintain these licenses or to meet the
regulatory inspection criteria would result in disruption to our manufacturing
processes and could have a significant and adverse effect on our business and
operations.
We Have Agreed to Certain Covenants in our 1999 Financing Which Place
Restrictions on the Operation of our Business
In connection with our December 1999 financing, we have agreed to
certain covenants, including covenants that will apply until such time as the
investors in that offering and their affiliates beneficially own less than 5% of
our common stock. Among other things, we have agreed that without the prior
consent of the investors, we may not sell our business to anyone that is an
affiliate of the company, unless the sale is for consideration at least equal to
(a) the fair market value in the event of a sale of
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assets (as determined in good faith by our board of directors) or (b) the then
current market price in the event of a sale of stock. As of December 30, 1999,
such investors in the aggregate beneficially owned 6.2% of our outstanding
common stock. For additional information regarding our December 1999 financing,
see "Immunomedics - December 1999 Financing."
Changes to Health Care Reimbursement Could Adversely Affect Our Operations
Our ability to successfully commercialize our products will depend in
part on the extent to which reimbursement for the cost of our products and
related treatment will be available from government health administration
authorities, private health insurers and other organizations. These third-party
payers are increasingly challenging the price of medical products and services.
Several proposals have been made that may lead to a government-directed national
health care system. Adoption of this type of system could further limit
reimbursement for medical products, and we cannot assure you that adequate
third-party coverage will be available to enable us to maintain price levels
sufficient to realize an appropriate return on our investment in product
development. In addition, we also cannot assure you that the U.S. government or
foreign governments will not implement a system of price controls. Any system
might significantly and adversely affect our ability to market our products
profitably.
The Loss of Key Employees Could Adversely Affect our Operations
As a small biotechnology company, we are heavily dependent upon the
talents of Dr. Goldenberg and certain key scientific personnel. If Dr.
Goldenberg or any of our other key personnel leave our employ, our operations
could be significantly and adversely affected. In addition, from time to time we
have a need to expand our management and scientific personnel. Competition for
qualified personnel in the biotechnology and pharmaceutical industries is
intense and we cannot assure you that we will be successful in our recruitment
efforts. If we are unable to retain or, when needed, attract additional
qualified personnel, our operations also could be significantly and adversely
affected.
We Face Substantial Competition in the Biotechnology Field and May Not Be Able
to Successfully Compete
The biotechnology industry is highly competitive, particularly in the
area of cancer diagnostic and therapeutic products. We are likely to encounter
significant competition with respect to our existing products as well as our
products currently under development. A number of companies, including IDEC
Pharmaceuticals, Genentech, SmithKline Beecham, Nycomed Amersham, and Coulter
Pharmaceutical, are engaged in the biotechnology field, and in particular the
development of cancer diagnostic and therapeutic products. Many of these
companies have significantly greater financial, technical and marketing
resources than us. In addition, many of these companies may have more
established positions in the pharmaceutical industry and may be better equipped
than us to develop, refine and market their products.
We also expect to face increasing competition from universities and
other non-profit research organizations. These institutions carry out a
significant amount of research and development in the field of antibody-based
technology. These institutions are becoming increasingly more aware of the
commercial value of their findings and more active in seeking patent and other
proprietary rights, as well as licensing revenues.
Our Products May Be Rendered Obsolete By Rapid Technological Change
We are pursuing an area of product development in which there is the
potential for extensive technological innovations in relatively short periods of
time. We cannot assure you that our competitors will not succeed in developing
products that are safer or more effective than our products. Rapid technological
change or developments by others may result in our current products as well as
those in development becoming noncompetitive or obsolete.
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If We Are Unable to Protect Our Intellectual Property Rights, We Could Lose Our
Competitive Advantage
Our commercial success is highly dependent upon patents and other
proprietary rights that we own or license. We cannot assure you that our key
patents will not be invalidated or will provide us protection that has
commercial significance. Litigation may be necessary to protect our patent
positions, which could be costly and time consuming. If any of our key patents
that we own or license are invalidated, our business may be significantly and
adversely affected. In addition, other companies may independently develop
similar trade secrets or know-how or obtain access to our trade secrets,
know-how or proprietary technology, which could significantly and adversely
affect our business.
Our Products May Infringe Third Party Intellectual Property Rights
Other companies may have filed applications for, or have been issued,
patents and obtained other proprietary rights to technology which may be
potentially useful to us. Since we do not have the resources to maintain a staff
whose primary function is to investigate the level of protection afforded to
third parties on devices and components which we use in our products, it is
possible that a third party could successfully claim that our products infringe
on their intellectual property rights. If this were to occur, we may be subject
to substantial damages, and we may not be able to obtain appropriate licenses at
a cost we could afford and we may not have the ability to timely redesign our
products. If we are required to pay damages or are unable to obtain these
rights, our business could be significantly and adversely affected. Even if we
are successful in defeating any alleged infringement claims, litigation could
result in a substantial diversion of managerial time and resources, which could
be better and more fruitfully utilized on other activities.
Our Operations Could Suffer If We Are Unsuccessful in Our Pending Infringement
Claims Concerning Our CEA Antibodies
We are involved in certain litigation with F. Hoffmann-LaRoche and its
affiliates concerning the validity our European patents covering the antibody we
use in our CEA-Scan cancer imaging product and our CEA-Cide(tm) cancer therapy
product, as well as the use of highly specific anti-CEA antibodies for a number
of other uses. We have claimed that they have infringed our patent and they have
counter-claimed seeking to nullify the patents that were issued. If we receive
an unfavorable outcome in any of these matters, our business could be
significantly and adversely affected.
Product Liability Claims in Excess of the Amount of Our Insurance Would
Adversely Affect Our Financial Condition
The clinical testing, marketing and manufacturing of our products
necessarily involve the risk of product liability. While we currently have
product liability insurance, we cannot assure that we will be able to obtain
insurance in the future at an acceptable cost, if at all. If we cannot maintain
our existing or comparable liability insurance, our ability to test clinically
and market our products may be significantly impaired. Moreover, the amount and
scope of our insurance coverage or indemnification arrangements with any
distributor or other third party upon which we rely may be inadequate to protect
us in the event of a successful product liability claim. Any claim in excess of
the amount of any insurance we then had could significantly and adversely affect
our financial condition and operating results.
Our Principal Stockholder Can Influence Most Matters Requiring Approval By Our
Stockholders
As of December 31, 1999, Dr. Goldenberg, our Chairman and Chief
Executive Officer, controlled the right to vote over approximately 26.7% of our
common stock (excluding options to purchase 337,500 shares). As a result of this
voting power, Dr. Goldenberg may have the ability to determine the election of
all of our directors, direct our policies and control the outcome of
substantially all matters which may be put to a vote of our stockholders.
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Resales of Shares Held By Our Directors and Executive Officers May Lower the
Market Price of Our Common Stock
As of December 31, 1999, we had a total of 46,260,121 shares of common
stock outstanding, 12,386,456 of which were held by our directors and executive
officers (excluding options to purchase 940,625 shares). These shares may only
be resold in limited quantities and only within the limitations imposed by Rule
144 under the Securities Act. The mere prospect that these shares may be
publicly resold could lower the market price for our common stock.
Our Stock Price Has Been Volatile
We believe that a variety of factors have caused the market price of
our common stock to fluctuate substantially, and that it will continue to
fluctuate in the future. These factors include:
* actual or anticipated fluctuations in our operating results;
* the status of our products in development;
* new products or technical innovations by us or by our existing or potential
competitors;
* the formation or termination of our corporate alliances and distribution
arrangements;
* prolonged periods of regulatory review of new products or new uses for
existing products;
* determinations regarding our patent applications and those of others;
* trading strategies occurring in the market place with respect to our common
stock; and
* general market conditions and other factors unrelated to us or outside our
control.
Potential Loss of Our Nasdaq Listing Could Make it More Difficult to Sell our
Shares and Affect Our Liquidity
If the bid price of our common stock were to fall below $1.00 per
share, if we were to have less than $4,000,000 in net tangible assets (total
assets less total liabilities and goodwill), or if the value of our common stock
held by our stockholders (other than our directors and executive officers) were
to be less than $5,000,000, our common stock could be delisted from The Nasdaq
Stock Market. If our common stock were delisted from Nasdaq, trading, if any,
would thereafter be conducted in the over-the-counter market. This would make it
more difficult for an investor to dispose of, or to obtain accurate quotations
for, our common stock. Additionally, it may become more difficult for us to
raise funds through the sale of our securities.
Stockholders Could Be Adversely Affected By Our Anti-Takeover Provisions
Our board of directors has the authority, without any further vote by
our stockholders, to issue up to 10,000,000 shares of preferred stock in one or
more series and to determine the designations, powers, preferences and relative,
participating, optional or other rights thereof, including the dividend rate,
whether dividends are cumulative, conversion rights, voting rights, rights and
terms of redemption, redemption price and liquidation preference. Issuance of
preferred stock could have the effect of delaying, deterring or preventing a
change in control of our company, or could impose various procedural and other
requirements that could make it more difficult for holders of our common stock
to effect certain corporate actions, including the ability to replace incumbent
directors and to accomplish transactions opposed by the incumbent board of
directors.
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<PAGE>
The rights of the holders of our common stock would be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future.
Our Operations Could Be Affected By Year 2000 Issues
Prior to December 31, 1999, we completed a review of our business
systems, including our computer systems and manufacturing equipment, and sent
written inquiries to our customers, distributors and vendors as to their
progress in identifying and addressing problems that their systems may face in
correctly interpreting and processing date information relating to Year 2000
issues. While we have not yet experienced significant difficulties relating to
Year 2000 issues, we still could encounter problems with supplier and/or revenue
sources which could affect us. We cannot accurately predict the occurrence or
outcome of any these problems, nor can we estimate the dollar amount of these
problems. In addition, we cannot assure you that a failure by a third party to
ensure year 2000 compliance will not significantly and adversely effect us.
Stockholders Should Not Expect That We Will Pay Dividends
We have never paid any dividends on our common stock. For the
foreseeable future, we expect to retain earnings, if any, to finance the
expansion and development of our business. Any future payment of dividends will
be within the discretion of our Board of Directors and will depend upon a
variety of factors, including our earnings, capital requirements, and operating
and financial condition.
Special Note Regarding Forward-Looking Statements
We have made statements in this prospectus, and in the documents we
incorporate by reference, that are "forward-looking statements" within the
meaning of the Securities Act and the Securities Exchange Act. Sometimes these
statements contain words like "may," "believe," "expect," "continue," "intend,"
"anticipate" or other similar words. These statements could involve known and
unknown risks, uncertainties and other factors that might significantly alter
the actual results suggested by the statements. In other words, our performance
might be quite different from what the forward-looking statements imply. The
following factors, as well as those discussed above in this "Risk Factors"
section and in the documents which we incorporate by reference, could cause our
performance to differ from the implied results:
* inherent uncertainties accompanying the marketing of CEA-Scan and
LeukoScan.
* inherent uncertainties involving new product development and marketing.
* inability to obtain capital for continued product development and
commercialization.
* actions of regulatory authorities concerning product approval.
* actions of government and private organizations concerning reimbursement of
medical expenses.
* impact of competitive products and pricing.
* results of clinical trials.
* loss of key employees.
* changes in general economic and business conditions.
* changes in industry trends.
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We have no obligation to release publicly the result of any revisions to any of
our "forward-looking statements" to reflect events or circumstances that occur
after the date of this prospectus or to reflect the occurrence of other
unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
We publicly file annual, quarterly and current reports, proxy statements
and other documents with the SEC. You may read and copy any of these documents
at the SEC's public reference rooms, which are located at:
450 Fifth Street, N.W.
Washington, D.C. 20549
7 World Trade Center, Suite 1300
New York, New York 10048
500 West Madison Street, Suite 1400
Chicago, Illinois 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC maintains an Internet website at
http://www.sec.gov where our publicly filed documents may be obtained.
This prospectus is part of a registration statement filed with the SEC.
Our registration statement contains more information than this prospectus
regarding us and our common stock and includes supplemental exhibits and
schedules. You can obtain a copy of the registration statement from the SEC at
the address listed above or from its Internet website.
The SEC allows us to "incorporate by reference" into this prospectus
the information we file with it. This means that we are deemed to be disclosing
such information to you by referring you to those documents. This information is
important and should be reviewed. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supercede the information in this
prospectus.
We incorporate by reference into this prospectus the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act:
* Annual Report on Form 10-K for the fiscal year ended June 30, 1999;
* Proxy Statement, dated October 18, 1999, with respect to our 1999 annual
meeting of stockholders;
* Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1999;
* Current Report on Form 8-K, dated November 24, 1999; and
* Description of our common stock contained in Item 1 of our Registration
Statement on Form 8-A, dated May 7, 1984.
You may request a copy of these filings, at no cost, by calling or
writing us at the following address:
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
(973) 605-8200
Attention: Investor Relations
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IMMUNOMEDICS
Description of Our Business
We are a biopharmaceutical company, which develops, manufactures and
markets products for the detection and treatment of cancers and other diseases.
These products, which are based on our monoclonal antibody technology, are
designed to deliver radioisotopes, chemotherapeutic agents, toxins, dyes or
other substances to a specific disease site or organ system.
We have received approval from the respective regulatory agencies in
the United States, the 15 member countries of the European Union, Canada and
certain other countries to market and sell CEA-Scan (arcitumomab), our imaging
product for the detection of recurrent and/or metastatic colorectal cancer.
We also have received approval to market and sell LeukoScan
(sulesomab), our imaging product for detection and diagnosis of osteomyelitis
(bone infection) in long bones and in diabetic foot ulcer patients, in the 15
member countries of the European Union. We have filed an application with the
FDA in the U.S. and the comparable regulatory agency in Canada for approval to
market LeukoScan for the imaging of infection in osteomyelitis as well as for
the imaging of infection in acute, atypical appendicitis. We have been advised
by the FDA that there are still deficiencies with our application relating to
the adequacy of our data necessary to support final approval for these
indications. Despite our confidence that we were making progress with FDA and
had adhered to all agreements and guidelines, it is now clear to us that we need
to take whatever steps are available to us to gain a more receptive audience in
order to gain marketing approval for this product. We can not assure you that we
will receive FDA approval for this product in a timely manner, or at all.
Marketing, Sales and Distribution
CEA-Scan is marketed and sold in the U.S. directly by our limited
internal sales force, who are focused on new customers in major medical centers.
Our skilled nuclear medicine technicians work with this sales force and provide
technical support directly to our customers. We have entered into a distribution
arrangement in the U.S. with Integrated Commercialization Solutions, a division
of Bergen Brunswig Corporation, to provide product support services including
customer service, order management, distribution, invoicing and collection. We
also have an agreement with Syncor International, a leading provider of
radiopharmacy services, under which Syncor makes CEA-Scan available to its
hospital and clinic accounts throughout the U.S., supported by our sales and
technical support specialists.
Our European operations, headquartered in Hillegom, The Netherlands,
include European management, sales and marketing, customer service and
invoicing, collection and other administrative functions. We also have
established sales representation in most major European markets. We service
other markets through the appointment of local distributors who provide sales
and marketing support as well as local product distribution. We have an
agreement with Eli Lilly Deutschland GmbH to package and distribute our products
throughout the 15 member countries of the European Union and other countries.
Imaging Products
Our imaging products involve injecting a patient with a radioisotope
attached to an antibody fragment. An antibody is a protein that can find and
attach itself to a specific substance called an antigen. These antigens are
present on tumor cells, white blood cells that accumulate at the sites of
infections, and other disease entities. A radioisotope attached to a
disease-targeting antibody is delivered to a disease site for imaging. A
standard nuclear medicine imaging camera is then used to detect and display
radioisotope concentrations at various sites of disease.
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<PAGE>
The antibody fragment in CEA-Scan is directed against carcinoembryonic
antigen (CEA), which is abundant at the site of virtually all cancers of the
colon or rectum. CEA also is associated with many other cancers. We are
conducting phase IV clinical trials to evaluate the product following repeated
administration. We also have been performing clinical trials using CEA- Scan for
imaging lung cancer and breast cancer. We are discussing the results of our
breast cancer trials with European regulatory authorities to determine whether
the data will support the submission of applications for marketing approval. In
addition, we are continuing our efforts in developing cancer detection
applications with CEA-Scan utilizing hand-held radiation-detecting probes for
use in colorectal cancer surgery.
LeukoScan is a monoclonal antibody fragment, which seeks out, and binds
to white blood cells (granulocytes) associated with a potentially wide range of
infectious and inflammatory diseases.
We are studying the following two other imaging products pursuant to
Investigational New Drug applications that we have filed or plan to file with
the FDA and for which we have ongoing clinical trials:
* LymphoScan(r), for non-Hodgkin's B-cell lymphomas.
* AFP-Scan(r), for liver cancer and germ-cell tumors of the ovaries and
testes.
