<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1999
REGISTRATION STATEMENT NO. 333-76343
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ALLIANCE PHARMACEUTICAL CORP.
(Exact name of registrant as specified in its charter)
NEW YORK 14-1644018
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3040 SCIENCE PARK ROAD
SAN DIEGO, CA 92121
(619) 558-4300
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
DUANE J. ROTH
CHIEF EXECUTIVE OFFICER
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, CA 92121
(619) 558-4300
(Name, address, including zip code, and telephone
number, of agent for service of process)
COPY TO:
Melvin Epstein, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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. [ ]
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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
To Be To Be Price Offering Registration
Registered Registered Per Unit Price Fee
<S> <C> <C> <C> <C>
Common Stock $0.01 par
value 12,000,000(1) $2.72(2) $32,640,000(2) $1,512.32(3)
</TABLE>
(1) This pre-effective amendment registers an additional 2,000,000 shares of
common stock, making the aggregate number of shares of common stock offered
12,000,000.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c).
(3) A registration fee of $7,812 was previously paid in connection with the
initial filing of this registration statement.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 18, 1999
ALLIANCE PHARMACEUTICAL CORP.
12,000,000
SHARES OF COMMON STOCK
------------
Alliance Pharmaceutical Corp. is offering up to 12,000,000 shares of
common stock with this prospectus. Our common stock is listed and traded on the
Nasdaq National Market under the symbol "ALLP." On May 14, 1999, the last
reported sale price of the common stock on the Nasdaq National Market was $3.13
per share.
<TABLE>
<CAPTION>
Per Share Total
------------------------ ---------------------
<S> <C> <C>
Public Offering Price
Placement Fees
Proceeds to Alliance
</TABLE>
The shares of common stock are being offered directly by Alliance.
Cruttenden Roth Incorporated will act as the placement agent in connection with
the offering. Cruttenden Roth has no commitment to buy any of the 12,000,000
shares offered. It is required only to use its best efforts to place the shares.
The offering is being made on a minimum-maximum basis and no shares of common
stock will be sold if at least 6,000,000 shares of common stock are not sold
prior to June 30, 1999. All investor funds received prior to the closing of the
offering will be deposited into escrow with an escrow agent until the closing.
If, for any reason, the offering is terminated any funds received will be
returned promptly.
WE URGE YOU TO READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 5 FOR
A DESCRIPTION OF RISKS ASSOCIATED WITH PURCHASING OUR COMMON STOCK THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE OR PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with different information.
The date of this prospectus is ______ __, 1999.
<PAGE>
RED HERRING LANGUAGE
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission 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 the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary..............................................................................................
Risk Factors....................................................................................................
Incorporation of Certain Documents by Reference.................................................................
Where You Can Find More Information.............................................................................
Use of Proceeds.................................................................................................
Dilution........................................................................................................
Plan of Distribution............................................................................................
Legal Matters...................................................................................................
Experts.........................................................................................................
</TABLE>
NOTE TO READERS OF THIS PROSPECTUS
We were incorporated in 1983 in New York. Our address is 3040 Science
Park Road, San Diego, California 92121. Information contained on our website
does not constitute part of this prospectus.
IMAGENT-R-, LIQUIVENT-R- and FLOGEL-R- are registered trademarks of Alliance.
OXYGENT-TM-, PULMOSPHERES-TM- and RODA-TM- are trademarks of Alliance.
<PAGE>
PROSPECTUS SUMMARY
MANY OF THE MATTERS SET FORTH IN THIS PROSPECTUS CONTAIN
FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN THIS
PROSPECTUS. WE REFER YOU TO CAUTIONARY INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS AND IN OTHER DOCUMENTS WE FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION FROM TIME TO TIME.
THE COMPANY
Alliance Pharmaceutical Corp. is a pharmaceutical research and
development company with three products in late-stage human (clinical)
development, each of which is designed to address a different medical need.
These products are based on our expertise with perfluorochemicals and other
technologies. Perfluorochemicals are man-made chemicals that can dissolve and
carry oxygen throughout the body, including within the lung. Perfluorochemicals
have also been shown to be useful in enhancing ultrasound images.
OXYGENT is a temporary oxygen carrier to reduce or eliminate the need
for human blood transfusions during elective surgeries where substantial blood
loss is common. OXYGENT is a "blood substitute" that uses perfluorochemicals as
raw materials, not human or animal blood. A Phase 3 study is underway in Europe
and an additional Phase 3 study is planned in the U.S. to assess whether the use
of OXYGENT can reduce the need for donor blood in surgical patients. Phase 3
studies are typically the final human studies required prior to requesting
marketing approval from a U.S. or foreign regulatory agency.
LIQUIVENT is a perfluorochemical liquid that is trickled directly into
the lungs of a patient who is being supported by a mechanical ventilator.
LIQUIVENT therapy is expected to reduce the damage resulting from prolonged use
of the ventilator, open up collapsed air sacs, assist in providing oxygen to and
removing carbon dioxide from the lungs, and flush debris from the lungs. We are
currently conducting a Phase 3 clinical study in the U.S., Canada, and Europe to
evaluate the use of LIQUIVENT for the treatment of adult patients with acute
(sudden-onset) lung injury and acute respiratory distress syndrome; however, one
or more additional studies may be required prior to filing a New Drug
Application with the FDA.
IMAGENT is a perfluorochemical-based diagnostic agent intended for use
with ultrasound diagnostic techniques to enhance real-time images of blood flow
in the blood vessels, heart, and other organs. On May 11, 1999 we announced that
two Phase 3 studies in which IMAGENT was evaluated as a contrast agent
demonstrated highly statistically significant improvement in visualization of
the walls of the heart (endocardial border delineation) compared to standard
(non-contrasted) ultrasound imaging.
In addition, we have other products in early development.
PULMOSPHERES are drug-containing hollow, porous particles that are
being developed for delivery of drugs to the lungs via traditional inhalers and
other devices. Laboratory (non-human) studies are being conducted to evaluate
the potential uses of PULMOSPHERES.
FLOGEL is a liquid/gel that is intended to reduce the occurrence of
internal adhesions (scar tissue) in patients undergoing surgeries involving
their internal organs.
1
<PAGE>
RODA is a monitor intended to provide real-time measurements of the
cardiovascular (heart and blood system) and oxygenation status of surgical
patients.
During the past 16 months we resumed responsibility for the development
and cost of OXYGENT and LIQUIVENT due to differences in priorities and clinical
development strategies with our former partners. This forced us to reallocate
our human and capital resources. We intend to seek new partners for both
products, as well as for PULMOSPHERES.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Offering................................................................ 12,000,000 shares
Securities offered...................................................... Common stock, $.01 par value
Shares of common stock outstanding prior to this offering............... 33,242,830 shares (1)
Use of proceeds......................................................... Clinical trials, working capital and
general corporate purposes
</TABLE>
(1) Shares of common stock outstanding as of May 10, 1999; excludes (i)
5,305,910 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $7.72 per share;
(ii) 565,523 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $14.78 per share; and
(iii) a variable amount of common stock (which number varies based on the
price of the common stock) issuable upon the conversion of Series D and
Series E-1 preferred stock.
3
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data for the three years ended June 30,
1998 are derived from the audited consolidated financial statements of Alliance.
The financial data for the nine months ended March 31, 1998 and 1999 are derived
from unaudited financial statements. The unaudited financial statements include
all adjustments, consisting of normal recurring accruals which the Company
considers necessary for a fair presentation of the financial position and
results of operations for such periods.
Operating results for the nine months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the entire year
ending June 30, 1999. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
-------------------------- ---------
OPERATING DATA: 1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total revenues.................... $ 17,323 $ 44,580 $ 21,209 $ 16,144 $ 7,169
Net loss applicable to
common shares
$(23,172) $(19,016) $(33,003) $(23,975) $(43,420)
Net loss per common share
Basic and diluted $ (0.91) $ (0.63) $ (1.04) $ (0.76) $ (1.35)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------ ---------
SELECTED BALANCE SHEET DATA: 1997 1998 1999
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Working capital........................................... $ 62,995 $ 48,730 $ 2,536
Total assets.............................................. 112,013 93,677 59,235
Long-term debt and other.................................. 2,871 8,921 24
Stockholders' equity...................................... 91,331 76,090 38,715
</TABLE>
4
<PAGE>
RISK FACTORS
Investing in our stock involves a high degree of risk. You should
carefully consider the following risk factors and all other information
contained in this prospectus before purchasing our stock. Any of the following
risks could materially adversely affect our business, operating results and
financial condition and could result in a complete loss of your investment.
WE HAVE A HISTORY OF OPERATING LOSSES AND LIMITED PRODUCT REVENUES AND WE MAY
NEVER BECOME PROFITABLE
We have had net operating losses since our inception and we expect such
losses to continue until we receive revenues from product sales. As of March 31,
1999, we had an accumulated deficit of $307.7 million. For the years ended June
30, 1996, 1997 and 1998, we incurred net losses of $23.2 million, $19.0 million
and $33.0 million, respectively. Our net loss for the nine months ended March
31, 1999 was $43.4 million. Substantially all of our revenues to date have come
from sources other than product sales, such as licensing fees, milestone
payments and payments to fund research and development activities under joint
development and license agreements.
WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING WE WILL NEED TO
COMPLETE DEVELOPMENT AND INTRODUCE PRODUCTS
The costs of our current clinical trials are high. We believe that our
existing capital resources, including expected revenues from our Schering
License Agreement for IMAGENT and investments, together with the proceeds from
this offering (assuming we sell at least $18,000,000 of common stock), will
satisfy our capital requirements through December 1999. However, we will need
additional financing to finance our business through at least the year 2000 and
possibly longer. Our future capital requirements will depend on many factors,
including:
- results of our late-stage clinical trials
- progress with pre-clinical testing
- continued scientific progress in our research and development
programs
- the time and cost involved in obtaining regulatory approvals
- changes in existing collaborative relationships
- patent costs
- competing technological and market developments
- the cost of manufacturing scale-up
Accordingly, we cannot estimate the amount that we will require, but we know
that it will be substantial.