Therapeutic Products
We are applying our expertise in antibody selection, modification and
chemistry to cancer therapeutics, using monoclonal antibodies labeled with
therapeutic radioisotopes or conjugated with drugs. We are engaged in
developing anti-cancer products, principally with a technique called
radioimmunotherapy. This technique may deliver radiolabeled therapeutic agents
to tumor sites more selectively than current radiation therapy technologies,
while minimizing debilitating side effects. In addition, we are evaluating in
clinical trials the effects of our non-radioactive lymphoma antibody in
non-Hodgkin's lymphoma patients.
Research Programs
In addition to concentrating on our products in clinical development,
we conduct ongoing research in many related areas. We conduct research in-house
and in collaboration with The Center for Molecular Medicine and Immunology, also
known as the Garden State Cancer Center, and other academic and research
centers. In March 1999, we entered into a joint venture with Beckman Coulter to
develop the next generation of cancer radiotherapeutics using bi-specific
antibodies. We believe our ongoing research efforts will identify new and
improved products and techniques for diagnosing and treating various cancers and
infectious diseases. However, we cannot assure you that such efforts will be
successful, given the complex issues involved in such diagnosis and treatment.
Our research efforts are focused in various areas related to our core
technology, including antibody engineering and the identification of other
antibody-directed approaches to cancer therapy. We have made significant
progress in humanizing certain mouse antibodies and have reengineered the
humanized antibodies with improved characteristics. We are continuing our work
on selective coupling of therapeutic site specific agents onto antibody
fragments which will offer the advantage of loading multiple therapeutic
compounds onto antibodies at a particular disease site. We also continue to
investigate pre-targeting, whereby an antibody is administered first, followed
by a radionuclide or drug administration.
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<PAGE>
We also are continuing our research into the use of alternative
radioisotopes, such as Yttrium-90 in place of Iodine-131. Our research indicates
that Yttrium-90 is retained by lymphoma cells for longer periods after antibody
metabolism, and shows greater efficacy against larger tumors. We also have
developed a technology using a compound called "DOTA" to tightly bind Yttrium-90
to antibodies.
In addition, we are continuing our efforts to scale-up our proprietary
method for technetium-99m radiolabeling of peptides, using single-vial kits.
December 1999 Financing
On December 14, 1999, we entered into a Common Stock Purchase Agreement
with a small group of private investors, each of whom is described below as a
selling stockholder. Under the Common Stock Purchase Agreement, we sold the
investors a total of 2,500,000 shares of our common stock at a price of $3.00
per share, for gross proceeds of $7,500,000. We used substantially all of the
net proceeds from this sale to redeem a total of 595 shares of our Series F
Preferred Stock, representing all of the shares of Series F Preferred Stock that
had not been converted into common stock. As a result, we no longer have any
shares of Series F Preferred Stock outstanding.
Under the Common Stock Purchase Agreement, we were required to make
certain promises to the investors. These covenants included the following:
* We agreed to register with the SEC the shares that we sold to the
investors. We promised to file a preliminary prospectus by January 13, 2000
and thereafter to use our best efforts to have our registration statement
declared effective by the SEC as expeditiously as possible. We were
successful in filing our preliminary prospectus prior to the January 13th
deadline.
* We agreed to use the net proceeds to purchase the outstanding shares of our
Series F Preferred Stock, as we have described above.
* We agreed to refrain from entering into certain transactions with persons
closely related to our company, including our executive officers and
directors, without the prior approval of the investors. The investors
agreed not to withhold their approval unreasonably.
* We agreed that without the prior consent of the investors, we may not sell
our business to anyone that is an affiliate of the company, unless the sale
is for consideration at least equal to (a) the fair market value in the
event of a sale of assets (as determined in good faith by our board of
directors) or (b) the then current market price in the event of a sale of
stock.
* We agreed that we would not amend our certificate of incorporation or
by-laws in a manner that would adversely affect the investors, without the
prior approval of the investors. The investors agreed not to withhold their
approval unreasonably.
* We agreed that if, during a six month period specified in our Common Stock
Purchase Agreement, we issue shares of our common stock at a price of less
than $3.00, we will issue additional shares of common stock to the
investors to protect them against dilution without requiring any additional
payment from the investors. This covenant is subject to certain exceptions;
among other things, no such adjustment will be required if shares are
issued below that price upon exercise or conversion of options, warrants or
convertible securities outstanding on December 14, 1999 or in connection
with corporate partnering transactions, including mergers. Furthermore, the
calculation of the adjustment is to be made on a weighted average basis.
Thus, if the number of shares that we issue in a non-exempt transaction is
not significant , or if the per share price in a non-exempt transaction is
only slightly below the trigger price, we would not be required to issue a
substantial number of additional shares to the investors.
* We agreed that if, during the twelve months ending December 31, 2000, we
desire to conduct a private placement of our securities through a placement
agent, broker-dealer or finder, we will give an entity associated with the
investors a right of first refusal to serve as the placement agent in that
transaction.
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<PAGE>
These covenants will cease to apply at such time as the investors and their
affiliates beneficially own less than 5% of our common stock. As of December 30,
1999, such investors in the aggregate beneficially owned 6.2% of our outstanding
common stock. Prior to the time, if any, when the investors' equity interest
falls below 5%, the investors may waive any one or more of the covenants set
forth in our Common Stock Purchase Agreement.
In connection with the execution of our Common Stock Purchase
Agreement, our executive officers and directors have agreed that, subject to a
limited carve-out, they will not sell any shares of their common stock until the
later of June 14, 2000 or the date on which the SEC declares effective the
registration statement of which this prospectus is a part. We also agreed to
refrain from publicly offering or selling our shares for a period of 60 days
after the SEC declares such registration statement effective.
The investors may waive these restrictions at any time.
Agreement with Financial Advisor
We have entered into an agreement with Sutro & Co. Incorporated
pursuant to which Sutro may serve as our financial advisor with respect to
various corporate finance and corporate partnering transactions. As part of the
consideration payable to Sutro for its services, we have issued to Sutro a
Warrant entitling Sutro to purchase up to 75,000 shares of our common stock.
This Warrant has an exercise price of $6.50 per share and expires in December
2004. The Warrant grants Sutro certain registration rights, including the right
to include in this prospectus the 75,000 shares of common stock issuable upon
exercise of the Warrant.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by
the selling stockholders. However, we did receive gross proceeds of $7,500,000
from the issuance of our common stock to the investors in the December 1999
financing. We used substantially all of those proceeds to redeem all of the
remaining outstanding shares of Series F Preferred Stock and to cover expenses
relating to this financing.
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SELLING STOCKHOLDERS
The table below presents the following information: (1) the number of
shares of common stock beneficially owned by each selling stockholder as of
December 31, 1999; (2) the number of shares that the selling stockholder is
offering under this prospectus, and (3) the number of shares that the selling
stockholder will beneficially own after the completion of this offering,
assuming that the selling stockholder does not acquire any other shares of our
common stock subsequent to December 31, 1999. The number of shares shown as
being beneficially owned by each selling stockholder after the offering assumes
that the selling stockholder has sold all the shares of our common stock which
may be sold pursuant to this prospectus.
The number and percentage of shares beneficially owned by each selling
stockholder is determined as of the date of this prospectus in accordance with
Rule 13d-3 of the Securities Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under this
rule, beneficial ownership includes any shares as to which the selling
stockholder has sole or shared voting power or investment power and also any
shares which the selling stockholder has the right to acquire within 60 days of
the date of this prospectus through the exercise of any stock option, warrant or
other right. Unless otherwise indicated in the footnotes, each person has sole
voting and investment power with respect to the shares shown as beneficially
owned.
None of the selling stockholders has had a material relationship with
us within the past three years, other than as described above under
"Immunomedics - December 1999 Financing" and "Immunomedics - Agreement with
Financial Advisor."
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
Selling Stockholder Shares of Common Shares of Common Shares of Common
Stock Beneficially Stock Being Offered Stock Beneficially
Owned as of Owned After the
December 31, 1999 Offering
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
<S> <C> <C> <C>
Sutro & Company, Inc. 75,000 75,000 --
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
Investors Under the Common Stock Purchase
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
The Aries Master Fund 1,814,053 1,557,645 256,408
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
The Aries Domestic Fund, L.P. 727,965 626,820 101,145
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
The Aries Domestic Fund II, L.P. 56,814 48,867 7,947
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
Lindsay A. Rosenwald, M.D. 2,765,4991 166,667 365,5003
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
Mark C. Rogers, M.D. 2,632,1662 33,334 365,5003
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
Wayne Rothbaum 66,667 66,667 --
- --------------------------------------------- ------------------------ -------------------------- ---------------------------
- -------------------
</TABLE>
1 Includes 1,814,053 shares of common stock owned by The Aries Master Fund,
727,965 shares of common stock owned by The Aries Domestic Fund, L.P. and
56,814 shares of common stock owned by The Aries Domestic Fund II, L.P. Dr.
Rosenwald is the Chairman and sole stockholder of Paramount Capital Asset
Management, Inc. ("PCAM"), which serves as the general partner to each of
The Aries Domestic Fund, L.P., and The Aries Domestic Fund II, L.P., and as
the investment manager to The Aries Master Fund. As such, Dr. Rosenwald and
PCAM may be deemed to beneficially own the securities held by each of The
Aries Domestic Fund, L.P., The Aries Domestic Fund II, L.P. and The Aries
Master Fund. Dr. Rosenwald and PCAM disclaim beneficial ownership of such
shares except to the extent of their pecuniary interest therein, if any.
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<PAGE>
2 Includes 1,814,053 shares of common stock owned by The Aries Master Fund,
727,965 shares of common stock owned by the Aries Domestic Fund, L.P. and
56,814 shares of common stock owned by the Aries Domestic Fund II, L.P. Dr.
Rogers is the President of PCAM. As such, Dr. Rogers and PCAM may be deemed
to beneficially own the securities held by each of Aries Domestic Fund,
L.P., Aries Domestic Fund II, L.P. and The Aries Master Fund. Dr. Rogers
and PCAM disclaim beneficial ownership of such shares except to the extent
of their pecuniary interest therein, if any.
3 Represents 256,408 shares of common stock owned by The Aries Master Fund,
101,145 shares of common stock owned by The Aries Domestic Fund, L.P. and
7,947 shares of common stock owned by The Aries Domestic Fund II, L.P.
PLAN OF DISTRIBUTION
Manner of Sales; Broker-Dealer Compensation
The selling stockholders, or any successors in interest to the selling
stockholders, may sell any shares of our common stock that they acquired
pursuant to our Common stock Purchase Agreement or that Sutro may acquire upon
exercise of its Warrant. The sale of our common stock may be effected in one or
more of the following methods:
* ordinary brokers' transactions;
* transactions involving cross or block trades or otherwise on the Nasdaq
National Market;
* purchases by brokers, dealers or underwriters as principal and resale by
these purchasers for their own accounts pursuant to this prospectus;
* "at the market" to or through market makers or into an existing market for
our common stock;
* in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
* through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise);
* in privately negotiated transactions;
* to cover short sales, except to the extent that they are restricted
contractually from doing so; or
* any combination of the foregoing.
The selling stockholders also may sell their shares in reliance upon Rule 144
under the Securities Act at such times as they are eligible to do so.
We have been advised by the selling stockholders that they have not
made any arrangements for the distribution of the shares of common stock.
Brokers, dealers or underwriters who effect sales for the selling stockholders
may arrange for other brokers, dealers or underwriters to participate. Brokers,
dealers or underwriters engaged by the selling stockholders will receive
commissions or discounts from them in amounts to be negotiated prior to the
sale. These brokers, dealers or underwriters may act as agent or as principals.
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From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares of common
stock acquired by them, and the pledgees, secured parties or persons to whom
these securities have been pledged shall, upon foreclosure in the event of
default, be considered a selling stockholders hereunder. In addition, subject to
contractual limitations, a selling stockholder may, from time to time, sell
short our common stock. In these instances, this prospectus may be delivered in
connection with these short sales.
From time to time one or more of the selling stockholders may transfer,
pledge, donate or assign shares of our common stock that it acquired to lenders
or others and each of these persons will be considered a selling stockholder for
purposes of this prospectus. The number of shares of our common stock
beneficially owned by those selling stockholders who so transfer, pledge, donate
or assign shares of our common stock will decrease as and when they take these
actions. The plan of distribution for our common stock by the selling
stockholders set forth herein will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be considered selling
stockholders hereunder.
Subject to contractual limitations, a selling stockholder may enter
into hedging transactions with broker-dealers and the broker-dealers may engage
in short sales of our common stock in the course of hedging the positions they
assume with this selling stockholder, including in connection with distributions
of our common stock by these broker-dealers. A selling stockholder may also
enter into option or other transactions with broker-dealers that involve the
delivery of our common stock to the broker-dealers, who may then resell or
otherwise transfer these shares. A selling stockholder also may loan or pledge
our common stock to a broker-dealer and the broker-dealer may sell our common
stock so loaned or upon a default may sell or otherwise transfer the pledged
common stock.
Filing of a Post-Effective Amendment In Certain Instances
If any selling stockholder notifies us that it has entered into a
material arrangement (other than a customary brokerage account agreement) with a
broker or dealer for the sale of shares of common stock under this prospectus
through a block trade, purchase by a broker or dealer or similar transaction, we
will file a post- effective amendment to the registration statement under the
Securities Act. The post-effective amendment will disclose:
* The name of each broker-dealer involved in the transaction.
* The number of shares of common stock involved.
* The price at which those shares of common stock were sold.
* The commissions paid or discounts or concessions allowed to the
broker-dealer(s).
* If applicable, that these broker-dealer(s) did not conduct any
investigation to verify the information contained or incorporated by
reference in this prospectus, as supplemented.
* Any other facts material to the transaction.
Certain Persons May Be Deemed to Be Underwriters
The selling stockholders and any broker-dealers who execute sales for
them may be deemed to be "underwriters" within the meaning of the Securities Act
because of the number of shares of common stock to be sold or resold by these
persons or entities or the manner of sale of these shares, or both. If a selling
stockholder or any broker-dealer or other holders were determined to be
underwriters, any discounts, concessions or commissions received by them or by
brokers or dealers acting on their behalf and any profits received by them on
the resale of their shares of common stock might be deemed to be underwriting
discounts and commissions under the Securities Act.
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Regulation M
We have informed the selling stockholders that Regulation M promulgated
under the Securities Exchange Act may be applicable to them with respect to any
purchase or sale our common stock. In general, Rule 102 under Regulation M
prohibits any person connected with a distribution of our common stock from
directly or indirectly bidding for, or purchasing for any account in which it
has a beneficial interest, any of our common stock or any right to purchase our
common stock, for a period of one business day before and after completion of
its participation in the distribution.
During any distribution period, Regulation M prohibits the selling
stockholders and any other persons engaged in the distribution from engaging in
any stabilizing bid or purchasing our common stock except for the purpose of
preventing or retarding a decline in the open market price of our common stock.
None of these persons may effect any stabilizing transaction to facilitate any
offering at the market. As the selling stockholders will be reoffering and
reselling our common stock at the market, Regulation M will prohibit them from
effecting any stabilizing transaction in contravention of Regulation M with
respect to our common stock.
Indemnification and Other Matters
We paid all of the expenses incident to the registration, offering and
sale of our common stock by the selling stockholders to the public other than
commissions or discounts of underwriters, broker-dealers or agents. We also have
agreed to indemnify the selling stockholders and certain related persons against
certain liabilities, including liabilities under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the SEC this indemnification agreement is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
This offering will terminate on the date on which all shares offered
hereby have been sold by the selling stockholders.
LEGAL MATTERS
Lowenstein Sandler PC will give its opinion on the validity of the common stock
EXPERTS
Our consolidated financial statements as of June 30, 1999 and 1998, and
for each of the years in the three-year period ended June 30, 1999 have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the estimated amounts of all expenses
payable by us in connection with the registration of the Shares:
SEC registration fee...................................... $ 8,328
Legal fees and expenses................................... 10,000
Accounting fees and expenses.............................. 4,500
Miscellaneous expenses.................................... 2,172
---------
Total.......................................... $ 25,000
===== =========
Item 15. Indemnification of Directors and Officers.
The Delaware General Corporation Law provides, in substance, that
Delaware corporations shall have the power, under specified circumstances, to
indemnify their directors, officers, employees and agents in connection with
actions or suits by or in the right of the corporation, by reason of the fact
that they were or are such directors, officers, employees and agents, against
expenses (including attorneys' fees) and, in the case of actions, suits or
proceedings brought by third parties, against judgments, fines and amounts paid
in settlement actually and reasonably incurred in any such action, suit or
proceeding.
The Company's Certificate of Incorporation provides that a director
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director except for liability (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. The Company's Bylaws also provide
that the Company may indemnify its directors, officers and legal representatives
to the fullest extent permitted by Delaware law against all awards and expenses
(including attorneys' fees).
Item 16. Exhibits.
Exhibit No. Description
4.1 - Common Stock Purchase Agreement, dated as of December 14, 1999,
by and among the Company and the investors named therein, as
amended by a side letter dated January 7, 2000.
4.2 - Warrant, dated as of December 16, 1999, issued by the Company.
5.1 - Opinion of Lowenstein Sandler PC
23.1 - Consent of KPMG LLP.
23.2 - Consent of Lowenstein Sandler PC
(included in their opinion filed as Exhibit 5.1).
24.1 - Power of Attorney (included on the signature page).
II-1
<PAGE>
Item 17. Undertakings.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to section 13(a) or section 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.
The Company undertakes that it will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this
registration statement to:
(i) Include any prospectus required by section 10(a)
(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any material information with respect
to the plan of distribution not previously disclosed in
the registration statement or any material changes to such
information in the registration statement.
provided, however, that the Company does not need to give
the statements in paragraph (1)(i) and (1)(ii) if the
information required in a post-effective amendment is
incorporated by reference from periodic reports filed by
the Company under the Exchange Act.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of
the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at
the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Morris Plains, State of New Jersey, on January 7,
2000.
IMMUNOMEDICS, INC.
By: /s/ David M. Goldenberg
David M. Goldenberg
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Each person whose signature appears below constitutes and appoints
David M. Goldenberg, Cynthia Sullivan and Shailesh R. Asher and each of them,
his or her true and lawful attorney-in-fact, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission under the Securities Act of 1933, hereby
ratifying and confirming all that said attorneys-in-fact or substitutes may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Dated:
January 7, 2000 /s/ David M. Goldenberg
-----------------------------
David M. Goldenberg, Chairman
of the Board, Chief Executive
Officer and a Director
(Principal Executive Officer)
January 7, 2000 /s/ Marvin E. Jaffe
-----------------------------
Marvin E. Jaffe, Director
January 7, 2000 /s/ Richard R. Pivirotto
-----------------------------
Richard R. Pivirotto,
Director
January 7, 2000 /s/ Richard C. Williams
-----------------------------
Richard C. Williams, Director
January 7, 2000 /s/ Shailesh R. Asher
-----------------------------
Shailesh R. Asher, Controller
and Acting Chief Financial
Officer (Principal Financial
and Accounting Officer)
II-3
<PAGE>
EXHIBIT INDEX
4.1 Common Stock Purchase Agreement, dated as of December 14, 1999,
by and among the Company and the investors named therein, as
amended by a side letter dated January 7, 2000.
4.2 Warrant, dated as of December 16, 1999, issued by the Company
5.1 Opinion of Lowenstein Sandler LP
23.1 Consent of KPMG LLP.
II-4
<PAGE>
Immunomedics, Inc.
300 American Road
Morris Plains, NJ 07950
973-605-8200
January 7, 2000
The Aries Master Fund
The Aries Domestic Fund, L.P.
The Aries Domestic Fund II, L.P.
Lindsay A. Rosenwald, M.D.
Mark C. Rogers, M.D.
Wayne Rothbaum
c/o Paramount Capital Asset Management, Inc.
787 7th Avenue, 48th Floor
New York, NY 10019
Attention: David M. Tanen
Gentlemen:
This letter is written to confirm our understanding with respect to certain
matters addressed in the Common Stock Purchase Agreement, dated as of December
14, 1999 (the "Agreement"), among us. Terms that are not otherwise defined in
this letter have the same meanings as in the Agreement.
We have agreed to delete the first sentence of Section 7.7 of the Agreement and
to insert in its place the following language:
"Without the prior consent of the Purchasers, the Company may not sell its
business (either by way of a sale or transfer of assets, sale or transfer of
stock, merger or otherwise) to any person or entity that is, prior to such sale,
an "Affiliate" of the Company, unless such transfer is for consideration at
least equal to (a) the Fair Market Value in the event of a sale or transfer of
assets or (b) the then Current Market Price in the event of a sale or transfer
of stock. The "Fair Market Value" of any asset of the Company means the fair
market value thereof as determined in good faith by the Company's Board of
Directors. The then "Current Market Price" per share shall be deemed to be the
last sale price of the Common Stock on the trading date prior to such sale or
transfer or, in case no such reported sale takes place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
<PAGE>
Quotation System ("Nasdaq"), or other similar organization if Nasdaq is no
longer reporting such information, or, if the Common Stock is not reported on
Nasdaq, the high per share bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or if not so available, the fair market value of the Common Stock
as determined in good faith by the Company's Board of Directors. For purposes of
this Agreement, the term "Affiliate" means any person or entity that controls,
is controlled by or is under common control with the Company."
We further agree that the change described above represents the only change to
the Agreement and the remaining provisions contained in the Agreement shall
remain unchanged and in effect.
Kindly acknowledge your agreement with the terms of this letter by signing
below.
Very truly yours,
IMMUNOMEDICS, INC.
By: /s/David M. Goldenberg, M.D.
_________________________________
David M. Goldenberg, M.D.
Chairman and Chief Executive Officer
DMG:wjh
Enclosures
Acknowledged and agreed to:
THE ARIES MASTER FUND
By: /s/ Lindsay A. Rosenwald, M.D.
_________________________________
-2-
<PAGE>
THE ARIES DOMESTIC FUND, L.P.
By: /s/ Lindsay A. Rosenwald, M.D.
_________________________________
THE ARIES DOMESTIC FUND II, L.P.
By: /s/ Lindsay A. Rosenwald, M.D.
_________________________________
/s/ Lindsay A. Rosenwald, M.D.
- -------------------------------------
Lindsay A. Rosenwald, M.D.
/s/ Marc C. Rogers, M.D.
- -------------------------------------
Mark C. Rogers, M.D.
- -------------------------------------
Wayne Rothbaum
-3-
<PAGE>
COMMON STOCK PURCHASE AGREEMENT (this
"Agreement") dated as of December 14, 1999, by and
among IMMUNOMEDICS, INC., a Delaware corporation (the
"Company"), and the PURCHASERS listed on Exhibit A
("Purchasers").
The Company desires to issue and sell to Purchasers, and
Purchasers desire to purchase from the Company, shares (the "Common Shares") of
the Company's common stock, par value $.01 per share (the "Common Stock"), at
$3.00 per share (the "Per Share Price") upon and subject to the terms and
conditions of this Agreement.
Accordingly, in consideration of the premises and the mutual
agreements contained herein, and for other good and valuable consideration,
Purchasers and the Company agree as follows:
1. Purchase of Company Securities.
1.1. Purchase and Sale of the Common Shares. (a) Subject to
the terms and conditions of this Agreement, (i) the Company shall issue and sell
to Purchasers, and Purchasers, severally and not jointly, shall purchase from
the Company, 2,500,000 shares of Common Stock as set forth on Exhibit A
(allocated among the Purchasers as set forth on Exhibit A). Such shares of
Common Stock are hereinafter sometimes referred to as the "Securities." The
aggregate purchase price for the Common Shares shall be $7,500,000 (the
"Aggregate Purchase Price") (allocated among the Purchasers as set forth on
Exhibit A).
2. Closing.
2.1. Closing. The closing of the purchase and sale of the
Common Shares shall take place at a single closing at the offices of Paramount
Capital Asset Management, Inc. ("Paramount"), at 787 Seventh Avenue, 48th Floor,
New York, New York, 10019. Such closing (the "Closing") will take place
contemporaneously with the execution and delivery of this Agreement. The date of
the Closing is referred to as the "Closing Date." At the Closing, the Company
will deliver to Purchasers the Common Shares against payment of the Aggregate
Purchase Price by Purchasers by wire transfer payable to the Company pursuant to
the instructions attached hereto as Exhibit B. The Common Shares shall be
registered in Purchasers' names in such denominations as are set forth on
Exhibit A annexed hereto.
3. Conditions to the Obligations of Purchasers at the Closing.
The obligation of Purchasers to purchase and pay for the Common Shares to be
purchased by Purchasers at the Closing is subject to the satisfaction on or
prior to the Closing Date of the following conditions, which may only be waived
by written consent of Purchasers:
3.1. Opinion of Counsel to the Company. Purchasers shall have
received from Lowenstein Sandler PC, counsel for the Company, its opinion dated
the Closing Date in the form of Exhibit C.
<PAGE>
3.2. Representations and Warranties. All of the
representations and warranties of the Company contained in this Agreement shall
be true and correct at and as of the Closing Date.
3.3. Performance of Covenants. All of the covenants and
agreements of the Company contained in this Agreement required to be performed
on or prior to the Closing Date shall have been performed in a manner
satisfactory in all respects to Purchasers.
3.4. Legal Action. No injunction, order, investigation, claim,
action or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the transactions
contemplated thereby, declare unlawful the transactions contemplated by this
Agreement or cause any such transaction to be rescinded.
3.5. Consents. The Company shall have obtained in writing or
made all consents, waivers, approvals, orders, permits, licenses and
authorizations of, and registrations, declarations, notices to and filings and
applications with, any governmental authority or any other Person (including,
without limitation, securityholders and creditors of the Company) required to be
obtained or made in order to enable the Company to observe and comply with all
of its obligations under this Agreement and to consummate and perform the
transactions contemplated hereby. The Board of Directors of the Company shall
have taken all action required to permit the transactions contemplated by this
Agreement.
3.6. Closing Documents. The Company shall have delivered to
Purchasers the following:
(a) a certificate executed on behalf of the Company by the
Chairman and Chief Executive Officer of the Company dated the Closing Date
stating that the conditions set forth in Sections 3.2 through 3.5 have been
satisfied;
(b) a certificate of the Secretary of the Company, dated the
Closing Date, as to the continued and valid existence of the Company, certifying
the attached copy of the By-laws of the Company, the authorization of the
execution, delivery and performance of this Agreement, and the resolutions
adopted by the Board of Directors of the Company authorizing the actions to be
taken by the Company under this Agreement;
(c) a certificate of the Secretary of State of the State of
Delaware, dated a recent date, to the effect that the Company is in good
standing in the State of Delaware and that all annual reports, if any, have been
filed as required and, if readily available that all franchise taxes and fees
have been paid in connection therewith;
(d) a certified copy of the Certificate of Incorporation of
the Company as filed with the Secretary of State of the State of Delaware,
including any amendments thereto; and
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<PAGE>
(e) such certificates, other documents and instruments as
Purchasers and their counsel may reasonably request in connection with, and to
effect, the transactions contemplated by this Agreement.
3.7. Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated by this Agreement
to be consummated at such Closing and all documents incident thereto shall be
satisfactory in form and substance to Purchasers.
3.8. Closing Financial Statements; Absence of Changes. (a) The
Company shall have provided to Purchasers (i) the unaudited balance sheets of
the Company as of September 30, 1999, and the related unaudited statements of
operations, and cash flows for the three-month period then ended (the "Financial
Statements"), all of which will be correct and complete and will present fairly
the financial position of the Company and the results of its operations and cash
flows as of the time and for the periods then ended, provided adjusting and
closing entries ordinarily made at the close of any such period in connection
with audit, and footnote information, are omitted, and (ii) the unqualified
certification, in form and substance satisfactory to Purchasers, of the Chief
Financial Officer of the Company, acting on behalf of the Company, to the effect
that the Financial Statements have been prepared in accordance with the books
and records of the Company and generally accepted accounting principles applied
on a basis consistent with prior years (except as otherwise specified in such
certification), and present fairly the financial position of the Company and the
results of its operations cash flows as of the time and for the periods then
ended, provided adjusting and closing entries ordinarily made at the close of
any such period in connection with audit, and footnote information, are omitted.
(b) Except as set forth on the schedules to this Agreement or
as previously publicly disclosed, and except for net losses consistent in scope
with net losses incurred by the Company during the nine months ended September
30, 1999, there shall have been no material adverse change in the business,
financial condition, operating results, employee or customer relations or
prospects of the Company, from September 30, 1999 to the Closing Date.
3.9. Schedules. The Company shall have provided to Purchasers
all schedules required pursuant to this Agreement, which schedules shall be
satisfactory to Purchasers in their sole discretion.
3.10. Material Agreements. The Company shall have provided to
the Purchasers a copy of agreements entered by and among the Company and all
holders of its Series F Convertible Preferred Stock pursuant to which such
holders have agreed that the Company may redeem all outstanding shares of Series
F Preferred Stock at any time on or before December 31, 1999, at a price equal
to 109% of the stated value of such Series F Convertible Preferred Stock (which
is $10,000).
4. Conditions to the Obligations of the Company at the
Closings. The obligation of the Company to issue and sell the Common Shares to
the Purchasers at the Closing is subject to the satisfaction on or prior to the
Closing Date of the following conditions, any of which may be waived by the
Company:
3
<PAGE>
4.1. Representations and Warranties. The representations and
warranties of Purchasers contained in this Agreement shall be true and correct
at and as of the Closing Date.
4.2. Legal Action. No injunction, order, investigation, claim,
action or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause any such transaction to be rescinded.
4.3 Performance of Covenants. All of the covenants and
agreements of the Purchasers contained in this Agreement required to be
performed on or prior to the Closing Date shall have been performed in a manner
satisfactory in all respects to the Company.
5. Representations and Warranties of the Company. The
representations and warranties of the Company contained herein are subject to
and qualified by the disclosures made in the Company's most recent Annual Report
on Form 10-K and Quarterly Report on Form 10-Q, as filed with the SEC. The
Company hereby represents and warrants to each Purchaser as of the Closing Date
as follows:
5.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is eligible to be treated as a C corporation under the
Internal Revenue Code of 1986, as amended (the "Code"). The Company has all
requisite corporate power and authority, and holds all licenses, permits and
other required authorizations from governmental authorities, necessary to
conduct its business as now being conducted and to own or lease the properties
and assets now owned or held under license or lease. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction wherein the character of its properties or the nature of the
activities conducted by it makes such qualification or licensing necessary,
except where the failure to so qualify would not have a material adverse effect
on the Company.
5.2. Charter Documents. The Company has heretofore delivered
to Purchasers true, correct and complete copies of the Certificate of
Incorporation and By-Laws (or comparable organizational documents) of the
Company as in full force and effect on the date hereof.
5.3. Capitalization. As of December 10, 1999, the Company's
authorized capitalization consists of 70,000,000 shares of Common Stock, of
which 43,655,709 shares are issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.01 per share, of which 595.5 shares are designated
as Series F Convertible Preferred Stock and are issued and outstanding.
15,022,288 shares of Common Stock are reserved for issuance upon the conversion
or exercise of convertible securities, options, warrants or other rights to
purchase Common Stock outstanding as of the Closing Date. All outstanding
securities of the Company are validly issued, fully paid and nonassessable.
Except for the rights of the Series F Convertible Preferred Stock, no
stockholder of the Company is entitled to any preemptive rights with respect to
the purchase or sale of any securities by the Company. There are no outstanding
options, warrants or other rights, commitments or arrangements, written or oral,
to purchase or otherwise acquire any authorized but unissued shares of capital
stock of the Company or any security directly or indirectly convertible into or
exchangeable for any capital stock of the Company or under which any such
option, warrant or convertible security may be issued in the future except
otherwise as set forth on Schedule 5.3. There are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell, rights of
4
<PAGE>
first offer, negotiation or refusal or proxies or similar arrangements relating
to any securities of the Company to which the Company is a party, and to the
best knowledge of the Company after due inquiry there are no other such trusts,
agreement, rights, proxies or similar arrangements, except as set forth on
Schedule 5.3. Except as otherwise set forth on Schedule 5.3 or as contemplated
by this Agreement, none of the shares of capital stock of the Company is
reserved for any purpose, and the Company is neither subject to any obligation
(contingent or otherwise), nor has any option to repurchase or otherwise acquire
or retire any shares of its capital stock.
5.4 Due Authorization, Valid Issuance, Etc. The Common Shares
to be purchased on the Closing Date have been duly authorized and, when issued
in accordance with this Agreement upon the Closing Date, will be validly issued,
fully paid and non-assessable and will be free and clear of all liens imposed by
or through the Company, subject only to restrictions set forth herein, as
applicable, or applicable federal and state securities laws. The issuance, sale
and clear delivery of such Common Shares will not be subject to any preemptive
right of stockholders of the Company or to any right of first refusal or other
right in favor of any person or entity except for provisions which have been
waived in writing (and as to which the Purchasers have received a copy of) or
satisfied and as set forth on Schedule 5.4. The Company's executive officers and
directors have studied and fully understand the nature of the securities being
sold hereunder, and recognize that they have a potential dilutive effect. Except
as set forth on Schedule 5.4, no anti-dilution adjustments with respect to the
outstanding securities of the Company will be triggered by the issuance of the
securities contemplated hereby.
5.5. Subsidiaries. Except as otherwise disclosed in the
Company's Annual Report on Form 10-K for the year ended June 30, 1999, the
Company has no wholly or partially owned Subsidiaries (as defined in Section
9.9) and does not control, directly or indirectly, any other corporation,
business trust, firm, partnership, association, joint venture, entity or
organization. Except as otherwise disclosed in the Company's Annual Report on
Form 10-K for the year ended June 30, 1999, the Company does not own any shares
of stock, partnership interest, joint venture interest or any other security,
equity or interest in any other corporation or other Person.