5
<PAGE>
WE ARE CURRENTLY IN VIOLATION OF OUR BANK LOAN TERMS
We have an outstanding bank loan in the amount of $13.9 million. That
loan is secured by certain assets, including equipment and machinery. The loan
requires us to have at all times cash, cash equivalents and receivables of at
least $25 million. Our cash, cash equivalents and receivables are below $25
million. Under our agreement, the bank may demand that we pay all of our loan in
full or it may take possession of the assets that secure the loan. If we are
forced to pay off our loan with existing cash, we may have to reduce, delay or
terminate some of our development efforts and would be forced to sell assets,
including technology, to raise capital. The bank has indicated that if we raise
$18 million, it will reduce the cash covenant to $10 million ($5 million of
which will be held by the bank as collateral), take a lien on some of our
patents and otherwise restructure the loan payments to increase principal
payments. The bank is receiving a warrant to purchase 180,000 shares of our
common stock at an exercise price of $2.88 per share.
FAILURE TO LICENSE OUR PRODUCTS COULD SERIOUSLY HINDER OUR ABILITY TO FURTHER
DEVELOP OUR PRODUCTS AND MARKET THEM SUCCESSFULLY
If we do not negotiate acceptable collaborative arrangements for our
principal products, we will lack the funds to further develop them. We do not
have internal marketing and sales capabilities and will need to rely on
collaborative partners to market and sell any products that we may successfully
develop. Even if we find collaborative partners, we may not be able to
completely control the amount and timing of resources our collaborative partners
will devote to these activities. We intend to seek collaborative arrangements
for Oxygent, LIQUIVENT and PULMOSPHERES to help cover the cost of development,
but we do not know whether we will be successful. If we cannot find
collaborative relationships or other sources of financing we may not be able to
continue some of our development programs and would be forced to sell assets,
including technology, to raise capital.
A TERMINATION OF THE SCHERING LICENSE AGREEMENT COULD ADVERSELY AFFECT OUR
RESEARCH, DEVELOPMENT AND, ULTIMATELY, MARKETING OF IMAGENT
We depend on Schering for development and regulatory approvals outside
the United States and for worldwide marketing of IMAGENT. As of December 30,
1998, the Schering license agreement was modified to reduce ongoing development
reimbursement, add new milestone payments and restructure the methods for
calculating royalties. The Schering license agreement may not be terminated
until September 1999; however, thereafter, it may be terminated on one month's
advance notice.
6
<PAGE>
WE ARE IN ARBITRATION WITH A FORMER PARTNER AND AN ADVERSE JUDGMENT COULD
COST MORE THAN $16.8 MILLION
In December 1997, our former partner for LIQUIVENT, Hoechst Marion
Roussel, Inc. (which we refer to as "HMR"), terminated its license agreement
with us. We regained all rights to and responsibilities for the product. In May
1998, HMR asked us to pay it up to $7.5 million, payable in cash or stock. On
September 25, 1998, we received a demand for arbitration from HMR, claiming up
to $16.8 million, plus interest and punitive damages, in connection with the
termination of the HMR license agreement. We have filed a counterclaim against
HMR. We do not believe its claim is valid. We intend to contest HMR's claim and
believe that the ultimate resolution will not have a material adverse effect on
our business. However, if we do not prevail on the claim, an adverse judgment
would take away substantial financial resources from our development programs,
adversely impacting our ability to finance our continuing operations.
IF WE DO NOT OBTAIN GOVERNMENTAL APPROVALS FOR OUR PRODUCTS, WE WILL BE
UNABLE TO MARKET THEM
We will not be able to commercialize our products until we have
acceptable clinical trial results and regulatory approval from the FDA and
foreign regulatory authorities. The FDA and other regulatory authorities require
that the safety and efficacy of a drug be supported by results from adequate and
well-controlled clinical trials before approval for commercial sale. If the
results of the clinical trials of our products do not demonstrate that they are
safe and effective, we will not be able to submit to the FDA a New Drug
Application or other relevant applications for pre-market approval. Further, the
results of preclinical testing and initial clinical trials do not necessarily
predict how safe and effective a product will be when it is evaluated in
large-scale Phase 3 clinical trials. It is possible that unacceptable side
effects may be discovered at any time. A number of companies have suffered
significant setbacks in advanced clinical trials, despite promising results in
earlier trials.
Even if we believe the clinical trials demonstrate the safety and
efficacy of a product, the FDA and other regulatory authorities may not accept
our assessment of the results. The FDA has required other companies involved in
the development of blood substitutes to increase the size of their Phase 3
trials, extending the time and cost to complete the trials. In any case, in
order to demonstrate the safety and efficacy of the products we may have to
conduct additional clinical trials beyond those currently planned. The process
of obtaining regulatory clearances or approvals is costly and time-consuming.
As of the date of this prospectus, we have not agreed with the FDA on
the design for the U.S. Phase 3 clinical trial for OXYGENT.
7
<PAGE>
DELAYS IN THE COMPLETION OF OUR CLINICAL TRIALS COULD INCREASE OUR COSTS
We cannot predict how long our preclinical and clinical trials will
take or whether they will be successful. The rate of completion of the clinical
trials for our products depends on many factors, including obtaining adequate
clinical supplies and the rate of patient recruitment. Patient recruitment is a
function of many factors, including the size of the patient population, the
proximity of patients to clinical sites, and the eligibility criteria for
patients who may enroll in the trial. We may experience increased costs, program
delays, or both, if there are delays in patient enrollment in the clinical
trials.
WE WILL BE UNABLE TO MANUFACTURE OUR PRODUCTS IF WE DO NOT RECEIVE FDA APPROVAL
While we believe that we can produce materials for clinical trials and
the initial market launch for OXYGENT and IMAGENT at our existing San Diego
facilities and for LIQUIVENT at our Otisville, New York facility, we will need
FDA approval in order to do so. We do not know whether the FDA will determine
that our facilities comply with Good Manufacturing Practices. A delay in FDA
approval of our manufacturing facilities would delay the marketing of our
products.
IF WE CANNOT PROTECT OUR PATENTS AND PROPRIETARY TECHNOLOGY WE WILL BE UNABLE TO
SUCCESSFULLY MANUFACTURE AND MARKET OUR PRODUCTS
We believe that our success will depend largely on our ability to
obtain and maintain patent protection for our own inventions, and to license the
use of patents owned by third parties. We have obtained patents covering certain
intermediate and high concentration PFC emulsions, patents related to liquid
ventilation, and patents covering certain stabilized microbubble compositions,
as well as other patents. We have filed, and when appropriate will file, other
patent applications with respect to our products and processes in the United
States and in foreign countries. We cannot assure you, however, that we will
develop any additional products and processes that will be patentable or that
any additional patents will be issued to us. It is possible that any of our
patents or any patents licensed to us may be challenged successfully. It is also
possible that we may unintentionally infringe on patents of third parties, or
that we may have to alter our products or manufacturing processes to take into
account the patents of third parties and this may cause delays in product
development. Further, we cannot assure that we will be able to alter our
products or manufacturing processes to avoid third party patents, in which case
we may have to terminate the development or commercialization of a product or
pay royalties to the holders of the patents. Litigation, which could result in a
substantial cost to us, may be necessary to enforce any patents we own and/or to
determine the scope and validity of others' proprietary rights. We also attempt
to protect our proprietary products and processes by relying on trade secret
laws and non-disclosure and confidentiality agreements with our employees and
certain other persons who have access to our products or processes. It is
possible that others will develop such products or processes independently or
obtain access to such products or processes. Our competitive position may be
affected adversely if others develop or obtain products or processes similar to
ours.
In particular, with respect to ultrasound contrast imaging patents,
there are several companies with issued patents and other patent applications in
process. Many of these patents overlap each other, and it will take several
years to clarify which ones are valid and enforceable. Although we believe we
have the right to manufacture, use and sell IMAGENT once it is approved, it is
possible that we may need to license rights under patents owned by others, and
that such rights may not be available. Other companies may well find that their
current or future activities violate our patents. We believe certain companies
have obtained patents to which they are not entitled under U.S. law, and have
requested
8
<PAGE>
patent interference proceedings in the U.S. Patent Office to resolve those
issues.
WE WILL NOT BE ABLE TO DEVELOP OR MANUFACTURE OUR PRODUCTS IF WE ARE UNABLE
TO OBTAIN THE NECESSARY RAW MATERIALS
Some of the raw materials for our products are available from single
sources. At times, one or more of these raw materials may not be available or
may be available only in limited quantities. Our ability to develop our products
could be materially adversely affected if sufficient supplies of raw materials
are not available. We are currently negotiating with some of these suppliers for
long-term supply contracts for raw materials; however, we do not know whether we
will be able to obtain commitments for a long-term supply of these raw materials
on acceptable terms.
UNFORESEEN TECHNOLOGICAL AND SCIENTIFIC PROBLEMS OR THIRD PARTY DEVELOPMENT
MAY DELAY OR PREVENT MARKETING
We or our collaborative partners may encounter unforeseen technological
or scientific problems, including adverse side effects, which may force us to
abandon or substantially change the plan of development of a specific product or
process. A technological change or product development by others may also have a
significant adverse effect on our operations.
THE LACK OR INADEQUACY OF THIRD-PARTY REIMBURSEMENT FOR OUR PRODUCTS WOULD HAVE
A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS
Our ability to commercialize our products successfully will depend in
part on the extent to which the cost of the products and related treatment will
be reimbursed by government authorities, private health insurers and other
organizations, such as HMOs. Third party payors are increasingly challenging the
prices charged for medical products and services. Also, the trend toward managed
healthcare in the United States, the growth of healthcare organizations such as
HMOs, and legislative proposals to reform healthcare and government insurance
programs could significantly influence the purchase of healthcare services and
products, resulting in lower prices and reducing demand for our products. The
cost containment measures that healthcare providers are instituting and any
healthcare reform could affect our ability to sell our products by not allowing
us to make a profit on sales of products. We cannot assure you that full or
partial reimbursement in the United States or foreign countries will be
available for any of our products. If reimbursements are not available or
sufficient, we may not be able to sell our products. We cannot forecast what
additional legislation or regulation relating to the healthcare industry or
third-party coverage and reimbursement may be enacted in the future, or what
effect the legislation or regulation would have on our business.
MANY OF OUR EXISTING OR POTENTIAL COMPETITORS HAVE SUBSTANTIALLY GREATER
RESOURCES AND MAY BE BETTER EQUIPPED TO DEVELOP, MANUFACTURE AND MARKET PRODUCTS
SIMILAR TO OURS
We may not be able to compete successfully in developing and marketing
our products. There are many pharmaceutical companies, biotechnology companies,
public and private universities, and research organizations actively engaged in
research and development of products that compete with our products. These
companies have more resources and may develop and introduce products and
processes competitive with or superior to ours. In addition, our products and
technologies may be rendered uncompetitive or obsolete by the development of
other technologies or products that have an entirely different approach or means
of accomplishing the same purposes.
9
<PAGE>
OUR PRODUCTS AND THE PROCESSES WE USE COULD EXPOSE ALLIANCE TO SUBSTANTIAL
LIABILITY
Product liability could arise from claims by users of our products or
of products manufactured by processes we developed, or from manufacturers or
others selling our products, either directly or as a component of other
products. Our product liability insurance coverage may not be adequate.
WE MAY ISSUE ADDITIONAL PREFERRED STOCK, THE TERMS OF WHICH COULD ADVERSELY
AFFECT OUR COMMON STOCK
Our Board of Directors has the authority to issue up to an additional
2,947,837 shares of preferred stock and may determine the rights, preferences,
privileges and restrictions of such shares without any further vote or action by
the shareholders. The possible issuance of preferred stock could have the effect
of delaying, deferring or preventing a change in control of Alliance. The
conversion and other features of any series of preferred stock may also limit
the price that investors might be willing to pay in the future for shares of our
common stock.
THE SUBSTANTIAL NUMBER OF OUR SHARES THAT ARE ELIGIBLE FOR FUTURE SALE COULD
ADVERSELY AFFECT OUR ABILITY TO FIND NEW EQUITY INVESTORS
As of May 10, 1999, 5,871,433 shares of our common stock (or 15% of
the total number of shares outstanding on a fully diluted basis) were issuable
upon the exercise of outstanding options and warrants. Additional shares may be
issued upon the conversion of preferred stock. We also intend to issue new
convertible notes and warrants concurrently with the closing of this offering
and will use the proceeds to repurchase the Series E-1 Preferred Stock. The bank
is receiving a warrant to purchase 180,000 shares of our common stock at an
exercise price of $2.88 per share. Also, over a period of approximately four
years, we may issue an indeterminate number of additional shares of our common
stock to the former shareholders of MDV Technologies, Inc., a company we
acquired in 1996. The existence of such warrants, options and convertible
securities, as well as certain registration rights, may adversely affect the
terms on which we may obtain additional equity financing and the aftermarket
trading of our stock. The holders of the outstanding warrants and options are
likely to exercise their securities at a time when we would otherwise be able to
obtain capital on terms more favorable than those provided by the exercise or
conversion prices thereof.
IF REMAINING SHARES OF OUR SERIES E-1 PREFERRED STOCK ARE CONVERTED OUR COMMON
STOCK COULD BE DELISTED FROM THE NASDAQ STOCK MARKET
In August 1998, we raised net proceeds of $5.6 million through the
issuance of Series E-1 Preferred Stock that is convertible into shares of our
common stock based on future trading prices of our common stock. We expect
that all or substantially all of the shares of Series E-1 Convertible
Preferred Stock will be converted at $2.46 per share or will be repurchased
by us concurrently with or prior to the completion of this offer. However, if
shares of Series E-1 Preferred Stock remain outstanding and the holders
convert those shares when the trading price of our common stock is low, the
resulting issuance of a large number of shares of our common stock could
cause our shares to be
10
<PAGE>
delisted from the Nasdaq Stock Market.
IF OUR COMPUTER SYSTEMS OR THE COMPUTER SYSTEMS OF ANY OF OUR SUPPLIERS OR
COLLABORATIVE PARTNERS ARE NOT YEAR 2000 COMPLIANT OUR OPERATIONS COULD BE
INTERRUPTED
Many currently installed operating systems and software products are
coded only to accept two digit entries in the date code field. Consequently,
they are unable to distinguish 21st century dates from 20th century dates. As a
result, the computer systems and software used by many companies may need to be
upgraded to prevent problems that would result from misreading the entries in
the date code field. Failure to correct systems to become "Year 2000 compliant"
may result in systems failures or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
data, send invoices or engage in similar normal business activities.
We are currently reviewing the potential impact of Year 2000 issues on
our business and attempting to mitigate or eliminate those issues. The primary
risks to us are those of business continuity. We are determining which equipment
we own needs to be replaced. We have also begun communicating with our
significant suppliers, financial institutions, insurance companies and other
parties that provide us significant services, including clinical trial sites, to
determine whether they anticipate Year 2000 problems in their operations. If we
or our significant vendors or suppliers are unable to become Year 2000 compliant
in time, this could delay our product development efforts and have a material
adverse effect on our ability to continue our operations.
11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements regarding our
plans, expectations, estimates and beliefs. Our actual results could differ
materially from those discussed in, or implied by, these forward-looking
statements. Forward-looking statements are identified by words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may," and other
similar expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. Forward-looking statements in this document
include, but are not necessarily limited to, those relating to:
- our ability to raise additional capital when needed
- obtaining, or our ability to obtain, approval by the FDA
and other regulatory authorities for certain products
- our ability or capacity to manufacture, market and distribute
our products
- uncertainty of market acceptance of our products
- our ability to obtain patents for our products and
technologies
- relationships with and abilities of important suppliers
and business partners
- the development of new products and enhanced versions of
existing products
Factors that cause actual results or conditions to differ from those anticipated
by these and other forward-looking statements include those more fully described
in the risk factors section and elsewhere in this prospectus. We are not
obligated to update or revise these forward-looking statements to reflect new
events or circumstances.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any documents we file at
the SEC's public reference room in Washington, D.C. at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or in the public reference rooms located in New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information we
later file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act:
1. Annual Report on Form 10-K/A for the fiscal year ended June 30,
1998;
2. Quarterly Report on Form 10-Q for the quarters ended September 30,
1998, December 31, 1998 and March 31, 1999; and
3. Registration Statement on Form 8-A, dated October 25, 1984.
12
<PAGE>
We will provide without charge to any person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any or all of
the documents which have been incorporated by reference in this prospectus.
Requests for copies should be directed to Lloyd Rowland, Secretary and General
Counsel, Alliance Pharmaceutical Corp., 3040 Science Park Road, San Diego,
California 92121, telephone (619) 558-4300.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act, with respect to the shares
offered in this prospectus. This prospectus does not contain all the information
set forth in the Registration Statement and exhibits thereto, certain portions
of which have been omitted as permitted by the rules and regulations of the SEC.
Copies of the Registration Statement (including the omitted portions) are
available from the SEC upon payment of prescribed rates. For further
information, reference is made to the Registration Statement and the exhibits
filed therewith. Statements contained in this prospectus or the Registration
Statement relating to the contents of any contract or other document filed as an
exhibit to the Registration Statement are not necessarily complete, and in each
instance are qualified in all respects by the full text of such contract or
document.
You should rely only on the information or representations provided in
this prospectus or incorporated by reference. We have not authorized anyone else
to provide you with different information. The selling stockholders have agreed
not to make an offer of the shares of our common stock in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the cover page.
13
<PAGE>
USE OF PROCEEDS
We plan to use the majority of the net proceeds from this offering to
fund late-stage clinical trials of OXYGENT and LIQUIVENT and to prepare a New
Drug Application filing package for IMAGENT. The balance of the net proceeds
will be used for working capital and other general corporate purposes and
limited research and development for PULMOSPHERES. The amounts actually expended
for each purpose and the timing of such expenditures may vary significantly
depending upon various factors including, but not limited to, the results and
timing of our clinical development, the launch of new products, governmental or
regulatory changes, the role of corporate partners and technological advances
and competition by others. In addition, there can be no assurance that any
product developed or introduced by us will be commercialized or that funds will
be sufficient to develop successful products.
We expect to use all of the net proceeds from this offering for the
purposes described above, and we will require substantial additional funds in
the future in order to continue our development programs and to manufacture and
market any future products. We anticipate that existing cash balances and
interest income thereon, together with the net proceeds of this offering will be
adequate to satisfy our capital requirements through December 1999 (assuming we
raise at least $18,000,000). Pending such uses, we intend to invest the net
proceeds of this offering in short-term, investment grade securities.
We also expect to privately place up to $2.2 million principal amount
of 6% convertible subordinated notes due 2002 and warrants to purchase up to
366,667 shares of common stock for an aggregate purchase price of approximately
$2.2 million. The conversion price of the notes will be the lower of $2 per
share and the public offering price; the exercise price of the warrants will be
the lower of $2.50 per share and 125% of the public offering price. We will use
the proceeds from this private placement to fund the repurchase of up to 20,707
of the outstanding shares of the Series E-1 Preferred Stock. All or
substantially all of the remaining shares of Series E-1 Preferred Stock will be
immediately converted at a conversion price of $2.46 per share. We expect the
repurchase and conversion of the Series E-1 Preferred Stock to occur in the near
future.
14
<PAGE>
DILUTION
As of March 31, 1999, the net tangible book value applicable to common
shareholders of Alliance was approximately $13.8 million, or $.42 per share.
"Net tangible book value per share" represents the amount of total tangible
assets of the Company reduced by the total liabilities and total liquidation
preferences of preferred stock, and divided by the number of shares of common
stock outstanding. After giving effect to the sale of all the 12,000,000 shares
of common stock offered in this offering at an assumed public offering price of
$3.13 per share, the pro forma net tangible book value of the common stock as of
March 31, 1999 (after deducting the estimated placement fees and estimated
expenses of this offering) would have been approximately $48.4 million, or $1.07
per share. This represents an immediate increase in net tangible book value of
$.65 per share to existing shareholders and an immediate dilution of $2.06 per
share to new investors purchasing shares of common stock in this offering.
"Dilution per share" represents the difference between the price per share of
common stock paid by the new investors in this offering and the net tangible
book value per share at March 31, 1999 as adjusted to give effect to the sale of
12,000,000 shares in this offering.