5.6. Authorization; No Breach. The Company has the full
corporate power and authority to execute, deliver and enter into this Agreement
and to perform its obligations hereunder, and the execution, delivery and
performance of this Agreement and all other transactions contemplated hereby
have been duly authorized by the Company. This Agreement constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms except as such enforceability may be limited by (a) bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (b) the availability of remedies under general equitable principles. Except
5
<PAGE>
as set forth on Schedule 5.6, the execution and delivery by the Company of this
Agreement, the offering, sale and issuance of the Common Shares, and the
performance and fulfillment by the Company of its obligations hereunder, do not
and will not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, or event which, with notice or
lapse of time or both, would constitute a breach of or default under, (iii)
result in the creation of any lien, security interest, adverse claim, charge or
encumbrance upon the capital stock or assets of the Company pursuant to, (iv)
give any third party the right to accelerate any obligation under or terminate,
(v) result in a violation of, (vi) result in the loss of any license,
certificate, legal privilege or legal right enjoyed or possessed by the Company
under, or (vii) with the exception of an application to NASDAQ, require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to or require the consent
of any other Person under, the Certificate of Incorporation or By-Laws of the
Company or any law, statute, rule or regulation to which the Company is subject
or by which any of its properties are bound, or any agreement, instrument,
order, judgment or decree to which the Company is subject or by which its
properties are bound, except, in all instances, for matters which do not
materially adversely affect the Company's business, financial condition, result
of operations or prospects ("Material Adverse Effect").
5.7. No Material Adverse Changes. Since September 30, 1999,
except as disclosed on Schedule 5.7 there has not at any time been any material
adverse change in the business, financial condition, operating results, business
prospects, employee relations or customer relations of the Company. Except as
set forth on Schedule 5.7, no event or circumstance has occurred or exists with
respect to the Company or its business, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
5.8. Absence of Certain Developments. Except as contemplated
by this Agreement, and except as set forth on Schedule 5.8, since September 30,
1999 the Company has not, nor will have prior to the Closing Date: (a) issued
any securities (other than as permitted or contemplated by this Agreement or
securities issued subsequent to December 10, 1999 upon conversion of outstanding
securities or options); (b) borrowed any amount or incurred or became subject to
any liabilities (absolute or contingent) which involve $50,000 or more, other
than liabilities incurred in the ordinary course of business and liabilities
under contracts entered into in the ordinary course of business; (c) discharged
or satisfied any lien, adverse claim or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business; (d) declared or made any payment or distribution of
cash or other property to the stockholders of the Company with respect to the
Common Stock or purchased or redeemed any shares of Common Stock; (e) mortgaged,
pledged or subjected to any lien, adverse claim, charge or any other
encumbrance, any of its properties or assets, except for liens for taxes not yet
due and payable and transactions in the ordinary course of business; (f) sold,
assigned or transferred any of its assets, tangible or intangible, except in the
ordinary course of business or in an amount less than $50,000, or disclosed to
any person, firm or entity not subject to a confidentiality obligation with the
Company any proprietary confidential information; (g) suffered any extraordinary
losses or waived any rights of material value; (h) made any capital expenditures
or commitments therefor greater than $50,000 in the aggregate; (i) entered into
any other transaction other than in the ordinary course of business; (j) made
any charitable contributions or pledges; (k) suffered damages, destruction or
casualty loss, whether or not covered by insurance, affecting any of the
6
<PAGE>
properties or assets of the Company or any other properties or assets of the
Company which could have a material adverse effect on the business, financial
condition, operating results, employee or customer relations or prospects of the
Company; (l) made any material change in the nature or operations of the
business of the Company; or (m) resolved to or entered into any agreement or
understanding with respect to any of the foregoing.
5.9. Properties. The Company has good and marketable title to
all of the real property and good title to all of the personal property and
assets it purports to own as set forth in the Financial Statements, whether such
property is real or personal, free and clear of all liens, adverse claims,
charges, encumbrances or restrictions of any nature whatsoever, except (a) such
as are reflected on Schedule 5.9 or in the notes to the Financial Statements in
the Company's Annual Report on Form 10-K for the year ended June 30, 1999, (b)
for receivables and charges collected in the ordinary course of business, (c)
liens with respect to taxes not yet due and (d) immaterial exceptions of a
routine and customary nature. Except as disclosed in Schedule 5.9, the Company
owns or leases all such properties as are necessary to its operations as now
conducted and as presently proposed to be conducted and all such properties are,
in all material respects, in good operating condition and repair.
5.10. Taxes. Except as set forth on Schedule 5.10, the Company
has timely filed all federal, state, local and foreign tax returns and reports
required to be filed, and all taxes, fees, assessments and governmental charges
of any nature shown by such returns and reports to be due and payable have been
timely paid except for those amounts being contested in good faith and for which
appropriate amounts have been reserved in accordance with generally accepted
accounting principles. There is no tax deficiency that has been, or, to the best
knowledge of the Company after due inquiry may reasonably be, asserted against
the Company that would materially adversely affect the business or operations,
or proposed business or operations, of the Company. All such tax returns and
reports were prepared in accordance with the relevant rules and regulations of
each taxing authority having jurisdiction over the Company and are true and
correct in all material respects. The Company has neither given nor been
requested to give any waiver of any statute of limitations relating to the
payment of federal, state, local or foreign taxes. The Company has not been,
nor, to its knowledge, is it now being, audited by any federal, state, local or
foreign tax authorities. The Company has made all required deposits for taxes
applicable to the current tax year. The Company is not, and has never been, a
member of any "affiliated group" within the meaning of Section 1504 of the Code,
as in effect from time to time.
5.11. Litigation. Except as set forth on Schedule 5.11, there
are no actions, suits, proceedings, orders, investigations or claims pending or,
to the best knowledge of the Company after due inquiry, threatened against or
affecting the Company, at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality; there are no arbitration proceedings pending under collective
bargaining agreements or otherwise.
5.12. Compliance with Law. The Company has complied in all
material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and applicable agencies and foreign
jurisdictions or bodies in respect of the conduct of its business and
operations.
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5.13. Trademarks and Patents. Schedule 5.13 contains a true,
complete and correct list of all registered, certificated or issued trademarks,
trade names, patents and copyrights (and applications therefor), if any, owned
or (to the extent evidenced by contract or license agreement) licensed or used
or required to be used by the Company as of or prior to the Closing Date in
connection with its business and, except as set forth on Schedule 5.13, each
such trademark, trade name, patent and copyright (and application therefor)
listed in Schedule 5.13 as being owned by the Company is not subject to any
license, royalty arrangement, option or dispute and is free and clear of all
material liens. To the best knowledge of the Company after due inquiry, none of
the trademarks, trade names, patents or copyrights used by the Company in
connection with its business infringes any trademark, trade name, patent or
copyright of others in the United States or in any other country, in any way
which materially adversely affects or which in the future is reasonable likely
to materially adversely affect the business or operations of the Company. Except
as set forth on Schedule 5.13 or in the Company's Annual Report on Form 10-K for
the year ended June 30, 1999, no stockholder, officer or director of the Company
or any other person owns or has any interest in any trademark, trade name,
service mark, patent, copyright or application therefor, or trade secret,
licenses, invention, information or proprietary right or process, if any, used
by the Company in connection with its business. The Company has no notice or
knowledge of any objection or claim being asserted by any person with respect to
the ownership, validity, enforceability or use of any such trademarks, trade
names, patents and copyrights (and applications therefor) listed on Schedule
5.13 or challenging or questioning the validity or effectiveness of any license
relating thereto. There are no unresolved conflicts with, or pending claims of,
any other person, whether in litigation or otherwise, involving the trademarks,
trade names, patents and copyrights (and applications therefor), and there are
no liens, encumbrances, adverse claims, or rights of any other person which
would prevent the Company from fulfilling its obligations under this Agreement
except in all cases which would not have a Material Adverse Effect. To the best
knowledge of the Company after due inquiry, the business of the Company, as
presently conducted does not cause the Company to violate any trademark, trade
name, patent, copyright, trade secret, license or proprietary interest of any
other person or entity, in any way which materially adversely affects the
business or operations of the Company. Except as disclosed in Schedule 5.13, the
Company possesses all proprietary technology necessary for the conduct of its
business.
5.14. Insurance. Each of the Company's insurance policies is
in full force and effect; and the Company is not in default in any material
respect with respect to its obligations under any of such insurance policies.
Such insurance coverage is in amounts not less than is customarily maintained by
corporations engaged in the same or similar business and similarly situated,
including, without limitation, insurance against loss, damage, fire, theft,
public liability and other risks. The activities and operations of the Company
have been conducted in a manner so as to conform to all applicable provisions of
these insurance policies and the Company has not taken or failed to take any
action which would cause any such insurance policy to lapse.
5.15. Agreements. Except as set forth on Schedule 5.15 or as
disclosed in the Company's proxy statement for its 1999 annual meeting of
stockholders or as filed on the Company's most recent Annual Report on Form
10-K, the Company is not party to nor bound by any agreement or commitment,
written or oral, which obligates the Company to make payments to any person, or
which obligates any person to make payments to the Company, in the case of each
such agreement in an amount exceeding $60,000, or which is otherwise material to
the conduct and operation of the business of the Company or any of its
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properties or assets, including, without limitation, all shareholder,
employment, non-competition and consulting agreements and employee benefit plans
and arrangements and collective bargaining agreements to which the Company is a
party or by which it is bound. The Company has performed all material
obligations required to be performed by it, and is not in default, or in receipt
of any claim, under any such agreement or commitment, and the Company has no
present expectation or intention of not fully performing all of such
obligations, nor does the Company have any knowledge of any breach or
anticipated breach by the other parties to any such agreement or commitment.
Each Purchaser has been furnished with, or the Company has made available for
such Purchaser's review, a true and correct copy of each written agreement
referred to in Schedule 5.15, together with all amendments, waivers or other
changes thereto.
5.16. Undisclosed Liabilities. Except to the extent reflected,
disclosed or reserved against in the Financial Statements or the notes thereto
and except for liabilities incurred since September 30, 1999 in the ordinary
course and consistent with past practice, the Company does not have any
obligation or liability whether absolute, accrued, contingent or otherwise,
which is material to the business, operations, assets or financial condition of
the Company.
5.17. Employees; Conflicting Agreements. (a) The Company has
caused all present members of management and all professional employees of and
consultants and advisors to the Company, including all employees and consultants
and advisors involved in research and development, and will cause all such
persons in the future, to be subject to agreements with respect to (i)
nondisclosure of confidential information, (ii) assignment of patents,
trademarks, copyrights and proprietary rights to the Company and (iii)
disclosure to the Company of inventions.
(b) To the best knowledge of the Company after due inquiry, no
stockholder, director, officer or key employee of the Company is a party to or
bound by any agreement, contract or commitment, or subject to any restrictions
in connection with any previous or current employment of any such person (other
than as set forth on Schedule 5.17(b) with respect to the Company), which
materially adversely affects, or which in the future may materially adversely
affect, the business or the proposed business of the Company or the rights of
any of the Purchasers under this Agreement.
5.18. Disclosure. Neither this Agreement nor any of the
schedules, exhibits, written statements, documents or certificates prepared or
supplied by the Company with respect to the transactions contemplated by this
Agreement contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which made. Except for general factors that are
common in the market and industry of the Company and such other information made
available to the Purchasers and their representatives, there exists no fact or
circumstance which, to the best knowledge of the Company after due inquiry,
materially adversely affects, or which could reasonably be anticipated to have a
material adverse effect on, the existing or expected financial condition,
operating results, assets, customer relations, employee relations or business
prospects of the Company.
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5.19. Compliance with Securities Laws. (a) Assuming the
accuracy and truth of each of Purchasers' representations set forth in Section
6, all securities of the Company heretofore sold and issued were sold and
issued, and the Common Shares were offered and will be sold and issued, in
compliance with all applicable federal, state and foreign securities laws.
Neither the Company, nor any of its Affiliates, nor, to its best knowledge after
due inquiry, any person or entity acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Common Shares under the Securities Act of 1933, as amended (the "Securities
Act") or for the offering of the same to be integrated with any other offering
of securities.
(b) The Company has not directly or indirectly purchased or
redeemed any shares of Common Stock during the 30 days preceding the Closing
Date.
5.20. Brokers. Except as set forth on Schedule 5.20, no
finder, broker, agent, financial person or other intermediary has acted on
behalf of the Company in connection with the offering of the Common Shares, the
execution of the Agreement or the consummation of any of the transactions
contemplated hereby.
5.21. Transactions with Affiliates. Except as set forth on
Schedule 5.21 or in the Company's proxy statement for its 1999 annual meeting of
stockholders, no director, officer, employee, consultant or agent of the
Company, or member of the family of any such person or any corporation,
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a substantial interest in or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a party to any transaction with the Company, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by or requiring payments to any such person or firm.
5.22. Environmental Matters. (a) The Company, and all
properties owned, operated or leased by the Company, have obtained and currently
maintain all material environmental permits required for their business and
operations and are in compliance with all such environmental permits. There are
no legal proceedings pending nor, to the best knowledge of the Company after due
inquiry, threatened to modify or revoke any such environmental permits. The
Company has not received any notice from any source that there is lacking any
environmental permit required for the current use or operation of the business
of the Company, or any property owned, operated or leased by the Company.
(b) Except as set forth on Schedule 5.22, all real property
owned, operated or leased by the Company, and, to the best knowledge of the
Company after due inquiry, all property adjacent to such properties, are free
from contamination by any hazardous material other than any such contamination
as would not have a Material Adverse Effect; and the Company is not subject to
environmental costs and liabilities with respect to hazardous materials, and no
facts or circumstances exist which could give rise to environmental costs and
liabilities with respect to hazardous materials.
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(c) Except as set forth on Schedule 5.22, there is not now,
nor, to the best knowledge of the Company after due inquiry, has there been in
the past, on, in, or under any real property owned, leased, or operated by the
Company, or by any of their respective predecessors (i) any asbestos-containing
materials, (ii) any underground storage tanks, (iii) above-ground storage tanks,
(iv) impoundments, (v) poly-chlorinated biphenyls or (vi) radioactive
substances.
(d) The Company, and all properties owned, operated or leased
by the Company, comply with all environmental laws.
(e) Since June 30, 1998, neither the Company, nor any property
owned, leased or operated by the Company, has received or been issued any
written request for information, or has been notified that it is a potentially
responsible party under the environmental laws with respect to any on-site or
off-site for which environmental costs and liabilities are asserted.
6. Representations, Warranties and Covenants of Purchasers.
Purchasers severally represent, warrant and covenant to the Company as of the
Closing Date as follows:
6.1. Investment Intent. Each Purchaser is an "accredited
investor" within the meaning of Regulation D under the Securities Act. Each
Purchaser has experience in making investments in development stage
biotechnology companies and is acquiring the Common Shares for its own account
and not with a present view to, or for sale in connection with, any distribution
thereof in violation of the registration requirements of the Securities Act.
Each Purchaser consents to the placing of a legend on the certificates
representing its respective Common Shares to the effect that, and each Purchaser
acknowledges that, such Common Shares have not been registered under the
Securities Act and may not be transferred unless registered in accordance with
applicable securities laws or, in the opinion of counsel to the Purchasers (such
opinion to be in form and substance reasonably satisfactory to the Company),
exempt therefrom.
6.2. Authorization. Each Purchaser has the power and authority
to execute and deliver this Agreement and to perform its obligations hereunder,
having obtained all required consents, if any, and this Agreement, when executed
and delivered, will constitute a legal valid and binding obligation of such
Purchaser except as such enforceability may be limited by (a) bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (b) the availability of remedies under general equitable principles.
6.3. Brokers. No finder, broker, agent, financial person or
other intermediary has acted on behalf of the Purchasers in connection with the
offering of the Common Shares or the consummation of this Agreement or any of
the transactions contemplated hereby.
6.4. No Short. For a period of six months from the Closing
Date, the Purchasers will not "short" or "short against the box" (as those terms
are generally understood) any equity security of the Company; provided, however,
that if the Shelf Registration Statement (as defined below) is not effective by
the date that is 60 days following the Closing Date, then the Purchasers shall
have no obligation under this section 6.4 until such time as the Shelf
Registration Statement is declared effective by the SEC.