The following table illustrates the dilution per share taking into
account estimated expenses of this offering(1):
<TABLE>
<S> <C>
Public offering price per share $3.13
- ---------------------------------------------------------------------------------------
Net tangible book value per share as of December 31, 1998 $0.42
- ---------------------------------------------------------------------------------------
Increase to present shareholders attributable to this offering $0.65
- ---------------------------------------------------------------------------------------
Pro forma net tangible book value per share after this offering $1.07
- ---------------------------------------------------------------------------------------
Dilution to investors in this offering (2) $2.06
- ---------------------------------------------------------------------------------------
</TABLE>
(1) For purposes of calculating expenses we estimated the placement agent's fee
at an average of 7.5% of the proceeds received.
(2) If 52,163 shares of Series E-1 Preferred Stock are converted into common
stock prior to this offering, the net tangible book value per share of common
stock would be $1.11 and the related dilution per share of common stock to new
investors would be $2.02.
To the extent fewer than 12,000,000 shares are sold in this offering, the
dilution to new investors would be increased.
15
<PAGE>
PLAN OF DISTRIBUTION
We cannot be certain that we will be able to sell all of the shares
offered, and it is possible that we will close this offering for less than the
12,000,000 shares being offered.
All investor funds will be deposited into an escrow account established
on the investors' behalf pending effectiveness of the registration statement and
issuance of the shares. No investor funds may be accepted by us until the
registration statement is declared effective. We will deposit the shares with
the Depository Trust Company upon receiving a notice from the escrow agent. The
shares will then be credited to the respective accounts of the investors.
The offering is being made on a minimum-maximum basis and no shares of
common stock will be sold if at least 6,000,000 shares are not sold prior to
June 30, 1999. All investors funds received prior to the closing of the offering
will be deposited into escrow with an escrow agent until the closing. If, for
any reason, the offering is terminated, then all funds that were deposited into
escrow will be returned to investors.
Cruttenden Roth Incorporated has agreed to act as placement agent in
connection with the offering and will use its best efforts to place the shares.
Cruttenden Roth has no obligation to buy any shares in the offering.
We have agreed to pay Cruttenden Roth a fee of 2% of the proceeds we
receive from existing shareholders who purchase shares in this offering and 8%
of the proceeds we receive from new investors in this offering. In addition, we
will issue to Cruttenden Roth at the closing of the offering, warrants to
purchase common stock in an amount up to 10% of the shares of common stock sold
in this offering to investors solicited by Cruttenden Roth. The warrants will be
exercisable for a period of five years from the closing of the offering with an
exercise price equal to 120% of the public offering price per share. We also
agreed to reimburse Cruttenden Roth for its expenses that it incurs in
connection with the offering and to indemnify Cruttenden Roth against certain
liabilities under the Securities Act. The Chairman and Chief Executive Officer
of Cruttenden Roth is the brother of both the President and the Chief Executive
Officer of Alliance.
LEGAL MATTERS
The legality of the issuance of the shares of common stock offered
hereby will be passed upon for Alliance by Stroock & Stroock & Lavan LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10K/A for the year
ended June 30, 1998, as set forth in their report (which contains an explanatory
paragraph describing conditions that raise substantial doubt about the Company's
ability to continue as a going concern as described in Note 1 to the
consolidated financial statements), which is incorporated by reference in this
prospectus and elsewhere in the registration statement. Our financial statements
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering, all of which
will be borne by the Registrant, are as follows:
<TABLE>
<S> <C>
SEC Registration Fee.................................................................... $9,552
Blue Sky Fees and Expenses.............................................................. 5,000
Legal Fees and Expenses................................................................. 30,000
Accounting Fees and Expenses............................................................ 15,000
Miscellaneous........................................................................... 40,448
Total................................................................................. $100,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Article VI of the By-Laws of the Company (filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989) and to Sections 721-727 of the New York Business
Corporation Law, which, among other things and subject to certain conditions,
authorize the Company to indemnify each of its officers and directors against
certain liabilities and expenses incurred by such persons in connection with
claims made by reason of their being such officers or directors.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Exhibits
<TABLE>
<S> <C>
1.1 Form of Placement Agency Agreement
1.2 Form of Escrow Agreement
5. Opinion of Stroock & Stroock & Lavan, counsel for Registrant.
23.(a) Consent of Stroock & Stroock & Lavan (included in Exhibit 5
hereof).
(b) Consent of Ernst & Young LLP, Independent Auditors.
24. Power of Attorney.*
- ---------
</TABLE>
* Previously filed
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
17
<PAGE>
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by
Section 10(c)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
PROVIDED, HOWEVER, that paragraphs (d)(1)(i) and (d)(1)(ii) do
not apply if the registration statement is on Form S-3, Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities and Exchange Act of 1934 that are
incorporated by reference in the registration statement.
18
<PAGE>
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of San Diego, State of California, on May 17, 1999.
ALLIANCE PHARMACEUTICAL CORP.
(Registrant)
Date: May 17, 1999 By: /s/ Theodore D. Roth
------------------------------------
Theodore D. Roth
President and Chief Operating Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
<S> <C> <C>
* Chairman and Chief Executive Officer May 17, 1999
- --------------------------------
Duane J. Roth
* Director, President and Chief Operating May 17, 1999
- -------------------------------- Officer
Theodore D. Roth
* Chief Financial Officer, Treasurer and May 17, 1999
- -------------------------------- Chief Accounting Officer
Tim T. Hart
* Director May 17, 1999
- --------------------------------
Pedro Cuatrecasas, M.D.
* Director May 17, 1999
- --------------------------------
Carroll O. Johnson
* Director May 17, 1999
- --------------------------------
Stephen M. McGrath
* Director May 17, 1999
- ---------------------------------
Helen M. Ranney, M.D.
* Director May 17, 1999
- ---------------------------------
Thomas F. Zuck, M.D.
* Director May 17, 1999
- ---------------------------------
Donald E. O'Neill
* Director May 17, 1999
- ---------------------------------
Jean G. Riess, Ph.D.
*by: /S/ THEODORE D. ROTH
-----------------------------
Theodore D. Roth
Attorney-in-Fact
</TABLE>
20
<PAGE>
EXHIBIT 1.1
12,000,000 SHARES
ALLIANCE PHARMACEUTICAL CORP.
COMMON STOCK
PLACEMENT AGENCY AGREEMENT
___________, 1999
Cruttenden Roth Incorporated
4350 La Jolla Village Drive, Suite 220
San Diego, CA 92122
Ladies and Gentlemen:
Alliance Pharmaceutical Corp., a New York corporation (the "Company"),
proposes to issue and sell (the "Offering") up to an aggregate of 12,000,000
shares (the "Shares") of common stock, par value $0.01 per share (the "Common
Stock"), to selected investors (collectively, "Investors"). The Company desires
to engage you as its placement agent (the "Placement Agent") in connection with
the Offering.
The Company hereby confirms its agreements with the Placement Agent as
follows:
1. AGREEMENT TO ACT AS PLACEMENT AGENT. On the basis of the
representations, warranties and agreements of the Company herein contained
and subject to all the terms and conditions of this Agreement, the Placement
Agent agrees to act as the Company's exclusive placement agent, on a best
efforts basis, in connection with the issuance and sale by the Company of the
Shares to Investors. The Company shall pay to the Placement Agent 2% of the
proceeds received by the Company from the sale of Shares in the Offering to
Investors who are existing stockholders of the Company and 8% of the proceeds
received by the Company from the sale of the Shares in the Offering to other
Investors, and the Company will issue to the Placement Agent a warrant to
purchase up to 10% of the number of shares sold in the Offering with an
exercise price equal to 120% of the purchase price of the Shares sold in the
Offering. The Company will also reimburse the Placement Agent for certain
out-of-pocket expenses up to a maximum of $_______ in accordance with Section
5 of this Agreement.
2. DELIVERY AND PAYMENT. On or prior to the Effective Date (as
defined below), the Company, the Placement Agent and City National Bank, as
escrow agent (the "Escrow Agent"), shall enter into an escrow agreement in
customary form mutually acceptable to the Company, the Placement Agent and
the Escrow Agent (the "Escrow Agreement"), pursuant to which an escrow
account will be established, at the Company's expense, for the benefit of
Investors (the "Escrow Account"). The Escrow Agreement will provide that,
prior to the Closing Date, (i) each Investor will deposit in the Escrow
Account an amount equal to the price per Share multiplied by the number of
Shares purchased by it, and (ii) the Escrow Agent will notify the Company and
the
1.
<PAGE>
Placement Agent in writing whether such Investors have deposited in the
Escrow Account funds in an amount which shall equal the proceeds of the sale
of not fewer than 6,000,000 of the Shares offered in the Offering (the
"Requisite Funds"). At 9:00 a.m., San Diego, California time, on June 30,
1999, or such other date (which shall not be later than September 1, 1999) as
may be agreed upon by the Company and the Placement Agent (such date is
hereinafter referred to as the "Closing Date"), the Escrow Agent will release
the Requisite Funds from the Escrow Account for collection by the Company and
the Placement Agent as provided in the Escrow Agreement and the Company shall
deliver the Shares to Investors, which delivery may be made through the
facilities of the Depository Trust Company. The closing of the Offering (the
"Closing") shall take place at the offices of the Company or such other
location as the Placement Agent and the Company shall agree. All actions
taken at the Closing shall be deemed to have occurred simultaneously.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Placement Agent as follows:
(a) REGISTRATION STATEMENT. A registration statement on Form S-3
(File No. 333-76343) under the Securities Act of 1933 as amended (the
"Securities Act"), with respect to the Shares, including a form of prospectus
subject to completion, has been prepared by the Company in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder (the "Rules
and Regulations"). Such registration statement has been filed with the
Commission under the Securities Act, and one or more amendments to such
registration statement (including any post-effective amendment thereto and
any registration statement filed under Rule 462(b) of the Commission relating
thereto) may also have been so filed. After the execution of this Agreement,
the Company shall file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the Commission
to be effective under the Securities Act, a prospectus in the form most
recently included in an amendment to such registration statement filed with
the Commission (or, if no such amendment shall have been filed, in such
registration statement), with such insertions and changes as are required by
Rule 430A under the Securities Act or permitted by Rule 424(b) under the
Securities Act as shall have been provided to and approved by the Placement
Agent prior to the filing thereof, or (ii) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Securities Act, an amendment to such registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Placement Agent prior to the filing thereof.
As used in this Agreement, the term "Registration Statement" shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (the "Effective Date"), shall
also mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement). The
term Prospectus as used in this Agreement shall mean the prospectus relating to
the Shares first filed with the Commission pursuant to Rule 424(b) and
2.
<PAGE>
Rule 430A (or if no such filing is required, as included in the Registration
Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the
filing with the Commission of such supplement or the effectiveness of such
amendment) such prospectus as so supplemented or amended. The term
Preliminary Prospectus as used in this Agreement shall mean each preliminary
prospectus included in such registration statement prior to the time it
becomes effective. Any reference to the Registration Statement or the
Prospectus shall be deemed to refer to and include the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 under the Securities
Act, as of the date of the Registration Statement or the Prospectus, as the
case may be, and any reference to any amendment or supplement to the
Registration Statement or the Prospectus shall be deemed to refer to and
include any documents filed after such date under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which, upon filing, are
incorporated by reference therein, as required by paragraph (b) of Item 12 of
Form S-3. As used in this Agreement, the term "Incorporated Documents" means
the documents which at the time are incorporated by reference in the
Registration Statement, the Prospectus or any amendment or supplement thereto.
(b) COMPLIANCE. Neither the Commission nor any state securities
commission has issued any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or threatened to institute any
proceedings with respect to such an order. When any Preliminary Prospectus
was filed with the Commission it (i) contained all statements required to be
stated therein in accordance with, and complied in all material respects with
the requirements of, the Securities Act and the Rules and Regulations and
(ii) did not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. When
the Registration Statement or any amendment thereto was or is declared
effective, it (A) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Securities Act and the Rules
and Regulations and (B) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus and when any amendment
or supplement thereto is filed with the Commission pursuant to Rule 424(b)
(or, if the Prospectus or such amendment or supplement is not required to be
so filed, when the Registration Statement and when any amendment thereto
containing such amendment or supplement to the Prospectus was or is declared
effective) and at all times subsequent thereto up to and including the
Closing Date (as defined in Section 2 hereof), the Prospectus, as amended or
supplemented at any such time, (I) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
in all material respects with the requirements of, the Securities Act and the
Rules and Regulations and (II) did not or will not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The foregoing provisions of this
paragraph (b) shall not apply to statements or omissions made in any
Preliminary Prospectus which have been corrected in a subsequent Preliminary
Prospectus or the Prospectus or to statements or omissions made in any
Preliminary Prospectus, the Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto in reliance upon,
and in conformity with, information furnished in writing to the Company by
the Placement Agent expressly for use therein. The Company has filed in a
timely manner all documents that the Company was required to file with the
Commission under Sections 13, 14(a)
3.
<PAGE>
and 15(d) of the Exchange Act during the twelve (12) months preceding the
filing date of the Registration Statement and prior to the Closing Date. As
of their respective filing dates (or, if amended, when amended), the
Incorporated Documents filed by the Company with the Commission complied with
the requirements of the Exchange Act. The Company currently and at the date
of filing of the Registration Statement satisfied the requirements for the
use of Form S-3 under the Securities Act.
(c) ORGANIZATION AND STANDING. The Company and each of its
subsidiaries is duly incorporated and validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation with
full power and authority (corporate and other) to own, lease and operate its
properties and conduct its current business as described in the Registration
Statement; the Company and each of its subsidiaries is duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing is not reasonably likely to have a material
adverse effect on the condition (financial or otherwise), operations,
business or business prospects of the Company and its subsidiaries taken as a
whole (hereinafter, a "Material Adverse Effect"); no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification; except as described in the Registration Statement, the Company
and each of its subsidiaries is in possession of and operating in compliance
with all authorizations, licenses, certificates, consents, orders and permits
from federal, state and other regulatory authorities, all of which are valid
and in full force and effect, except where the failure to possess or be in
compliance with any of the foregoing or where the failure of any of the
foregoing to be valid or in full force and effect, is not reasonably likely
to have a Material Adverse Effect. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other
than the subsidiaries described in the Registration Statement.
(d) CORPORATE POWER; AUTHORIZATION. The Company has full legal
right, power and authority to enter into this Agreement and to perform the
transactions to be performed by it, or contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company (assuming due
authorization, execution and delivery by each of the other parties hereto and
thereto) and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles. The making, execution and performance of this
Agreement by the Company and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, (i) any bond, debenture, note or other evidence of indebtedness, or
under any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the
Company is a party or by which its properties may be bound, (ii) the
Certificate of Incorporation or bylaws of the Company or (iii) any law,
order, rule, regulation, writ, injunction, judgment or decree of any court,
administrative agency, regulatory body, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or its
properties, except in the case of (i) and (iii) for any conflict, breach,
violation or default which is not reasonably likely to have a Material
Adverse Effect.
4.
<PAGE>
(e) FINANCIAL STATEMENTS. The consolidated financial statements
of the Company and its subsidiaries included in the Registration Statement
(the "Financial Statements") comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto. The Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently
applied ("GAAP") and fairly present the financial position of the Company and
its subsidiaries at the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring adjustments and the absence of complete
footnotes). Except as and to the extent reflected in the Financial
Statements, neither the Company nor any of its subsidiaries had, as of the
date of the Financial Statements, any liabilities or obligations (other than
obligations of continued performance under contracts and other commitments
and arrangements entered into in the ordinary course of business) which GAAP
would require the Company to reflect in the Financial Statements. Except as
otherwise disclosed in the Registration Statement, there have not been any
changes in the assets, liabilities, financial condition or operations of the
Company or its subsidiaries from that reflected in the Financial Statements,
except in the ordinary course of business (which in the aggregate are not
material) and except for continuing operating losses that have not exceeded
$_______________ from the most recent date of such financial statements to
the date hereof, and changes in the ordinary course of business that have not
had a Material Adverse Effect.
(f) INTERNAL CONTROLS. The Company and each of its subsidiaries
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles 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 existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(g) PROPERTIES. Except as set forth in the Registration
Statement, (i) the Company or one of its subsidiaries has good title to all
properties and assets described in the Registration Statement as owned by any
of them, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest, other than as would not have a Material Adverse
Effect, (ii) the agreements to which the Company or any of its subsidiaries
is a party described in the Registration Statement are valid agreements,
enforceable by the Company or its subsidiary, as the case may be, except as
the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and, to the
Company's knowledge, the other contracting party or parties thereto are not
in material breach or material default under any of such agreements, and
(iii) the Company or one of its subsidiaries has valid and enforceable leases
for all properties described in the Registration Statement as leased by it,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
Except as set forth in the Registration Statement, the Company and its
subsidiaries own or lease all such properties as are necessary to the
Company's operations as now conducted.
5.
<PAGE>
(h) CAPITALIZATION. All outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid
and nonassessable, have been issued in compliance with all applicable federal
and state securities laws, and were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities. The Shares have been duly authorized for issuance and sale to the
Investors pursuant to the Registration Statement and this Agreement, and,
when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly issued
and fully paid and nonassessable, and will be sold free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest. No
preemptive right, co-sale right, registration right, right of first refusal
or other similar right of shareholders exists with respect to any of the
Shares or the issuance and sale thereof other than those that have been
satisfied or expressly waived prior to the date hereof and those that will
automatically expire upon and will not apply to the consummation of the
transactions contemplated on or before the Closing. No further approval or
authorization of any shareholder or the Board of Directors of the Company is
required for the issuance and sale or transfer of the Shares. Except as
disclosed in the Registration Statement and the Financial Statements, and the
related notes thereto included in the Registration Statement, and subject to
the applicable anti-dilution provisions of securities described in the
Registration Statement, the Company has no outstanding options to purchase,
or any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations.
(i) LITIGATION. Except as described in the Registration
Statement, there is not pending or, to the Company's knowledge, threatened,
any action, suit, claim or proceeding against the Company, any of its
subsidiaries, or any of their respective officers, properties, assets or
rights before any court, administrative agency, regulatory body, government
or governmental agency or body, domestic or foreign, having jurisdiction over
the Company, any of its subsidiaries, or any of their respective officers,
properties, which (i) is reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect or might materially and adversely affect
the Company's properties, assets or rights, (ii) is reasonably likely to
prevent consummation of the transactions contemplated hereby or (iii) is
required to be disclosed in the Registration Statement (as of the date
hereof) and is not so disclosed in the Registration Statement. There are no
agreements, contracts, leases or documents of the Company or any of its
subsidiaries of a character required to be described or referred to in the
Registration Statement (or in any Incorporated Document, or that must be
filed as an exhibit to the Registration Statement by the Securities Act or
the Rules and Regulations thereunder), as of the date hereof, which have not
been accurately described in all material respects in the Registration
Statement or filed as an exhibit to the Registration Statement or an
Incorporated Document. Neither the Company nor any of its subsidiaries is a
party or subject to the provisions of any injunction, judgment, decree or
order of any court, regulatory body, administrative agency, government or
governmental agency or body domestic or foreign, that could reasonably be
expected to have a Material Adverse Effect. The Company and each of its
subsidiaries has conducted and is conducting its business in compliance with
all applicable federal, state, local and foreign statutes, laws, rules,
regulations, ordinances, codes, decisions, decrees, directives and orders,
except where the failure to do so would not reasonably be likely, singly or
in the aggregate, to have a Material Adverse Effect.
6.
<PAGE>
(j) LISTED SHARES. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and is approved for quotation on the
Nasdaq National Market (the "NMS"). The Company has taken no action designed
to, or likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or delisting the Common Stock from the
NMS, nor has the Company received any notification that the Commission or
Nasdaq is contemplating terminating such registration or listing.
(k) INTELLECTUAL PROPERTY.