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7. Covenants of the Company. Until such time as (a) Purchasers
and their Affiliates beneficially own less than five percent (5%) of the Common
Stock then outstanding, the Company covenants and agrees with Purchasers as
follows:
7.1. Books and Accounts. The Company will: (a) make and keep
books, records and accounts, which, in reasonable detail, accurately and fairly
reflect its transactions, including without limitation, dispositions of its
assets; and (b) devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and in
accordance with the Company's past practices or any other criteria applicable to
such statements, and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
7.2. Periodic Reports. The Company will furnish to the
Purchasers, other than documents available via EDGAR: (i) as soon as practicable
(but in the case of the annual report of the Company to its stockholders, within
ninety (90) days after the end of each fiscal year of the Company) one copy of:
(A) its annual report to its stockholders (which annual report shall contain
financial statements audited in accordance with generally accepted accounting
principles in the United States of America by a firm of certified public
accountants of recognized standing), (B) if not included in substance in its
annual report to stockholders, its annual report on Form 10-K, (C) each of its
quarterly reports to its stockholders, and if not included in substance in its
quarterly reports to stockholders, its quarterly report on Form 10-Q, (D) each
of its current reports on Form 8-K, and (E) a copy of the full Shelf
Registration Statement (as defined below), (the foregoing, in each case,
excluding exhibits); and (ii) upon reasonable request, all exhibits excluded by
the parenthetical to the immediately preceding clause 7.2(a)(i)(E) and any other
information published by the Company that is generally available to the public.
7.3. Other Reports and Inspection. The Company will furnish to
the Purchasers, other than documents available via EDGAR: (a) as soon as
practicable after issuance, copies of any financial statements or reports
prepared by the Company for, or otherwise furnished to, its stockholders or the
SEC (other than information furnished to the SEC on a confidential or
supplemental basis) and (b) promptly, such other documents, reports and
financial data as Purchasers may reasonably request, provided that the
Purchasers agree to preserve the confidential nature of, and to refrain from
trading on the basis of, material requested by the Purchasers which the Company
has marked as confidential. In addition the Company will, upon reasonable prior
notice, make available to Purchasers or its representatives or designees (x) all
assets, properties and non-confidential business records of the Company for
inspection and (y) the directors and officers of the Company for interviews
concerning the business, affairs and finances of the Company.
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7.4. Insurance. The Company will at all times maintain valid
policies of worker's compensation insurance and such other insurance with
respect to its properties and business of the kinds and in amounts not less than
is customarily maintained by corporations engaged in the same or similar
business and similarly situated, including, without limitation, insurance
against fire, loss, damage, theft, public liability and other risks. The
activities and operations of the Company shall be conducted in a manner to
conform in all material respects to all applicable provisions of such policies.
7.5. Use of Proceeds. The Company shall use the net proceeds
from the sale of the Common Shares for the redemption of all outstanding shares
of its Series F Convertible Preferred Stock at a price equal to 109% of the
stated value of such Series F Convertible Preferred Stock (which is $10,000).
Any net proceeds exceeding the amount required to redeem the Series F
Convertible Preferred Stock shall be used for general corporate purposes.
7.6. Transactions with Affiliates. Except for employment and
consulting agreements entered into in the ordinary course of business (including
such agreements in effect as of the Closing Date) and the transactions
contemplated by this Agreement, the Company shall not (a) engage in any
transaction with, (b) make any loans to, nor (c) enter into any contract,
agreement or other arrangement (i) providing for (x) the employment of, (y) the
furnishing of services by (other than employment and consulting services), or
(z) the rental of real or personal property from, or (ii) otherwise requiring
payments to, any officer, director or key employee of the Company or any
relative of such persons or any other "associate" of such persons (as such terms
are defined in the rules and regulations promulgated under the Securities Act),
without the prior written approval of the Purchasers, which approval shall not
be unreasonably withheld.
7.7. Corporate Existence, Licenses and Permits; Maintenance of
Properties; New Businesses. The Company will at all times conduct its business
in the ordinary course and will use its best efforts to cause to be done all
things necessary to maintain, preserve and renew its existence and will use its
best efforts to preserve and keep in force and effect, all licenses, permits and
authorizations necessary to the conduct of its business. The Company will also
maintain and keep its properties in good repair, working order and condition,
and from time to time, to make all needful and proper repairs, renewals and
replacements, so that the business carried on in connection therewith may be
properly conducted at all times.
7.8. Other Material Obligations. The Company will use its best
efforts to comply in all material respects with, (a) all material obligations
which it is subject to, or becomes subject to, pursuant to any contract or
agreement, whether oral or written, as such obligations are required to be
observed or performed, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and the Company has set
aside on its books adequate reserves with respect thereto, and (b) all
applicable laws, rules, and regulations of all governmental authorities, the
violation of which could have a material adverse effect upon the business,
financial condition, operating results, employee or customer relations or
prospects of the Company.
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7.9. Amendment to the Certificate of Incorporation and the
By-Laws. The Company will perform and be in compliance with and observe all of
the provisions set forth in its Certificate of Incorporation and By-Laws to the
extent that the performance of such obligations is legally permissible; provided
that the fact that performance is not legally permissible will not prevent such
nonperformance from constituting an event of default under this Agreement.
Except with the consent of the Purchasers, which consent shall not be
unreasonably withheld, the Company will not amend its Certificate of
Incorporation or By-Laws or any Certificate of Designations for any series of
Preferred Stock of the Company so as to affect adversely the rights of
Purchasers under this Agreement, the Certificate of Incorporation or the
By-Laws.
7.10. Consents and Waivers. The Company has obtained all
consents and waivers needed to enable it to perform all of its obligations under
this Agreement and the transactions contemplated hereby.
7.11. Taxes and Liens. The Company shall duly pay and
discharge when payable, all taxes, assessments and governmental charges imposed
upon or against the Company or its properties, or any part thereof or upon the
income or profits therefrom, in each case before the same become delinquent and
before penalties accrue thereon, as well as all claims for labor, materials or
supplies which if unpaid might by law become a lien upon any of its property,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings and the Company has set aside on its books adequate
reserves with respect thereto.
7.12. Restrictive Agreement. The Company covenants and agrees
that subsequent to the Closing, it shall not be a party to any agreement or
instrument which by its terms would restrict the Company's performance of its
obligations pursuant to this Agreement, the Certificate of Incorporation or
By-laws of the Company or the Common Shares.
7.13. Publicity. The Company shall not issue any press release
or make any other public announcement with respect to this Agreement or the
transactions contemplated hereby or utilizing the names of Purchasers or their
officers, directors, employees, agents or Affiliates without obtaining the prior
approval of Purchasers, except as may be required by law or the regulations of
any securities exchange.
7.14. Restriction on Securities. (a) During the 12-month
period following the Closing Date, the Company will not extend the expiration
date or lower the exercise price of any options or warrants, or take any similar
action with respect to any convertible securities of the Company.
(b) Prior to the Closing Date, the Company shall obtain the
written agreement of all executive officers and directors of the Company to (i)
"lock-up" all of the shares of Common Stock owned by each of them at any time
until (1) the date on which all Common Shares may be sold in a single
transaction on a registered securities exchange or national market under an
applicable exemption from the registration requirements of the Securities Act
and all other applicable securities laws and (2) the date that is six months
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following the Closing Date; provided that the executive officers and directors
of the Company may sell an aggregate of one million (1,000,000) shares of Common
Stock in such 6-month period so long as any such executive officer or director
provide to the Purchasers a written notice of their intent to sell at least five
(5) days prior to the earlier of (A) the filing of a Form 144 by such person and
(B) the date of such proposed sale, (ii) not directly or indirectly sell "short"
or "short against the box" (as those terms are generally understood), until the
date that is 6 months following the Closing Date.
7.15. Restriction on Liens. The Company shall not create or
permit the imposition of any liens on any of its assets from and after the
Closing Date without the prior written authorization of the Board of Directors.
7.16. Restrictions on Indebtedness. Without the prior approval
of the Board of Directors, the Company shall not incur, create, assume or permit
to exist any indebtedness except (i) pursuant to equipment lease financings with
commercial banks or Persons whose business consists in substantial part of
engaging in such financings, (ii) pursuant to customary accounts receivable and
inventory financing in the ordinary course of business, (iii) in an amount less
than $100,000 incurred in the ordinary course of business, and (iv) indebtedness
for borrowed money existing on the date hereof and disclosed in writing to the
Purchasers, but not any extensions, renewals or replacements of such
indebtedness.
7.17. Board of Directors. (a) The Company shall at all times
maintain provisions in its By-laws and/or Certificate of Incorporation
indemnifying all directors against liability and absolving all directors from
liability to the Company and its stockholders to the maximum extent permitted
under the laws of the State of Delaware.
(b) The By-laws of the Company shall always contain provisions
consistent with the provisions of this Section 7.17 except to the extent this
Section 7.17 deals with the possible observer.
7.18. Certain Subsidiaries. Except for wholly owned
subsidiaries of the Company., the Company will not create any entity that would
be a Subsidiary (as defined in Section 9.9) without the prior written consent of
the Purchasers. Notwithstanding the foregoing, the Company may acquire any
interest in any business from any person, firm or entity (whether by a purchase
of assets, purchase of stock, merger or otherwise) using cash or stock without
the prior written consent of the Purchasers.
7.19. Listing. The Company will take all action necessary
promptly to file an Application for Listing of Additional Shares with Nasdaq
National Market and/or take any other necessary action to enable the Common
Stock to trade on a national market.
7.20. Material Changes. The Company will promptly notify the
Purchasers of any material adverse change in its business or financial
condition.
7.21. Adjustment to Per Share Price. If, commencing on the
date that is six months from the Closing Date and ending on the date that is one
year from the Closing Date, the Company issues shares of Common Stock, or
securities convertible into or exercisable for shares of Common Stock, at a
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price per share less than the Per Share Price, then the Company shall
simultaneously issue to the Purchasers for no additional consideration, a number
of shares of Common Stock sufficient to reduce the Per Share Price then in
effect to equal the "Adjusted Price" (as defined below). For purposes of this
section 7.21(b), the term Adjusted Price (which shall not be greater than the
Per Share Price then in effect) shall equal a fraction, the numerator of which
shall equal (1) the sum of (A) the number of shares of Common Stock outstanding
on the record date of such issuance or sale multiplied by the Per Share Price
then in effect plus (B) the Total Consideration (as defined below), and the
denominator of which shall be the number of shares of Common Stock outstanding
on the record date of such issuance or sale plus the maximum number of
additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities. "Total Consideration" shall mean the total
amount, if any, received or receivable by the Company in consideration of the
issuance or sale of such securities plus the total consideration, if any,
payable to the Company upon exercise thereof. The provisions of this section
7.21(b) shall not apply (i) to issuances of securities in any corporate
partnering arrangements (including mergers) consummated by the Company, (ii) to
the exercise or conversion of options, warrants or other convertible securities
outstanding as of the Closing Date, or (iii) to issuances which, in the
aggregate, yield gross proceeds to the Company of less than $250,000.
7.22. Right of First Refusal. In the event that, within the 12
month period following the Closing Date, the Company intends to conduct a
private placement of its securities through a placement agent, broker-dealer or
finder, pursuant to which it will pay such agent a commission, then the Company
shall (a) notify Paramount Capital, Inc. ("Paramount") of such intent in writing
detailing the terms of such proposed offering and (b) grant Paramount the right
of first refusal to act as placement agent for the Company in such private
placement. Paramount shall notify the Company within 15 days of its intent. In
the event that Paramount declines to act as placement agent for the Company on
the terms proposed to Paramount in the notice and the Company subsequently
offers to a third-party the opportunity to act as placement agent on terms more
favorable than those offered to Paramount, then the Company must first offer
such opportunity to Paramount on such more favorable terms.
8. Registration of Common Stock.
8.1. Registration. (i) Not later than 30 days after the Closing Date,
the Company will file with the SEC a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Common Shares
beneficially owned by Purchasers following the Closing (the "Registrable
Securities"). The Company will use its best efforts to effect the registrations,
qualifications or compliances (including, without limitation, the execution of
any required undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be reasonably requested and as would permit or facilitate
that sale and distribution of all Registrable Securities until the distribution
thereof is complete; provided that the Company shall not be obligated to
maintain the effectiveness of the Shelf Registration Statement (and any related
qualifications and compliance) following such time as the Company shall deliver
an opinion of counsel reasonably satisfactory to the holders of Registrable
Securities (the "Holders') and in form and substance satisfactory to each Holder
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that (i) such Holders may sell in a single transaction all Registrable
Securities then held or issuable to such Holder on a registered securities
exchange or Nasdaq market under an applicable exemption from the registration
requirements of the Securities Act and all other applicable securities laws and
(ii) all transfer restrictions and restrictive legends with respect to such
Registrable Securities will be removed upon the consummation of such sale.
8.2. Registration Procedures. In connection with the
registration of any Registrable Securities under the Securities Act as provided
in this Section 8, the Company will use its best efforts, as expeditiously as
possible to:
(a) Prepare and file with the SEC the Shelf Registration
Statement with respect to such Registrable Securities and use its best efforts
to cause such Shelf Registration Statement to become effective as expeditiously
as possible;
(b) Prepare and file with the SEC such amendments and
supplements to such Shelf Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Shelf Registration
Statement effective until the disposition of all securities in accordance with
the intended methods of disposition by the seller or sellers thereof set forth
in such Shelf Registration Statement shall be completed, and to comply with the
provisions of the Securities Act (to the extent applicable to the Company) with
respect to such dispositions;
(c) Furnish to each seller of such Registrable Securities such
number of copies of such Shelf Registration Statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such Shelf Registration Statement
(including each preliminary prospectus), in conformity with the requirements of
the Securities Act, and such other documents, as such seller may reasonably
request, in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) Use its best efforts to register or qualify such
Registrable Securities covered by such Shelf Registration Statement under such
other securities or blue sky laws of such jurisdictions as any seller reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller, except
that the Company will not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would
not, but for the requirements of this Section 8.2(d) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction;
(e) Provide a transfer agent and registrar for all such
Registrable Securities covered by such Shelf Registration Statement not later
than the effective date of such Shelf Registration Statement;
(f) Notify each seller of such Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Shelf Registration Statement contains an untrue
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<PAGE>
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company will
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading. The Purchasers agree to
suspend, upon request of the Company, any disposition of Registrable Securities
pursuant to the Registration Statement contemplated hereby during any period,
not to exceed one 30-day period per circumstance or development.
(g) Cause all such Registrable Securities to be listed on each
securities exchange or automated over-the-counter trading system on which
similar securities issued by the Company are then listed;
(h) Enter into such customary agreements (including, in the
event Purchasers elect to engage an underwriter in connection with the Shelf
Registration Statement, an underwriting agreement containing customary terms and
conditions) and take all such other actions as reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities; and
(i) Make available for inspection by any seller of Registrable
Securities, all financial and other records, pertinent corporation documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller in
connection with the Shelf Registration Statement pursuant to Section 8.1.
8.3 Registration and Selling Expenses. (a) All expenses
incurred by the Company in connection with the Company's performance of or
compliance with this Section 8, including, without limitation (i) all
registration and filing fees (including all expenses incident to filing with the
National Association of Securities Dealers, Inc.), (ii) blue sky fees and
expenses, (iii) all necessary printing and duplicating expenses, (iv) all fees
and disbursements of counsel and accountants retained by the Company (including
the expenses of any audit of financial statements) and (v) a single counsel
retained by the Purchasers; provided that the Company shall not be required to
pay for the costs of any in-house counsel and the amount of any fees for outside
counsel shall be offset against the $10,000 cap described in Section 11.2 (all
such expenses being called "Registration Expenses"), will be paid by the Company
except as otherwise expressly provided in this Section 8.3.
(b) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or other duties in connection therewith and expenses of audits
of year-end financial statements), the expense of liability insurance and the
expenses and fees for listing the securities to be registered on one or more
securities exchanges or automated over-the-counter trading systems on which
similar securities issued by the Company are then listed.
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(c) Nothing in this Agreement shall be construed to prevent
any Holder or Holders of Registrable Securities from retaining such counsel as
they shall choose at their own expense.
8.4. Other Public Sales and Registrations. The Company agrees
that it will not, on its own behalf, file or cause to become effective any other
registration of any of its securities under the Securities Act or otherwise
effect a public sale or distribution of its securities (except pursuant to
registration on Form S-8 and Form S-4 or any successor form relating to a
special offering to the employees or security holders of the Company) until at
least 60 days have elapsed after the effective date of the Shelf Registration
Statement without the prior written consent of the Purchasers.
8.5. Indemnification. (a) The Company shall indemnify, to the
extent permitted by law, each holder of Registrable Securities, its officers and
directors, if any, and each person, if any, who controls such holder within the
meaning of the Securities Act, against all losses, claims, damages, liabilities
and expenses (under the Securities Act or common law or otherwise) caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if the
Company has furnished any amendments or supplements thereto) or any preliminary
prospectus, which registration statement, prospectus or preliminary prospectus
shall be prepared in connection with the registration contemplated by this
Section 8, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any untrue statement or alleged untrue
statement contained in or by any omission or alleged omission from information
furnished in writing by such holder to the Company in connection with the
registration contemplated by this Section 8, provided the Company will not be
liable pursuant to this Section 8.5 if such losses, claims, damages, liabilities
or expenses have been caused by any selling security holder's failure to deliver
a copy of the registration statement or prospectus, or any amendments or
supplements thereto, after the Company has furnished such holder with the number
of copies required by Section 8.2(c).