(i) To the best of the Company's knowledge and except as
disclosed in the Registration Statement, (i) the Company and each of its
subsidiaries has good title to and ownership of or licensed rights to, free
and clear of all liens, claims and encumbrances of any nature, all patents,
patent rights, patent applications, know-how, information, proprietary rights
and processes (collectively, the "Intellectual Property") to conduct the
business of the Company as described in the Registration Statement, and (ii)
the conduct by the Company and its subsidiaries of their businesses in
connection with the Intellectual Property neither conflicts with or
constitutes, or is expected to conflict with or constitute, an infringement
of the rights of others.
(ii) To the best of the Company's knowledge, the Company has
sufficient title to and ownership of, or license rights to, or has applied
for, all patents, trademarks, service marks, trade names, copyrights and
information, proprietary rights and processes necessary to the proper conduct
of its business as described in the Registration Statement.
(iii) The Company has not received any communications
alleging that, and has no knowledge that the Company has violated or, by
conducting its business, would infringe or violate any of the patents,
trademarks, service marks, trade names, copyrights, proprietary rights or
processes of any other person or entity.
(l) NO CHANGE. Subsequent to the respective dates as of which
information is given in the Registration Statement (except as disclosed
therein), there has not been (i) any transaction that is material to the
Company, (ii) any obligation, direct or contingent, incurred by the Company
or any of its subsidiaries, except obligations incurred in the ordinary
course of business, (iii) any change in the capital stock or outstanding
indebtedness of the Company or any of its subsidiaries, except outstanding
trade credit and obligations incurred in the ordinary course consistent with
past practices, (iv) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company or any of its subsidiaries, (v)
any default in the payment of principal of or interest on any outstanding
debt obligations, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained
or will have been sustained which has a Material Adverse Effect.
(m) NO DEFAULTS. Neither the Company nor any of its subsidiaries
is (a) in violation of its Certificate of Incorporation or bylaws or (b),
except as disclosed in the Registration Statement, in default (upon notice or
lapse of time or both) in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture, note or
other evidence of indebtedness, or in any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which it is a
7.
<PAGE>
party or by which its properties may be bound, or (c) in violation of any
law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company, any of its subsidiaries or their properties
except in the case of (b) or (c) for any default or violation not reasonably
likely to have a Material Adverse Effect.
(n) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement ("Consents") except for (a) such
Consents which are not material, (b) compliance with the securities and Blue
Sky laws in the states and other jurisdictions in which Shares are offered
and/or sold, which compliance will be effected in accordance with such laws,
(c) Consents required by the NMS and the SEC, and (d) the effectiveness of
the Registration Statement. The Company has not been advised, and has no
reason to believe, that either it or any of its subsidiaries is not
conducting business in compliance in all material respects with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including but not limited to, all applicable federal,
state, provincial and local environmental laws and regulations, except for
any failure to comply which is not reasonably likely to have a Material
Adverse Effect.
(o) LABOR; EMPLOYEES.
(i) No labor disturbance by the employees of the Company or
any of its subsidiaries exists or, to the Company's knowledge, is imminent.
The Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or any of its subsidiaries' principal suppliers,
subcontractors, authorized dealers or international distributors that is
reasonably likely to result in a Material Adverse Effect. No collective
bargaining agreement exists with any of the Company's or any of its
subsidiaries' employees and, to the Company's knowledge, no such agreement is
imminent.
(ii) If any employee of the Company or any of its
subsidiaries has entered into any non-competition, non-disclosure,
confidentiality or other similar agreement with any party other than the
Company or its subsidiaries, to the Company's knowledge, such employee is
neither in violation thereof nor is expected to be in violation thereof as a
result of the business conducted or expected to be conducted by the Company
or any of its subsidiaries as described in the Registration Statement or such
person's performance of his obligations to the Company or any of its
subsidiaries. To the Company's knowledge, no consultant or scientific advisor
of the Company or any of its subsidiaries is in violation of any
non-competition, non-disclosure, confidentiality or similar agreement between
such consultant or scientific advisor and any party other than the Company or
any of its subsidiaries. Every consultant and scientific advisor
(collectively, "Consultants") engaged by or on behalf of the Company or any
of its subsidiaries to render services for the Company or any of its
subsidiaries has entered into an agreement with the Company or its
subsidiaries providing for terms and conditions of non-disclosure and
confidentiality in connection with such services ("Consulting Agreements").
Assuming due authorization, execution and delivery of the Consulting
Agreements, the Consulting Agreements are legal, valid, binding and
enforceable instruments of the Consultants.
8.
<PAGE>
(p) TAXES. The Company and each of its subsidiaries have timely
filed all necessary federal, state and foreign income and franchise tax
returns and have paid all taxes shown thereon as due, and there is no tax
deficiency that has been or, to the Company's knowledge, that might be
asserted against the Company that is reasonably likely to have a Material
Adverse Effect. All tax liabilities are adequately provided for on the books
of the Company.
(q) INSURANCE. The Company and its subsidiaries maintain
insurance with insurers of recognized financial responsibility of the types
and in the amounts generally deemed prudent for its business and consistent
with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and
personal property owned or leased by the Company or its subsidiaries against
theft, damage, destruction, acts of vandalism, products liability, errors and
omissions, and all other risks customarily insured against, all of which
insurance is in full force and effect. The Company has not been refused any
insurance coverage sought or applied for; and the Company does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
(r) INVESTMENT COMPANY ACT. The Company has been advised
concerning the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations thereunder, and is not, and intends in the
future to conduct its and its subsidiaries' affairs in such a manner as to
ensure that it is not and will not become, an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
1940 Act and such rules and regulations.
(s) NO ILLEGAL CONTRIBUTIONS. Neither the Company nor any of its
subsidiaries has at any time during the last five (5) years (i) made any
unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment
to any federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(t) NO MANIPULATION. Neither the Company nor any of its
subsidiaries has taken, and neither the Company nor any of its subsidiaries
will take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(u) TRANSACTIONS WITH AFFILIATES. There are no outstanding loans,
advances (except normal advances for business expenses in the ordinary course
of business) or guarantees of indebtedness by the Company or any of its
subsidiaries to or for the benefit of any of the officers or directors of the
Company or any of its subsidiaries or any shareholder who owns beneficially
more than five percent (5%) of the Common Shares of the Company or any of the
members of the families of any of them, except as disclosed in the
Registration Statement. No relationship, direct or indirect, exists between
or among the Company or any of its subsidiaries on the one hand and the
directors, officers, shareholders, customers or suppliers of the Company or
any of its subsidiaries on the other hand, that is required by the Securities
Act or the Exchange
9.
<PAGE>
Act or the Rules and Regulations promulgated thereunder to be described in
the Registration Statement or any Incorporated Documents that is not
described in the Registration Statement.
(v) REGULATORY MATTERS.
(i) The Company is not aware of any rule making or similar
proceedings before the United States Food and Drug Administration ("FDA") or
comparable federal, state, local or foreign government bodies which involve
or affect the Company or any of its subsidiaries which, if the subject of an
action unfavorable to the Company or any of its subsidiaries, would have a
Material Adverse Effect.
(ii) The descriptions of the results of tests or evaluations
contained in the Registration Statement are accurate and complete in all
material respects, and the Company has no knowledge of any other tests or
evaluations, the results of which reasonably call into question the results
described or referred to in the Registration Statement. Neither the Company
nor any of its subsidiaries has received any notices or correspondence from
the FDA or any other governmental agency requiring the termination,
suspension or modification of any tests or evaluations conducted on behalf of
the Company or any of its subsidiaries that are described in the Registration
Statement or the results of which are referred to in the Registration
Statement.
(w) ENVIRONMENTAL MATTERS. (i) The Company and each of its
subsidiaries is in compliance with all rules, laws and regulations relating
to the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("Environmental Laws") which are
applicable to its business, except where the failure to comply would not
reasonably be likely to have a Material Adverse Effect, (ii) neither the
Company nor any of its subsidiaries has received any written notice from any
governmental authority or third party of an asserted claim under
Environmental Laws, which claim would be required to be disclosed in the
Registration Statement, (iii) to the Company's knowledge, neither the Company
nor any of its subsidiaries will be required to make future material capital
expenditures to comply with Environmental Laws and (iv) no property which is,
or has been, owned, leased or occupied by the Company or any of its
subsidiaries has, to the Company's knowledge, been designated as a Superfund
site pursuant to the Comprehensive Response, Compensation, and Liability Act
of 1980, as amended, or otherwise designated as a contaminated site under
applicable state or local law.
4. COVENANTS OF THE COMPANY. The company covenants and agrees as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and
any amendments thereto to become effective as promptly as practicable. If
required, the Company will file the Prospectus and any amendment or
supplement thereto with the Commission in the manner and within the time
period required by Rule 424(b) under the Securities Act. During any time when
a prospectus relating to the Shares is required to be delivered under the
Securities Act, the Company (i) will comply with all requirements imposed
upon it by the Securities Act and the Rules and Regulations to the extent
necessary to permit the continuance of sales of or dealings in the Shares in
accordance with the provisions hereof and of the Prospectus, as then amended
or supplemented, and (ii) will not file with the Commission the prospectus or
the amendment referred to in the third sentence of Section 3(a) hereof, any
amendment or supplement to such
10.
<PAGE>
prospectus or any amendment to the Registration Statement of which the
Placement Agent shall not previously have been advised and furnished with a
copy a reasonable period of time prior to the proposed filing and as to which
filing the Placement Agent shall not have given their consent.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Placement Agent (i) when the
Registration Statement, as amended, has become effective; if the provisions
of Rule 430A promulgated under the Securities Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective;
(ii) of any request made by the Commission for amending the Registration
Statement, for supplementing any Preliminary Prospectus or the Prospectus or
for additional information, or (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or the institution or threat of any investigation or
proceeding for that purpose, and will use its best efforts to prevent the
issuance of any such order and, if issued, to obtain the lifting thereof as
soon as possible.
(c) The Company will (i) use its best efforts to arrange for the
qualification of the Shares for offer and sale under the state securities or
blue sky laws of such jurisdictions as the Placement Agent may designate,
(ii) continue such qualifications in effect for as long as may be necessary
to complete the distribution of the Shares, and (iii) make such applications,
file such documents and furnish such information as may be required for the
purposes set forth in clauses (i) and (ii); provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general or unlimited consent to service of process in any such jurisdiction.
(d) The Company consents to the use of the Prospectus (and any
amendment or supplement thereto) by the Placement Agent in connection with
the offering or sale of the Shares and for such period of time thereafter as
the Prospectus is required by law to be delivered in connection therewith.
If, at any time when a prospectus relating to the Shares is required to be
delivered under the Securities Act, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein not misleading, or if it becomes necessary at any
time to amend or supplement the Prospectus to comply with the Securities Act
or the Rules and Regulations, the Company promptly will so notify the
Placement Agent and, subject to Section 4(a) hereof, will prepare and file
with the Commission an amendment to the Registration Statement or an
amendment or supplement to the Prospectus which will correct such statement
or omission or effect such compliance, each such amendment or supplement to
be reasonably satisfactory to counsel to the Placement Agent.
(e) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which
may be the same entity as the Transfer Agent) for its Common Stock.
(f) The Company will furnish, without charge, to Placement Agent
or on the Placement Agent's order, at such place as the Placement Agent may
designate, copies of each
11.
<PAGE>
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which copies will be signed and
will include all financial statements and exhibits) and the Prospectus, and
all amendments and supplements thereto, in each case as soon as available and
in such quantities as the Placement Agent may reasonably request.
(g) Except as contemplated by the Prospectus, the Company will
not, directly or indirectly, without the prior written consent of the
Placement Agent, issue, offer, sell, grant any option to purchase or
otherwise dispose (or announce any issuance, offer, sale, grant of any option
to purchase or other disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock for a period of 90 days after the Closing Date, except for
issuances pursuant to the exercise of stock options outstanding on or granted
subsequent to the date hereof, pursuant to a stock option or other employee
benefit plan in existence on the date hereof and except as contemplated by
the Prospectus.
(h) The Company will cause the Shares to be duly included for
quotation on the NMS prior to the Closing Date.
(i) Neither the Company nor any of its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(j) The Company will apply the net proceeds of the offering
received by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(k) The Company will timely file all such reports, forms or other
documents as may be required from time to time, under the Securities Act, the
Rules and Regulations, the Exchange Act and the rules and regulations
thereunder, and all such reports, forms and documents filed will comply as to
form and substance with the applicable requirements under the Securities Act,
the Rules and Regulations, the Exchange Act and the rules and regulations
thereunder.
5. EXPENSES. Regardless of whether the transactions contemplated in this
Agreement are consummated, and regardless of whether for any reason this
Agreement is terminated, the Company will pay, and hereby agrees to indemnify
the Placement Agent against, all fees and expenses incident to the performance
of the obligations of the Company under this Agreement, including, but not
limited to, (i) fees and expenses of accountants and counsel for the Company,
(ii) all costs and expenses incurred in connection with the preparation,
duplication, printing, filing, delivery and shipping of copies of the
Registration Statement and any pre-effective or post-effective amendments
thereto, any Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto (including postage costs related to the delivery by the
Placement Agent of any Preliminary Prospectus or Prospectus, or any amendment or
supplement thereto), this Agreement, the Escrow Agreement and all other
documents in connection with the transactions contemplated herein, including the
cost of all copies thereof, (iii) fees and expenses relating to qualification of
the Shares under state securities or blue sky laws, including the cost of
preparing and mailing the preliminary and final blue sky memoranda
12.
<PAGE>
and filing fees and disbursements and fees of counsel and other related
expenses, if any, in connection therewith, (iv) filing fees of the Commission
and the NASD relating to the Shares and reasonable fees of counsel to the
Placement Agent in connection with NASD filings, (v) any fees and expenses in
connection with the listing for quotation of the Shares on the NMS, (vi)
costs and expenses incident to the preparation, issuance and delivery to the
escrow Agent of any certificates evidencing the shares, including transfer
agent's and registrar's fees and any applicable transfer taxes incurred in
connection with the delivery to the Escrow Agent of the Shares to be sold by
the company pursuant to this Agreement and (vii) the fees of the Escrow
Agent. In addition, the Company shall reimburse the Placement Agent, upon
invoice on a monthly basis, for all actual, accountable travel, legal
(including fees and expenses of counsel to the Placement Agent) and other
out-of-pocket expenses incurred in connection with its engagement hereunder
up to a maximum of $_______.
6. CONDITIONS OF THE PLACEMENT AGENT'S OBLIGATIONS. The obligations of the
Placement Agent under this Agreement are subject to the accuracy in all material
respects of the representations of the Company herein as of the date hereof and
as of the Closing Date as if they had been made on and as of the Closing Date;
the accuracy, in all material respects, on and as of the Closing Date of the
statements of officers of the Company made pursuant to the provisions hereof;
the performance by the Company on and as of the Closing Date of its covenants
and agreements hereunder; and the following additional conditions:
(a) If the Company has elected to rely on Rule 430A under the
Securities Act, the Registration Statement shall have been declared
effective, and the Prospectus (containing the information omitted pursuant to
Rule 430A) shall have been filed with the Commission not later than the
Commission's close of business on the second business day following the date
hereof or such later time and date to which the Placement Agent shall have
consented; if the Company does not elect to rely on Rule 430A, the
Registration Statement shall have been declared effective not later than
11:00 A.M., California time, on the date hereof or such later time and date
to which the Placement Agent shall have consented; if required, in the case
of any changes in or amendments or supplements to the Prospectus in addition
to those contemplated above, the Company shall have filed such Prospectus as
amended or supplemented with the Commission in the manner and within the time
period required by Rule 424(b) under the Securities Act; no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto shall have been issued, and no proceedings for that purpose shall
have been instituted or threatened or, to the knowledge of the Company or the
Placement Agent, shall be contemplated by the Commission; and the Company
shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus
or otherwise).
(b) The Placement Agent shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Placement Agent's opinion, is material, or
omits to state a fact which, in the Placement Agent's opinion, is material
and is required to be stated therein or is necessary to make the statements
therein not misleading, or that the Prospectus, or any supplement thereto,
contains an untrue statement of fact which, in the Placement Agent's opinion,
is material, or omits to state a fact which, in the Placement Agent's
opinion, is material and is required to be stated therein or is
13.
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) On the Closing Date, the Placement Agent shall have received
the opinion, dated the Closing Date, of (i) Stroock & Stroock & Lavan LLP,
counsel to the Company ("Company Counsel"), and (ii) Knobbe, Martens, Olson &
Bear, LLP, patent counsel to the Company ("Patent Counsel"), in forms
acceptable to Placement Agent's counsel.
(d) On or prior to the Closing Date, counsel to the Placement
Agent shall have been furnished such documents, certificates and opinions as
they may reasonably require in order to evidence the accuracy, completeness
or satisfaction of any of the representations or warranties of the Company or
conditions herein contained.
(e) On the Closing Date, the Placement Agent shall have received
from Ernst & Young LLP (the "Accountants") a letter dated as of the Closing
Date in form and substance satisfactory to the Placement Agent. The letter
shall not disclose any change, or any development involving a prospective
change, in or affecting the business or properties of the Company which, in
your reasonable judgment, makes it impracticable or inadvisable to proceed
with the offering of the Shares as contemplated by the Prospectus. In
addition, you shall have received from the Accountants a letter addressed to
the Company and made available to you for your use stating that its review of
the Company's system of internal accounting controls, to the extent it deemed
necessary in establishing the scope of its latest examination of the
Company's financial statements, did not disclose any weaknesses in internal
controls that it considered to be material weaknesses. All such letters shall
be in a form reasonably satisfactory to the Representatives and their counsel.
(f) On the Closing Date, the Placement Agent shall have received
a certificate, dated the Closing Date, of the principal executive officer and
the principal financial or accounting officer of the Company to the effect
that each of such persons has carefully examined the Registration Statement
and the Prospectus and any amendments or supplements thereto and this
Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made on and as
of the Closing Date, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement on its
part to be performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best knowledge of each of such
persons are contemplated or threatened under the Securities Act and any and
all filings required by Rule 424 and Rule 430A have been timely made;
(iii) The Registration Statement and Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and information
required to be included therein, and neither the Registration Statement nor
any amendment thereto includes any
14.
<PAGE>
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and neither the Prospectus (or any supplement thereto) or any
Preliminary Prospectus includes or included any untrue statement of a
material fact or omits or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus up to and including
the Closing Date, neither the Company nor any of its subsidiaries has
incurred, other than in the ordinary course of its business or as
contemplated by the Prospectus, any material liabilities or obligations,
direct or contingent; neither the Company nor any of its subsidiaries has
purchased any of its outstanding capital stock or paid or declared any
dividends or other distributions on its capital stock; neither the Company
nor any of its subsidiaries has entered into any transactions not in the
ordinary course of business, except as contemplated by the Prospectus; and
there has not been any change in the capital stock or consolidated long-term
debt or any increase in the consolidated short-term borrowings (other than
any increase in short-term borrowings in the ordinary course of business) of
the Company or any material adverse change to the business properties,
assets, net worth, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries taken as a whole, except for
continuing operating losses of not more than $________; neither the Company
nor any of its subsidiaries has sustained any material loss or damage to its
property or assets, whether or not insured; there is no litigation which is
pending or threatened against the Company or any of its subsidiaries which is
required under the Securities Act or the Rules and Regulations to be set
forth in an amended or supplemented Prospectus which has not been set forth;
and there has not occurred any event required to be set forth in an amended
or supplemented Prospectus which has not been set forth therein.
References to the Registration Statement and the Prospectus in this
paragraph (g) are to such documents as amended and supplemented at the date of
the certificate.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus up to and including
the Closing Date there has not been (i) any change or decrease specified in
the letter or letters referred to in paragraph (f) of this Section 6 or (ii)
any change, or any development involving a prospective change, in the
business or properties of the Company or its subsidiaries which change or
decrease in the case of clause (i) or change or development in the case of
clause (ii) makes it impractical or inadvisable in the Placement Agent's
judgment to proceed with the public offering or the delivery of the Shares as
contemplated by the Prospectus.
(h) No order suspending the sale of the Shares in any
jurisdiction designated by you pursuant to Section 4(c) hereof has been
issued on or prior to the Closing Date and no proceedings for that purpose
have been instituted or, to your knowledge or that of the Company, have been
or are contemplated.