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information as is reasonably requested by
the Company for use in any such registration statement or prospectus and shall
severally, but not jointly, indemnify, to the extent permitted by law, the
Company, its directors and officers and each person, if any, who controls the
Company within the meaning of the Securities Act, against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein not misleading, but only to the extent such losses, claims,
damages, liabilities or expenses are caused by an untrue statement or alleged
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<PAGE>
untrue statement contained in or by an omission or alleged omission from
information so furnished in writing by such holder in connection with the
registration contemplated by this Section 8. If the offering pursuant to any
such registration is made through underwriters, each such holder agrees to enter
into an underwriting agreement in customary form with such underwriters and to
indemnify such underwriters, their officers and directors, if any, and each
person who controls such underwriters within the meaning of the Securities Act
to the same extent as hereinabove provided with respect to indemnification by
such holder of the Company. Notwithstanding the foregoing or any other provision
of this Agreement, in no event shall a holder of Registrable Securities be
liable for any such losses, claims, damages, liabilities or expenses in excess
of the lesser of (a) the net proceeds received by such holder in the offering or
(b) $500,000.
(c) Promptly after receipt by an indemnified party under
Section 8.5 (a) or (b) of notice of the commencement of any action or
proceeding, such indemnified party will, if a claim in respect thereof is made
against the indemnifying party under such Section, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under such Section. In case any such action
or proceeding is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and, to the extent that it wishes, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel approved by such indemnified party (such approval not to be
unreasonably withheld), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section for any legal or any other expenses subsequently incurred by such
indemnified party in connection with the defense thereof (other than reasonable
costs of investigation) unless incurred at the written request of the
indemnifying party. Notwithstanding the above, the indemnified party will have
the right to employ counsel of its own choice in any such action or proceeding
if the indemnified party has reasonably concluded that there may be defenses
available to it which are different from or additional to those of the
indemnifying party, or counsel to the indemnified party is of the opinion that
it would not be desirable for the same counsel to represent both the
indemnifying party and the indemnified party because such representation might
result in a conflict of interest (in either of which cases the indemnifying
party will not have the right to assume the defense of any such action or
proceeding on behalf of the indemnified party or parties and such legal and
other expenses will be borne by the indemnifying party). An indemnifying party
will not be liable to any indemnified party for any settlement of any such
action or proceeding effected without the consent of such indemnifying party.
(d) If the indemnification provided for in Section 8.5(a) or
(b) is unavailable under applicable law to an indemnified party in respect of
any losses, claims, damages or liabilities referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
the Holders on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of the Holders on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company or by the Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include, subject to the
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limitations set forth in Section 8.5(c), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(e) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of any action or proceeding, such party
will, if a claim for contribution in respect thereof is to be made against
another party (the "contributing party"), notify the contributing party of the
commencement thereof; but the omission so to notify the contributing party will
not relieve it from any liability which it may have to any other party other
than for contribution under this Agreement. In case any such action, suit, or
proceeding is brought against any party, and such party notifies a contributing
party of the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified.
8.6. Additional Common Stock Issuable Upon Delay of
Registration and Other Events. (a) Except to the extent any delay is due to the
failure of a Holder to reasonably cooperate in providing to the Company such
information as shall be reasonably requested by the Company in writing for use
in the Shelf Registration Statement, if the Shelf Registration Statement is not
filed with the SEC within 30 days following the Closing Date (the "Outside
Target Date"), the Company shall immediately declare, issue and pay for no
additional consideration to each Holder additional Common Shares equal to one
percent (1%) of the Common Shares then held by such Holder, for each 15-day
period (or fraction thereof) after the Outside Target Date that the Registration
Statement remains unfiled.
(b) All shares of Common Stock issuable pursuant to this
Section 8.6 shall be duly authorized, fully paid and nonassessable shares of
Common Stock and shall be included in the Shelf Registration Statement
contemplated by Section 8.1. Such shares shall be registered in Purchasers'
names or the name of the nominee(s) of Purchasers in such denominations as
Purchasers shall request pursuant to instructions delivered to the Company.
9. Certain Definitions. For the purposes of this Agreement,
the following terms have the respective meanings set forth below:
9.1. "Affiliate" means any person, corporation, firm or entity
that directly or indirectly controls, is controlled by, or is under common
control with the indicated person, corporation, firm or entity.
9.2. "Common Stock" means the Company's Common Stock.
9.3. "Generally Accepted Accounting Principles" means
generally accepted accounting principles consistently applied.
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9.4. "Person" shall mean any natural person and any
corporation, partnership, joint venture, limited liability company or other
legal person, but shall not include any governmental entity.
9.5. "Securities" means the Common Shares.
9.6. "Securities Act" means, as of any given time, the
Securities Act of 1933, as amended, or any similar federal law then in force.
9.7. "Exchange Act" means, as of any given time, the
Securities Exchange Act of 1934, as amended, or any similar federal law then in
force.
9.8. "SEC" shall mean the United States Securities and
Exchange Commission and includes any governmental body or agency succeeding to
the functions thereof.
9.9. "Subsidiary" means any person, corporation, firm or
entity at least the majority of the equity securities (or equivalent interest)
of which are, at the time as of which any determination is being made, owned of
record or beneficially by the Company, directly or indirectly, through any
Subsidiary or otherwise.
10.1 Indemnification. (a) The Company agrees to indemnify,
defend and hold Purchasers and their officers, directors, partners, employees
and consultants (the "Purchasers' Indemnitees") harmless from and against any
direct damages or third-party claims incurred or suffered by any of Purchasers'
Indemnitees as a result of or arising out of or in connection with the Company's
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement. The Purchasers Indemnities will promptly notify the
Company of any potential indemnification claim upon discovery of the facts
supporting the potential claim and, if such indemnification is based on a
third-party claim, allow the Company to defend, manage and resolve the matter at
the Company's cost and with the indemnities' reasonable cooperation.
(b) The Purchasers agree to indemnify, defend and
hold the Company and its officers, directors, shareholders, employees and
consultants (the "Company Indemnitees") harmless from and against any direct
damages or third-party claims incurred or suffered by any of Company Indemnitees
as a result of or arising out of or in connection with the Purchasers' breach of
any representation, warranty, covenant or agreement of the Purchasers contained
in this Agreement. The Company Indemnities will promptly notify the Purchasers
of any potential indemnification claim upon discovery of the facts supporting
the potential claim and, if such indemnification is based on a third-party
claim, allow the Purchasers to defend, manage and resolve the matter at the
Purchaser's cost and with the indemnities' reasonable cooperation.
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11. Miscellaneous.
11.1. Termination; Survival of Representations, Warranties and
Covenants. Except as otherwise provided for in this Agreement all
representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate by any party
delivered in connection herewith shall survive the execution and delivery of
this Agreement and the Closing Dates and the consummation of the transactions
contemplated hereby, regardless of any investigation made by Purchasers or on
their behalf.
11.2. Expenses. The Company shall pay all its own expenses in
connection with this Agreement and the transactions contemplated herein. The
Company agrees to pay promptly all out-of-pocket expenses incurred by the
Purchasers in connection with the preparation and consummation of the Agreement
and the transactions contemplated herein, including but not limited to legal
fees and disbursements of the Purchasers' counsel in connection with the
preparation and consummation of this Agreement and the transactions contemplated
herein, including the legal fees (other than legal fees for in-house
counsel)_and costs of negotiating and drafting any transaction documents, due
diligence and any necessary regulatory filings, provided the total expenses for
which the Company is responsible shall be limited to $10,000.
11.3. Amendments and Waivers. This Agreement and the exhibits
and schedules hereto set forth the entire agreement and understanding among the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
This Agreement may be amended only by mutual written agreement of the Company
and the Purchasers, and the Company may take any action herein prohibited or
omit to take any action herein required to be performed by it, and any breach of
any covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of a majority in interest of
the Purchasers. No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
11.4. Successors and Assigns. This Agreement may not be
assigned by the Company except with the prior written consent of the Purchasers.
This Agreement shall be binding upon and inure to the benefit of the Company and
its permitted successors and assigns and Purchasers and their successors and
assigns. The provisions hereof which are for Purchasers' benefit as purchasers
or holders of the Common Shares are also for the benefit of, and enforceable by,
any subsequent holder of such Common Shares.
11.5. Notices. All notices, demands and other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the addresses of the respective parties set forth
below or to such changed addresses as such parties may have fixed by notice;
provided, however, that any notice of change of address shall be effective only
upon receipt:
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If to the Company:
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
Attn: Dr. David M. Goldenberg
With a Copy (which shall not constitute notice) to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07065
Attn: Peter H. Ehrenberg
If to the Purchasers:
The Aries Master Fund
The Aries Domestic Fund, L.P.
The Aries Domestic Fund II, L.P.
c/o Paramount Capital Asset Management, Inc.
787 Seventh Avenue, 48th Floor
New York, NY 10019
Attn: David M. Tanen
11.6. Governing Law; Consent to Jurisdiction. The validity,
performance, construction and effect of this Agreement shall be governed by
those laws of the State of Delaware. The parties hereto irrevocably consent to
the jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out of
or relating to this Agreement, any document or instrument delivered pursuant to,
in connection with or simultaneously with this Agreement, or a breach of this
Agreement or any such document or instrument.
11.7. Counterparts. This Agreement may be executed in any
number of counterparts and, notwithstanding that any of the parties did not
execute the same counterpart, each of such counterparts shall, for all purposes,
be deemed an original, and all such counterparts shall constitute one and the
same instrument binding on all of the parties thereto.
11.8. Headings. The headings of the Sections are inserted as a
matter of convenience and for reference only and in no way define, limit or
describe the scope of this Agreement or the meaning of any provision hereof.
11.9. Severability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless the provision
held invalid shall substantially impair the benefit of the remaining portion of
this Agreement.
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11.10. Freedom of Action. The Purchasers and their Affiliates
shall have no obligation to the Company to refrain from (i) engaging in the same
or similar activities or lines of business as the Company or develop or market
any products, services or technologies that does or may in the future compete,
directly or indirectly, with those of the Company, (ii) investing or owning any
interest publicly or privately in, or develop a business relationship with, any
corporation, partnership or other person or entity engaged in the same or
similar activities or lines or business as, or otherwise in competition with,
the Company or (iii) doing business with any client, collaborator, licensor,
consultant, vendor or customer of the Company. It is agreed and understood that
the preceding sentence shall not limit the obligations to the Company under
applicable law of any person acting as a director of the Company, nor shall it
limit the obligations of the Purchasers or their Affiliates under this Agreement
or any other agreement with the Company.
11.11. Exculpation Among Purchasers. Each Purchaser
acknowledges and agrees that it is not relying upon any other Purchaser, or any
officer, director, employee partner or affiliate of any such other Purchaser, in
making its investment or decision to invest in the Company or in monitoring such
investment. Each Purchaser agrees that no Purchaser nor any controlling person,
officer, director, stockholder, partner, agent or employee of any Purchaser
shall be liable for any action heretofore or hereafter taken or omitted to be
taken by any of them relating to or in connection with the Company or the
securities, or both.
11.12. Actions by Purchasers. Any actions permitted to be
taken by holders or Purchasers of Common Shares and any consents required to be
obtained from the same under this Agreement, may be taken or given only by, in
the case of consents or actions requiring approval of a Purchaser, by the
applicable Purchaser, and in all other cases, except to the extent inconsistent
with any explicit provision of this Agreement, only by holders of a majority in
interest of the Common Shares.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
IMMUNOMEDICS, INC. THE ARIES MASTER FUND
By: /s/ David M. Goldenberg By: /s/ Lindsay Rosenwald, M.D.
Name: David M. Goldenberg Name: Lindsay Rosenwald, M.D.
Title: Chairman and Chief Title: Chairman of Paramount Capital
Executive Officer Asset Management, Inc.
Investment Manager
ARIES DOMESTIC FUND, L.P. ARIES DOMESTIC FUND II, L.P.
By: /s/ Lindsay Rosenwald, M.D. By: /s/ Lindsay Rosenwald, M.D.
Name: Lindsay Rosenwald, M.D. Name: Lindsay Rosenwald, M.D.
Title: Chairman of Paramount Capital Title: Chairman of Paramount Capital
Asset Management, Inc. Asset Management, Inc.
General Partner General Partner
LINDSAY A. ROSENWALD, M.D. MARK C. ROGERS, M.D.
By: /s/ Lindsay Rosenwald, M.D. By: /s/ Marc C. Rogers, M.D.
Name: Lindsay Rosenwald, M.D. Name: Mark C. Rogers, M.D.
WAYNE ROTHBAUM
By: /s/ Wayne Rothbaum
Name: Wayne Rothbaum
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EXHIBIT A
Name Initial
$ Amount Common Shares
- -------------------------------- -------------- ----------------
The Aries Master Fund, a
Cayman Island exempted
Company: $4,672,935 1,557,645
The Aries Domestic Fund, L.P. $1,880,460 626,820
The Aries Domestic Fund II, L.P. $ 146,601 48,867
Lindsay A. Rosenwald, M.D. $ 500,001 166,667
Mark C. Rogers, M.D. $ 100,002 33,334
Wayne Rothbaum $ 200,001 66,667
27
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December 16, 1999
WARRANT AGREEMENT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES).
IMMUNOMEDICS, INC.
WARRANT TO PURCHASE 75,000 SHARES OF COMMON STOCK
IMMUNOMEDICS, INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Sutro & Co. Incorporated ("Sutro"), a
_________ corporation, or its registered transferees, successors or assigns
(each, a "holder"), is the registered holder of warrants (the "Warrants") to
subscribe for and purchase SEVENTY-FIVE THOUSAND (75,000) shares of the fully
paid and nonassessable Common Stock (as adjusted pursuant to Section 4 hereof,
the "Warrant Shares") of the Company, at a purchase price per share equal to SIX
DOLLARS AND FIFTY CENTS ($6.50) (such price, as adjusted pursuant to Section 4
hereof, the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, (a) the term "Common Stock"
shall mean the Company's presently authorized Common Stock, par value $.01 per
share, and any stock into or for which such Common Stock may hereafter be
converted or exchanged, and (b) the term "Date of Grant" shall mean December 16,
1999. The term "Warrant" as used herein shall be deemed to include any warrant
issued upon transfer or partial exercise of this Warrant, unless the context
clearly requires otherwise. This Warrant is being issued pursuant to that
certain Letter Engagement Agreement (the "Agreement") of even date herewith
between the Company and Sutro.
1. Term.
The purchase right represented by this Warrant is exercisable, in whole
or in part, at any time and from time to time from the Date of Grant through and
including the close of business on December 16, 2004 (the "Expiration Date");
provided, however, that in the event that any portion of this Warrant is
unexercised as of the Expiration Date, the terms of Section 2(b) below shall
apply.
<PAGE>
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant.
Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the holder hereof, in whole or in part and from
time to time, by the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company, and, except as otherwise provided for herein, by the payment to the
Company of an amount equal to the then applicable Warrant Price multiplied by
the number of Warrant Shares then being purchased. The person or persons in
whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised if exercised prior to the close of
business on such date; otherwise, the date of record shall be the next business
day. In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered to
the holder hereof as soon as possible after such exercise and, unless this
Warrant has been fully exercised (including without limitation, exercise
pursuant to Section 2(b) below), a new Warrant representing the portion of the
Warrant Shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof as soon as possible.
b. Automatic Exercise. In the event that any portion of this
Warrant remains unexercised as of the Expiration Date and the fair market value
(determined in accordance with Section 4(i) below) of one share of Common Stock
as of the Expiration Date is greater than the applicable Warrant Price as of the
Expiration Date, then this Warrant shall be deemed to have been exercised
automatically immediately prior to the close of business on the Expiration Date
(or, in the event that the Expiration Date is not a business day, the
immediately preceding business day) (the "Automatic Exercise Date") in
accordance with Section 2(c) below, and the person entitled to receive the
shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such Warrant Shares as of the close of
business on such Automatic Exercise Date. This Warrant shall be deemed to be
surrendered to the Company on the Automatic Exercise Date by virtue of this
Section 2(b) and without any action by the holder of this Warrant or any other
person, upon the payment to the Company of the then applicable Warrant Price
multiplied by the number of Warrant Shares then being purchased shall be deemed
to be made pursuant to the terms of Section 2(c) below (without payment by the
holder of any exercise price or any cash or other consideration). As promptly as
practicable on or after the Automatic Exercise Date but in no event prior to the
date on which this Warrant is surrendered to the Company at the principal office
of the Company, the Company at its expense shall issue and deliver to the person
or persons entitled to receive the same a certificate or certificates for the
number of Warrant Shares issuable upon such exercise, in accordance with Section
2(c).
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<PAGE>
c. Cashless Right to Convert Warrant into Common Stock; Net
Issuance.
(1) Right to Convert.
In addition to and without limiting the rights of the holder
hereof under the terms of this Warrant, the holder shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 2(c) at any time or from time to
time during the term of this Warrant. Upon exercise of the Conversion Right with
respect to all or a specified portion of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
that number of shares of fully paid and nonassessable Common Stock equal to the
quotient obtained by dividing (i) the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in Section 2(c)(2) hereof),
which value shall be equal to (A) the aggregate fair market value of the
Converted Warrant Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the Conversion Date less (B) the aggregate Warrant
Price of the Converted Warrant Shares immediately prior to the exercise of the
Conversion Right by (ii) the fair market value of one (1) share of Common Stock
on the Conversion Date. Expressed as a formula, such conversion shall be
computed as follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock that may be issued to
the holder
Y = the fair market value ("FMV") of one (1) share of Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of Section 9 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(2) Method of Exercise.
The Conversion Right may be exercised by the holder by the surrender of
this Warrant at the principal office of the Company together with a written
statement specifying that the holder thereby intends to exercise the Conversion
Right and indicating the number of shares subject to this Warrant which are
being surrendered (referred to in Section 2(c)(1) hereof as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
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Date and shall be delivered to the holder as soon as possible following the
Conversion Date.
(3) Determination of Fair Market Value.
d. For purposes of Section 2(c), "fair market value" of
a share of Common Stock shall have the meaning set forth in Section 4(i) below.
3. Stock Fully Paid; Reservation of Shares.
All Warrant Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from all taxes,
liens, charges, and statutory pre-emptive rights with respect to the issue
thereof. The Company shall pay all transfer taxes, if any, attributable to the
issuance of the Warrant Shares upon the exercise of this Warrant, provided that
such Warrant Shares are issued in the name of the holder of this Warrant. During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized, and reserved for the purpose of
the issue upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:
a. Intentionally omitted.
b. Merger, Sale, Reclassification.
In case of any (i) consolidation or merger (including a merger
in which the Company is the surviving entity), (ii) sale or other disposition of
all or substantially all of the Company's assets or distribution of property to
stockholders (other than distributions payable out of earnings or retained
earnings), or (iii) reclassification, change or conversion of securities of the
class issuable upon exercise of this Warrant (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), then the Company shall take all
necessary actions (including but not limited to executing and delivering to the
holder of this Warrant an additional Warrant or other instrument, in form and
substance acceptable to the holder of this Warrant such acceptance not to be
unreasonably withheld) to ensure that the holder of this Warrant shall
thereafter have the right to receive, at a total purchase price not to exceed
that payable upon the exercise of the unexercised portion of this Warrant, and
in lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such consolidation, merger, sale or other disposition,
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reclassification, change or conversion by a holder of the number of shares of
Common Stock then purchasable under this Warrant. Such new Warrant shall provide
for adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this Section 4(b)
shall similarly apply to successive reclassifications, changes and conversions.
c. Subdivision or Combination of Shares.
If the Company at any time while this Warrant remains
outstanding and unexpired shall subdivide or combine its outstanding shares of
Common Stock, the Warrant Price shall be proportionately decreased in the case
of a subdivision or increased in the case of a combination, effective at the
close of business on the date the subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions.
If the Company at any time while this Warrant is outstanding
and unexpired shall (i) pay a dividend with respect to Common Stock payable in
Common Stock, or (ii) make any other distribution with respect to Common Stock
(except any distribution specifically provided for in Section 4(b) or Section
4(c) hereof) of Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of Fully Diluted Shares
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
outstanding immediately after such dividend or distribution.
e. Rights Offerings.
In case the Company shall, at any time after the Date of
Grant, issue rights, options or warrants generally to the holders of equity
securities of the Company, entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible or exchangeable into Common Stock) at a
price per share of Common Stock (or having a conversion or exchange price per
share of Common Stock if a security convertible or exchangeable into Common
Stock) less than the fair market value per share of Common Stock on the record
date for such issuance (or the date of issuance, if there is no record date),
the Warrant Price to be in effect on and after such record date (or issuance
date, as the case may be) shall be adjusted so that it shall equal the price
determined by multiplying the Warrant Price in effect immediately prior to such
record date (or issuance date, as the case may be) by a fraction (i) the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date (or issuance date, as the case may be) plus the number of
shares of Common Stock which the aggregate offering price of the total number of
shares of such Common Stock so to be offered (or the aggregate initial exchange
or conversion price of the exchangeable or convertible securities so to be
offered) would purchase at such fair market value on such record date (or
issuance date, as the case may be) and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding on such record date (or
issuance date, as the case may be) plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which the
convertible securities to be offered are initially exchangeable or convertible).
In case such subscription price may be paid in part or in whole in a form other
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than cash, the fair market value of such consideration shall be determined by
the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, provided, that in the event the Board of Directors is unable to make
such a determination, then the fair market value of such consideration shall be
determined in the same manner as a Valuation under Section 4(i) below. Such
adjustment shall be made successively whenever such an issuance occurs; and in
the event that such rights, options, warrants, or convertible or exchangeable
securities are not so issued or expire or cease to be convertible or
exchangeable before they are exercised, converted, or exchanged (as the case may
be), then the Warrant Price shall again be adjusted to be the Warrant Price that
would then be in effect if such issuance had not occurred, but such subsequent
adjustment shall not affect the number of Warrant Shares issued upon any
exercise of this Warrant prior to the date such subsequent adjustment is made.
f. Other Special Distributions.
In case the Company shall fix a record date for the making of
a distribution (other than dividends, distributions or issuances referred to in
Section 4(c), Section 4(d) or Section 4(e) above, and other than cash dividends)
to all holders of shares of Common Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
surviving corporation) of evidences of indebtedness, assets or subscription
rights, options, warrants, or exchangeable or convertible securities containing
the right to subscribe for or purchase shares of any class of equity securities
of the Company, the Warrant Price to be in effect on and after such record date
shall be adjusted by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction (i) the numerator of which shall be the fair
market value per share of Common Stock on such record date (determined in
accordance with Section 4(i) below), less the fair market value (as determined
by the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights, options, warrants, or exchangeable
or convertible securities applicable to one (1) share of the Common Stock
outstanding as of such record date, provided, that in the event the Board of
Directors is unable to make such a determination, then the fair market value of
such consideration shall be determined in the same manner as a Valuation under
Section 4(i) below, and (ii) the denominator of which shall be the fair market
value per share of Common Stock as determined in the manner set forth under
Section 4(i) below. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Warrant Price shall again be adjusted to be the Warrant Price which would
then be in effect if such record date had not been fixed, but such subsequent
adjustment shall not affect the number of Warrant Shares issued upon any
exercise of this Warrant prior to the date such subsequent adjustment was made.
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g. Other Issuances of Securities.
Shares outstanding immediately after such sale and issuance.
Such adjustment shall be made successively whenever such an issuance is made.
h. Adjustment of Number of Shares.
Upon each adjustment in the Warrant Price, the number of
Warrant Shares purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Warrant Shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
i. Determination of Fair Market Value.
For purposes of those provisions of this Warrant requiring a
determination in accordance with this Section 4(i), "fair market value" as of a
particular date (the "Determination Date") shall mean (i) for any security if
such security is traded on a national securities exchange (an "Exchange"), the
weighted average (based on daily trading volume) of the mid-point between the
daily high and low trading prices of the security on each of the last five (5)
trading days prior to the Determination Date reported on such Exchange, (ii) for
any security that is not traded on an Exchange but which is quoted on the Nasdaq
Stock Market ("NASDAQ"), the weighted average (based on daily trading volume) of
the mid-point between the daily high and low trading prices reported on NASDAQ
on each of the last five (5) trading days (or if the relevant price or quotation
did not exist on any of such days, the relevant price or quotation on the next
preceding business day on which there was such a price or quotation, for a total
of five trading days) prior to the Determination Date, or (iii) for any security
or any other asset, if no price can be determined on the basis of the above
methods of valuation, then the judgment of valuation shall be determined in good
faith by the Board of Directors of the Company, which determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary. If the Board of Directors of the Company is
unable to determine any Valuation (as defined below), the Company shall select
an investment banking firm of national reputation which has not had a material
relationship with the Company or any officer of the Company within the preceding
two (2) years, which shall determine such Valuation. Such investment banking
firm's determination of such Valuation shall be final, binding and conclusive on
the Company and the holders of all of the Warrants issued hereunder and then
outstanding, to the extent of the issuance or distribution to which such
Valuation applies. If the Board of Directors of the Company was unable to
determine such Valuation, all costs and fees of such investment banking firm
shall be borne by the Company. For purposes of this Section 4(i), the term
"Valuation" shall mean the determination, to be made initially by the Board of
Directors of the Company, of the fair market value of any asset pursuant to
clause (iii) above in this paragraph.
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5. Notice of Adjustments.
Whenever the Warrant Price or the number of Warrant Shares purchasable
hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make
a certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price and the
number of Warrant Shares purchasable hereunder after giving effect to such
adjustment, which shall be mailed (without regard to Section 11 hereof, by first
class mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares.
No fractional shares of Common Stock will be issued in connection with
any exercise hereunder, but in lieu of such fractional shares the Company shall
make a cash payment therefor based on the fair market value (as determined in
accordance with Section 4(i) above) of a share of Common Stock on the date of
exercise.
7. Compliance with Securities Act; Disposition of Warrant or Warrant
Shares.
a. Compliance with Securities Act.
The holder of this Warrant, by acceptance hereof, agrees that
this Warrant and the shares of Common Stock to be issued upon exercise hereof,
are being acquired for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Common Stock to be issued
upon exercise hereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise
of this Warrant, the holder hereof shall confirm in writing, by executing the
form attached as Schedule 1 to Exhibit A hereto, that the shares of Common Stock
so purchased are being acquired for investment and not with a view toward
distribution or resale. All shares of Common Stock issued upon exercise of this
Warrant (unless registered under the Act) shall be stamped or imprinted with a
legend in substantially the following form: "THE SECURITIES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED, or (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES)"
In addition, in connection with the issuance of this Warrant,
the holder specifically represents to the Company by acceptance of this Warrant
as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for resale in connection with any "distribution" thereof for
purposes of the Act.
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(2) The holder understands that this Warrant and the Warrant Shares have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption maybe
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Warrant and the Warrant
Shares, or for a period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and the Warrant Shares
must be held indefinitely unless subsequently registered under the Act and any
applicable state securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 and 144A, promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant and the Warrant Shares there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144 and
144A, and that, in such event, the holder may be precluded from selling this
Warrant and the Warrant Shares under Rule 144 and 144A even if the one (1)-year
minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
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b. Disposition of Warrant or Warrant Shares. This Warrant and
the Warrant Shares may be detached and transferred, in whole or in part,
separately from the Agreement.
With respect to any offer, sale or other disposition of this
Warrant, or any Warrant Shares acquired pursuant to the exercise of this Warrant
prior to registration of such Warrant or Warrant Shares, the holder hereof and
each subsequent holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such Warrant
Shares and indicating whether or not under the Act certificates for this Warrant
or such Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
ensure compliance with applicable law. Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has been
made pursuant to this Section 7(b) that the opinion of counsel for the holder is
not reasonably satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made. The foregoing
notwithstanding, this Warrant or such Warrant Shares may, as to such federal
laws, be offered, sold or otherwise disposed of in accordance with Rule 144 and
144A under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 and 144A have been satisfied. Each
certificate representing this Warrant or the Warrant Shares thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent or, if acting as its
own transfer agent, the Company may stop transfer on its corporate books, in
connection with such restrictions.
8. Rights as Stockholders; Information.
No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise, until this Warrant shall have been exercised and the Warrant
Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein. The foregoing notwithstanding, the Company will transmit to the
holder of this Warrant such information, documents and reports as are generally
distributed to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the stockholders.
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9. Registration Rights
9.1 Demand Registration Rights
a. The Company covenants and agrees that at any time after
receipt of a written request (a "Demand Registration Request") from holder(s) of
Warrants and/or Warrant Shares (collectively, the "Securityholders") holding at
least twenty-five percent (25%) of the Registrable Securities not already sold
pursuant to this Section 9 or Rule 144 under the Act, stating that such
Securityholders desire and intend to have the Company register all or a portion
of the Warrant Shares then outstanding or issuable pursuant to unexercised
Warrants (the "Registrable Securities") for sale, then the Company shall: (i)
promptly deliver written notice (the "Registration Notice") to all other
Securityholders of the Company's receipt of such registration request; (ii) file
with the SEC, within forty-five (45) days of delivery of the Registration
Notice, a registration statement on Form S-3, or any successor form of
registration to such form, or, if the Company is ineligible therefore, Form S-1,
or any successor form of registration to such form, for an offering to be made
covering all of the Registrable Securities; (iii) use its best efforts to cause
such registration statement to be declared effective within ninety (90) days of
delivery of the Registration Notice; and (iv) use its best efforts to cause such
registration statement to become effective under the Act and remain effective
for six (6) months or such shorter period as may be required if all such
Registrable Securities covered by such registration statement are sold prior to
the expiration of such six (6)-month period; provided, however, that the Company
shall be obligated to effect only one such registration pursuant to this Section
9.1. For purposes of this Section 9.1(a), a registration shall not be deemed to
have been effected unless a registration statement including at least
eighty-five percent (85%) of the Registrable Shares requested to be included
therein has been declared effective and, subject to Section 9.3(b) hereof,
remained effective for a period of six (6) months (or such shorter period as is
permitted in clause (iv) of the first sentence of this Section 9.1(a)).
b. The foregoing Section 9.1(a) notwithstanding, in the event
of an underwritten offering pursuant to this Section 9.1, if the managing
underwriter of such offering shall advise the Securityholders in writing that,
in its opinion, the distribution of a specified portion of the securities
requested to be included in the registration would materially adversely affect
the distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in the registration shall be reduced in the
following order: (i) first, securities proposed to be included by the Company
and securities that are not Registrable Securities shall be excluded as
determined by the Company and (ii) second, Registrable Securities will be
excluded pro rata among all of the Registrable Securities requested to be
included therein. For purposes of this Section 9.1, the Securityholders who have
requested registration of Common Stock to be acquired upon the exercise of
Warrants not theretofore exercised shall furnish the Company with an undertaking
that they or the underwriters or other persons to whom such Warrants will be
transferred have undertaken to exercise such Warrants and to sell, transfer or
otherwise dispose of the Shares received upon exercise of such Warrants in such
registration.
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9.2 Incidental Registration
a. Subject to Section 9.2(b) below, the Company covenants and
agrees that in the event the Company proposes after the Date of Grant to file a
registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms and other than registrations pursuant to
Section 9.1 hereof), whether or not for its own account, then the Company shall
give written notice of such proposed filing to all Securityholders promptly (and
in any event at least twenty (20) days before the anticipated filing date). Such
notice shall offer to such Securityholders, together with others who have
similar rights, the opportunity to include in such registration statement such
number of Registrable Securities as they may request (other than Registrable
Securities already registered pursuant to a Shelf Registration Statement). The
Company shall direct and use its reasonable best efforts to cause the managing
underwriter of a proposed underwritten offering (unless the offering is an
underwritten offering of a class of the Company's equity securities other than
Common Stock and the managing underwriter has advised the Company in writing
that, in its opinion, the inclusion in such offering of Common Stock would
materially adversely affect the distribution of such offering) to permit the
holders of Registrable Securities requested to be included in the registration
to include such Registrable Securities in the proposed offering and the Company
shall use its reasonable best efforts to include such Registrable Securities in
such proposed offering on the same terms and conditions as any similar
securities of the Company included therein. If the offering of which the Company
gives notice is a public offering involving an underwriter, the right of a
Securityholder to registration pursuant to this Section 9.2 shall be conditioned
upon (i) such Securityholder's participation in such underwriting and the
inclusion of the Registrable Securities to be sold by such Securityholder in the
underwriting and (ii) such Securityholder executing an underwriting agreement
entered into by the Company which includes customary terms and conditions
relating to sales by shareholders. The foregoing notwithstanding, in the case of
a firm commitment offering on underwriting terms appropriate for such a
transaction, other than a registration requested by Securityholders pursuant to
Section 9.1, if any such managing underwriter of recognized standing shall
advise the Company and the Securityholders in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be reduced in the following
order: (i) first, Registrable Securities and such other securities requested to
be included by holders of such other securities shall be excluded pro rata and
(ii) second the securities the Company proposes to include therein shall be
excluded.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders) requests, pursuant
to rights granted to such holder or holders, that the Company file a
registration statement for the public offering of securities and the Company and
the other holders of the Company's securities (including the Securityholders)
who have rights to be included in such registration, request to be included in
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such registration and the managing underwriter of such offering shall advise the
Company and the holders requesting inclusion in the offering that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution
then, the securities to be included in the registration shall be reduced in the
following order: (i) first, any securities requested to be included therein by
the holders of such other securities in such a manner as determined by the
Company, (ii) second Registrable Securities shall be excluded pro rata, (iii)
securities proposed to be included by the Company shall be excluded and, (iv)
fourth, securities requested to be included therein by the holder or holders
making the initial request for the registration. For purposes of this Section
9.2(b), the Company agrees to request for inclusion in the registration only
that number of securities that the Company intends, in good faith, to sell, if
all such securities so requested by the Company were permitted to be included by
the managing underwriter in such registration and sold pursuant thereto.
9.3 Company's Obligations
a. In connection with the registration of Registrable
Securities on behalf of the holders thereof (such Securityholders being referred
to herein as "Sellers") in accordance with Section 9.1 or Section 9.2 above, and
in addition to its other obligations under this Section 9, the Company agrees
to:
(i) with respect to any registration pursuant
to Section 9.1(a) or Section 9.1(b), prepare and file with the SEC a
registration statement on the form specified in such section, with respect to
the Registrable Securities to be registered pursuant to such section, and to use
its best efforts to cause such registration statement to become and remain
effective as provided in such section;
(ii) enter into a cross-indemnity agreement, in
customary form, with each underwriter, if any, and each
Seller;
(iii) subject to the provisions of Section 9.1
and Section 9.2 regarding reductions in Registrable Securities to be included in
a registration, include in the registration statement filed with the SEC, the
Registrable Securities for which requests for registration have been made (or,
in the case of a registration under Section 9.1(a), all such Registrable
Securities), promptly after filing of such a registration statement or
prospectus or any amendments or supplements thereto, furnish to each Seller
copies of all such documents filed including, if requested, documents
incorporated by reference in the registration statement, and notify each Seller
of any stop order issued or threatened by the SEC and use its best efforts to
prevent the entry of such stop order or to remove it if entered;
(iv) subject to Section 9.3(b), prepare and file with
the SEC such amendments of and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective with respect to a registration statement under
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Section 9.1 or Section 9.2, for a period of six (6) months or such shorter
period as may be required if all such Registrable Securities covered by such
registration statement are sold prior to the expiration of such period and to
otherwise comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Sellers set forth in
such registration statement;
(v) furnish to each Seller and each underwriter, if
any, without charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
proposed to be sold by such Seller;
(vi) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or Blue Sky laws
of such jurisdictions as any Seller or any such underwriter reasonably requests
in writing and keep such registrations or qualifications in effect for so long
as such registration statement remains in effect and do any and all acts and
things which may be reasonably necessary or advisable to enable such Seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Seller; provided, however, that the Company shall not be required
to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Subsection 9.3(a)(vi), or (B)
consent to general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when a
prospectus relating to such Seller's Registrable Securities is required to be
delivered under the Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(viii) cause all such Registrable Securities to be
listed on any Exchange or NASDAQ on which similar securities issued by the
Company are then listed;
(ix) provide a transfer agent, registrar and CUSIP
number for all such Registrable Securities not later than the effective date of
such registration statement;
(x) enter into such customary agreements (including
an underwriting agreement in customary form) and take all such other actions
that the Sellers or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
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(xi) make available for inspection by the Sellers and
their counsel, any underwriter participating in any disposition pursuant to such
registration statement, and any counsel retained by any such underwriter, all
pertinent financial and other information and corporate documents of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Seller, underwriter or counsel in
connection with such registration statement;
(xii) with respect to any underwritten offering, use
its reasonable best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the Sellers or any
underwriter may reasonably request;
(xiii) with respect to an underwritten offering,
obtain an opinion of counsel to the Company, addressed to the Sellers and any
underwriter, in customary form and including such matters as are customarily
covered by such opinions in underwritten registered offerings of equity
securities as the Sellers or any underwriter may reasonably request, such
opinion to be reasonably satisfactory in form and substance to each Seller; and
(xiv) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
Securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this Section 9 notwithstanding,
upon receipt by the Securityholders of a written notice signed by the chief
executive officer or chief financial officer of the Company to the effect set
forth below, the Company shall not be obligated during a reasonable period of
time (not to exceed ninety (90) days) thereafter (i) to effect any registrations
pursuant to this Section 9 or (ii) with respect to an effective Shelf
Registration Statement, may suspend the effectiveness of such registration
statement, at any time at which, in the Company's reasonable judgment, (i) there
is a development involving the Company or any of its affiliates which is
material but which has not yet been publicly disclosed or (ii) sales pursuant to
the registration statement would materially and adversely affect an underwritten
public offering for the account of the Company or any other material financing
project or a proposed or pending material merger or other material acquisition
or material business combination or material disposition of the Company's
assets, to which the Company or any of its affiliates is, or is expected to be,
a party. In the event a registration is postponed in accordance with this
Section 9.3(b), (x) the Company must (unless otherwise instructed by those
holders who requested such registration) file the requested registration within
nine (9) months from the date the Company first received the request of the
holders, (y) the Company may not defer the filing of a requested registration or
suspend the effectiveness of a Shelf Registration Statement pursuant to this
Section 9.3(b) more than once in any eighteen (18)-month period, and (z) there
shall be added to any period during which the Company is obligated to keep a
registration effective the number of days for which the registration was
postponed pursuant to this Section 9.3(b).
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c. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant hereto, furnish the
Company with such information regarding the distribution of the Registrable
Securities proposed to be sold by such Seller as the Company may from time to
time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section
9.3(a)(vii) above, such Seller shall forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Seller's receipt of copies of the supplemented
or amended prospectus contemplated by Section 9.3(a)(vii) above and, if so
directed by the Company, such Seller will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies in such Seller's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any such
notice, the period mentioned in Section 9.3(a)(iv) above shall be extended by
the number of days during the period from and including the date of giving of
such notice to and including the date when each Seller shall have received the
copies of the supplemented or amended prospectus contemplated by Section
9.3(a)(vii) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by name or
otherwise as the Seller of any securities of the Company unless such reference
to such Seller is agreed to by the Seller or is specifically required by the Act
or any similar federal statute then in force.
9.4 Fees and Expenses. All expenses incident to the Company's
performance of or compliance with this Warrant shall be borne by the Company,
including without limitation all registration and filing fees, fees and expenses
relating to filings with any Exchange and/or NASDAQ, fees and expenses of
compliance with securities or Blue Sky laws in jurisdictions reasonably
requested by any Seller or underwriter pursuant to Section 9.3(a)(vi) (including
reasonable fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Securities), all word processing, duplicating
and printing expenses, messenger and delivery expenses, fees and disbursements
of counsel for the Company and one (1) counsel for the Sellers (selected by
those Sellers owning a majority of the Registrable Securities), fees and
expenses of independent public accountants (including the expenses of any
special audit or "cold comfort" letters required by or incident to such
performance), fees and expenses of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals attributable directly to the securities being
registered, which discounts, commissions or fees with respect to any Seller's
respective shares shall be paid by such Seller), all the Company's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the expense of any liability insurance (if the Company
determines to obtain such insurance), the fees and expenses incurred in
connection with the listing of the securities to be registered on any Exchange
and/or NASDAQ on which such securities issued by the Company are then listed,
the reasonable fees and expenses of any special experts (including attorneys)
retained by the Company (if it so desires) in connection with such registration,
and fees and expenses of other persons retained by the Company (all such
expenses being herein called "Registration Expenses").
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9.5 Participation. In connection with the preparation and filing of
each registration statement under the Act pursuant to this Section 9, the
Company shall give the Sellers under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such Sellers' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Act.
9.6 Indemnification
a. In the event of any registration of any securities of the
Company under the Act, the Company shall, and hereby does, indemnify and hold
harmless in the case of any registration statement filed pursuant to Section 9.1
or Section 9.2 above, the Seller of any Registrable Securities covered by such
registration statement, its directors, officers, employees and agents, each
other person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls such Seller
or any such underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which such Seller or any
such director or officer or employee or agent or underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company shall reimburse such Seller and each such director, officer,
employee, agent, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding, whether
commenced or threatened in respect thereof), or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment, or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Seller for the express purpose of use in the preparation thereof
and, provided, further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof), or expense
arises out of such person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, within the time
required by the Act to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Seller or any such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such Registrable Securities
by such Seller.
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b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement filed pursuant
to Section 9.1 or Section 9.2 above, such prospective Seller shall, and hereby
does, indemnify and hold harmless the Company, its directors, officers,
employees and agents, each other person who participates as an underwriter in
the offering or sale of such Registrable Securities and each other person, if
any, who controls the Company or any such underwriter within the meaning of the
Act against any losses, claims, damages, or liabilities (or actions or
proceedings whether commenced or threatened in respect thereof), joint or
several, to which the Company or any such director or officer or employee or
underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and such prospective Seller shall reimburse
the Company and any such director, officer, employee, agent, underwriter or
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action, or proceeding if, and only if, such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment, or supplement. In no event shall the
liability of any Seller hereunder be greater in amount than the dollar amount of
the proceeds received by such Seller upon the sale of the Registrable Securities
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such Registrable Securities
by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities industry
professionals participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such persons
specifically for inclusion in any prospectus or registration statement.
d. Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
this Section 9.6, such indemnified party shall, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided, however, that the failure of any
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indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 9.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. If, in the indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnified party may assume the
defense of such claim, jointly with any other indemnified party that reasonably
determines such conflict of interest to exist, and the indemnifying party shall
be liable to such indemnified parties for the reasonable legal fees and expenses
of one counsel for all such indemnified parties and for other expenses
reasonably incurred in connection with the defense thereof incurred by the
indemnified party. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to sue, in respect of such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
e. Indemnification and contribution similar to that specified
in this Section 9.6 (with appropriate modifications) shall be given by the
Company and each Seller with respect to any required registration or other
qualification of Registrable Securities under any Federal or state law or
regulation of any governmental authority, other than the Act.
f. The indemnification required by this Section 9.6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
g. If the indemnification provided for in this Section 9.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
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been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities,
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. In no event shall the liability of any Seller
hereunder be greater in amount than the dollar amount of the proceeds received
by such Seller upon the sale of the Registrable Securities giving rise to such
contribution obligation. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.6(g) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in this Section 9.6(g). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
9.7 Assignment of Rights; Termination.
The rights granted under this Section 9 may be assigned to the
transferee of any of the Registrable Securities and will terminate on the five
(5) year anniversary of the Expiration Date.
10. Representations and Warranties.
The Company represents and warrants to the holder of this
Warrant as follows:
a. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
b. The Warrant Shares have been duly authorized and reserved
for issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable;
c. The rights, preferences, privileges and restrictions
granted to or imposed upon the Common Stock and the holders thereof are as set
forth in the certificate of incorporation of the Company, as amended to the Date
of Grant (as so amended, the "Charter"), a true and complete copy of which has
been delivered to the original holder of this Warrant;
d. The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Charter or by-laws of the
Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
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with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby;
e. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant;
f. Intentionally omitted.
g. Intentionally omitted.
h. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any security convertible into or exchangeable for any of its
capital stock.
10. Modification and Waiver.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
11. Notices.
Unless otherwise specifically provided herein, all communications under
this Warrant shall be in writing and shall be deemed to have been duly given (i)
on the date of service if served personally on the party to whom notice is to be
given, (ii) on the day of transmission if sent by facsimile transmission to a
number provided to a party specifically for such purposes, and telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(iii) on the day after delivery to Federal Express or similar overnight courier,
or (iv) on the fifth day after mailing, if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid, and
properly addressed, return receipt requested, to each such holder at its address
as shown on the books of the Company or to the Company at the address indicated
therefor on the signature page of this Warrant. Any party hereto may change its
address for purposes of this Section 11 by giving the other party written notice
of the new address in the manner set forth herein.
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12. Binding Effect on Successors.
This Warrant shall be binding upon any corporation succeeding the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets, and all of the obligations of the Company relating to the
Common Stock issuable upon the exercise or conversion of this Warrant shall
survive the exercise, conversion and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise or conversion of this Warrant, in whole or in part, upon request of
the holder hereof but at the Company's expense, acknowledge in writing its
continuing obligation to the holder hereof in respect of any rights to which the
holder hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
13. Lost Warrants or Stock Certificates.
The Company covenants to the holder hereof that, upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant or any stock certificate and, in the case of any
loss, theft or destruction, upon receipt of an executed lost securities bond or
indemnity reasonably satisfactory to the Company, or in the case of any such
mutilation upon surrender and cancellation of such Warrant or stock certificate,
the Company will make and deliver a new Warrant or stock certificate, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
14. Descriptive Headings.
The descriptive headings of the several paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
15. Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by, and construed in accordance with, the laws of the
State of California applicable to contracts made and to be performed entirely
within such State, regardless of the law that might be applied under principles
of conflicts of law.
16. Survival of Representations, Warranties and Agreements. Each of the
respective representations and warranties of the Company and the holder hereof
contained herein shall survive the Date of Grant, the exercise or conversion of
this Warrant (or any part hereof) and the termination or expiration of any
rights hereunder. Each of the respective agreements of each of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative. Without limiting the generality
of the foregoing sentence, the registration rights contained in Section 9 above
shall survive the exercise or conversion of this Warrant (or any part hereof)
and the termination or expiration of any other rights hereunder.
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17. Remedies.
In case any one (1) or more of the covenants and agreements contained
in this Warrant shall have been breached, the holders hereof (in the case of a
breach by the Company), or the Company (in the case of a breach by a holder),
may proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
18. Acceptance.
Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
19. No Impairment of Rights.
The Company will not, by amendment of its Charter or through any other
means, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
material impairment.
20. Amendment. This Warrant may be amended by written agreement of the
Company and holders of 65% of the Warrant Shares, collectively on an
as-exercised basis, and such amendment shall be binding on all holders of this
Warrant or Warrant Shares.
[Signature page follows.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on its
behalf by one of its officers thereunto duly authorized.
IMMUNOMEDICS, INC.
By: /s/ David M. Goldenberg
Name: David M. Goldenberg
Title: Chairman and Chief Executive Officer
Address:
Dated: as of December 16, 1999
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EXHIBIT A
NOTICE OF EXERCISE
To: IMMUNOMEDICS, INC.
1. The undersigned hereby elects to purchase _____ shares of Common Stock of
______________________ pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
- ------------------------------
- ------------------------------
(Name)
- ------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation Statement
attached hereto as Schedule 1.
_________________________ (Signature)
__________________(Date)
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
- ------------------------------------------
Date: _________________________
By:
(Warrantholder) _________________________
Name: (Print) ______________________________
Its:
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Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser: _______________________________
Company: IMMUNOMEDICS, INC.
Security: Common Stock
Amount: _____________________________
Date: _____________________________
In connection with the purchase of the above-listed securities (the "Registrable
Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Registrable Securities. The
Purchaser is purchasing the Registrable Securities for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Registrable Securities Act
of 1933, as amended (the "Act").
(b) The Purchaser understands that the Registrable Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Registrable Securities and
Exchange Commission ("SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated solely upon a
present intention to hold these Registrable Securities for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Registrable Securities,
or for a period of one year or any other fixed period in the future.
(c) The Purchaser further understands that the Registrable Securities must be
held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise available. In addition, the Purchaser
understands that the certificate evidencing the Registrable Securities will be
imprinted with the legend referred to in the Warrant under which the Registrable
Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A, promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Registrable Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein.
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(e) The Purchaser further understands that at the time it wishes to sell the
Registrable Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Registrable
Securities under Rule 144 and 144A even if the one-year minimum holding period
had been satisfied.
(f) The Purchaser further understands that in the event all of the requirements
of Rule 144 and 144A are not satisfied, registration under the Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden or proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
Purchaser:___________________
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EXHIBIT 5.1
January 10, 2000
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
Gentlemen and Ladies:
You have requested our opinion, as counsel for Immunomedics, Inc., a
Delaware corporation (the "Company"), in connection with a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933 (the "Act"), filed by the Company with the Securities and Exchange
Commission (the "Commission").
The Registration Statement relates to (a) the offering by a selling
stockholder of up to 75,000 shares (the "Shares") of the Company's common stock,
$.01 par value per share (the "Common Stock"), issuable from time to time, upon
exercise of a warrant granted by the Company to Sutro & Co. Incorporated
("Sutro") and (b) the offering by a group of selling stockholders of up to
2,500,000 Shares purchased from the Company pursuant to a Common Stock Purchase
Agreement
In the preparation of our opinion, we have examined (1) the Restated
Certificate of Incorporation of the Company, as amended to date, (2) the By-Laws
of the Company, in effect on the date hereof, (3) minutes of meetings of the
Company's Board of Directors, as made available to us by executive officers of
the Company, (4) a certificate from an executive officer of the Company, (5) the
Registration Statement, (6) the Common Stock Purchase Agreement, dated as of
December 14, 1999, as amended (the "Agreement") and (7) the form of Sutro's
warrant (the "Warrant"). In our examinations, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals,
the conformity to the originals of all documents submitted to us as certified,
photostatic or conformed copies, and the authenticity of the originals of all
such latter documents.
Based upon such examination, we are of the opinion that (a) the Shares
issuable to Sutro, when issued and delivered in accordance with the terms of the
Warrant, will be validly issued, fully paid and non-assessable and (b) the
Shares issued to the purchasers under the Agreement were validly issued, fully
paid and non-assessable .
We hereby consent to the filing of our opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Sincerely yours,
/s/ Lowenstein Sandler PC
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Immunomedics, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG LLP
Short Hills, New Jersey
January 7, 2000