(i) The Placement Agent shall have received from each person who
is a director or officer of the Company an agreement to the effect that such
person will not, directly or indirectly, without the prior written consent of
the Placement Agent, offer, sell, grant any
15.
<PAGE>
option to purchase or otherwise dispose (or announce any offer, sale, grant
of an option to purchase or other disposition) of any shares of Common Stock
or any securities convertible into, or exchangeable or exercisable for,
shares of Common Stock for a period of 90 days after the Closing Date.
(j) The Shares have been duly authorized for quotation on the NMS.
(k) The Company shall have furnished the Placement Agent with
such further opinions, letters, certificates or documents as the Placement
Agent or counsel for the Placement Agent may reasonably request. All
opinions, certificates, letters and documents to be furnished by the Company
will comply with the provisions hereof only if they are reasonably
satisfactory in all material respects to the Placement Agent and to counsel
for the Placement Agent. The Company shall furnish the Placement Agent with
conformed copies of such opinions, certificates, letters and documents in
such quantities as you reasonably request. The certificates delivered under
this Section 6 shall constitute representations, warranties and agreements of
the Company as to all matters set forth therein as fully and effectively as
if such matters had been set forth in Section 2 of this Agreement.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each person, if any, who controls such Placement Agent
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities,
joint or several (and actions in respect thereof), to which such Placement
Agent or such controlling person may become subject, under the Securities Act
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements, in light of the circumstances under which they were
made, not misleading and will reimburse, as incurred, such Placement Agent or
such controlling persons for any legal or other expenses incurred by such
Placement Agent or such controlling persons in connection with investigating,
defending or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any of such documents in reliance upon and in conformity with information
furnished in writing to the Company by the Placement Agent expressly for use
therein, and provided, further, that such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of the Placement Agent
(or to the benefit of any person controlling such Placement Agent) to the
extent that any such loss, claim, damage, liability or action (i) results
from the fact that such Placement Agent failed to send or give a copy of the
Prospectus (as amended or supplemented) to a purchaser of Shares that is
asserting such loss, claim, damage or liability, at or prior to the
confirmation of the sale of such Shares to such person in any case where such
delivery is required by the Securities Act and (ii) arises out of or is based
upon an untrue statement or omission of a material fact contained in such
Preliminary
16.
<PAGE>
Prospectus that was corrected in the Prospectus (as amended and
supplemented), unless such failure resulted from non-compliance by the
Company with Section 4(h) hereof. The indemnity agreement in this paragraph
(a) shall be in addition to any liability which the Company may have at
common law or otherwise.
(b) The Placement Agent agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all losses, claims, damages or liabilities (and actions
in respect thereof) to which the Company or any such director, officer, or
controlling person may become subject, under the Securities Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or the Prospectus or
any Preliminary Prospectus, or any amendment or supplement thereto or arise
out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished in writing by the Placement Agent to the Company expressly for use
therein; and will reimburse, as incurred, all legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. The Company acknowledges that only the
statements relating to the Placement Agent with respect to the public
offering of the Shares set forth in the second paragraph of the cover page of
the Prospectus and under the heading "Plan of Distribution" in the Prospectus
have been furnished by the Placement Agent to the Company expressly for use
therein and constitute the only information furnished in writing by or on
behalf of the Placement Agent for inclusion in the Prospectus. The indemnity
agreement contained in this subsection (b) shall be in addition to any
liability which the Placement Agent may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify such indemnifying party or
parties of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under subsection (a) or (b) of this
Section 7 or to the extent that the indemnifying party was not adversely
affected by such omission. In case any such action is brought against an
indemnified party and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties against which a claim
is to be made will be entitled to participate therein and, to the extent that
it or they may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party has reasonably concluded that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select one
separate counsel for all of them to assume such legal defenses and otherwise
to
17.
<PAGE>
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 7 for any legal or
other expenses (other than the reasonable costs of investigation)
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party has employed such counsel in
connection with the assumption of such different or additional legal defenses
in accordance with the proviso to the immediately preceding sentence, (ii)
the indemnifying party has not employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, or (iii) the indemnifying
party has authorized in writing the employment of counsel for the indemnified
party at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 7 is
unavailable to hold harmless an indemnified party under paragraph (a) or (b)
above in respect of any losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) (i) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and
the party to be indemnified, on the other hand, from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. In any case where the
Company is a contributing party and the Placement Agent is the indemnified
party, the relative benefits received by the Company, on the one hand, and
the Placement Agent, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares (before
deducting expenses) bear to the total placement agent commissions and fees
received by the Placement Agent hereunder, in each case as set forth in the
table on the cover page of the Prospectus. Relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Placement Agent, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this paragraph (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (d), no Placement Agent shall be required to
contribute any amount in excess of the placement agent commissions applicable
to the Shares paid to such Placement Agent hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph
(d), (i) each person, if any, who controls the Placement Agent within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Placement Agent, and (ii)
each director of the Company, each officer of the Company who has signed the
Registration
18.
<PAGE>
Statement, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Company, subject in each
case to this paragraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this paragraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation (x) it or they may have
hereunder or otherwise than under this paragraph (d) or (y) to the extent
that such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective
representations, warranties, agreements, covenants, indemnities and
statements of, and on behalf of, the Company and its officers and the
Placement Agent, respectively, set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Placement Agent, and will survive
delivery of and payment for the Shares. Any successors to the Placement Agent
shall be entitled to the indemnity, contribution and reimbursement agreements
contained in this Agreement.
9. TERMINATION.
(a) This Agreement (except for the provisions of Sections 5 and 7
hereof) may be terminated by the Placement Agent by notice to the Company in
the event that the Company has failed to comply in any respect with any of
the provisions of this Agreement required on it to be performed at or prior
to the Closing Date, or if any of the representations or warranties of the
Company is not accurate in any material respect or if the covenants,
agreements or conditions of, or applicable to the Company herein contained
have not been complied with in any respect or satisfied within the time
specified on the Closing Date or if prior to the Closing Date:
(i) the Company or any of its subsidiaries shall have
sustained a loss by strike, fire, flood, accident or other calamity of such a
character as to interfere materially with the conduct of the business and
operations of the Company and its subsidiaries takes as a whole regardless of
whether or not such loss was insured;
(ii) trading in the Common Stock shall have been suspended
by the Commission or the Nasdaq National Market or trading in securities
generally on the New York Stock Exchange or the Nasdaq National Market shall
have been suspended or a material limitation on such trading shall have been
imposed or minimum or maximum prices shall have been established on any such
exchange or market system;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
19.
<PAGE>
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak or
escalation of any other insurrection or armed conflict involving the United
States; or
(v) there shall have been a material adverse change in (A)
general economic, political or financial conditions or (B) the present or
prospective business or condition (financial or other) of the Company and its
subsidiaries taken as a whole that, in each case, in the Placement Agent's
judgment, makes it impracticable or inadvisable to make or consummate the
public offering, sale or delivery of the Shares on the terms and in the
manner contemplated in the Prospectus and the Registration Statement.
(b) This Agreement may be terminated by either party in the event
that the Requisite Funds shall not have been deposited by Investors by the
close of business thirty (30) days after the Effective Date.
(c) Termination of this Agreement shall be without liability of
any party to any other party other than as provided in Sections 5 and 7
hereof.
10. NOTICES. All communications hereunder shall be in writing and if
sent to the Placement Agent shall be mailed or delivered or telegraphed and
confirmed by letter or telecopied and confirmed by letter to Cruttenden Roth
Incorporated at 4350 La Jolla Village Drive, Suite 220, San Diego, CA 92122,
Attention: Managing Director or, if sent to the Company, shall be mailed or
delivered or telegraphed and confirmed to the Company at 6175 Lusk Boulevard,
San Diego, CA 92121, Attention: President.
11. SUCCESSORS. This agreement shall incur to the benefit of and be
binding upon the Company and the Placement Agent and the Company's and the
Placement Agent's respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons
and for the benefit of no other person, except that the representations,
warranties, indemnities and contribution agreements of the Company contained
in this Agreement shall also be for the benefit of any person or persons, if
any, who control the Placement Agent within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and except that the
Placement Agent's indemnity and contribution agreements shall also be for the
benefit of the directors of the Company, the officers of the Company who have
signed the Registration Statement and each person or persons, if any, who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act.
12. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
giving effect to the choice of law or conflict of law principles thereof.
Each party hereto consents to the jurisdiction of each court in which any
action is commenced seeking indemnity or contribution pursuant to Section 7
above and agrees to accept, either directly or through an agent, service of
process of each such court.
20.
<PAGE>
13. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument.
21.
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate the Placement Agent's acceptance thereof in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
ALLIANCE PHARMACEUTICAL CORP.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Accepted as of the date first above written:
CRUTTENDEN ROTH INCORPORATED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
22.
<PAGE>
EXHIBIT 1.2
ESCROW INSTRUCTIONS
(SECURITIES OFFERING)
These Escrow Instructions are given by ALLIANCE PHARMACEUTICAL CORP., a New York
corporation (the "Company") and CRUTTENDEN ROTH INCORPORATED, a California
corporation (the "Placement Agent"), to CITY NATIONAL BANK, a national banking
association ("Escrow Holder").
1. OFFERING: The Company desires to offer to subscribers for Minimum
Subscriptions (as defined Section 5(a) below) its shares of common stock, at
a price per share of $2.00 (or such other price as specified by the Company
or the Placement Agent), as more particularly set forth in a Registration
Statement on Form S-3 (Reg. No. 333-76343) filed with the Securities and
Exchange Commission (the "Registration Statement"), a copy of which has been
delivered to Escrow Holder. Escrow Holder is not to be concerned with the
Registration Statement, except as specifically set forth below.
2. ESTABLISHMENT OF THE ESCROW: Escrow Holder will open one or more escrow
accounts (the "Escrow"), and either the Company or the Placement Agent, in
accordance with Rule 15c2-4 under the Securities Exchange Act of 1934, as
amended, will deliver to Escrow Holder from time to time for deposit into the
Escrow the full amount of each payment received from each subscriber (the
"Subscription Price"), together with the name, address and taxpayer
identification number of such subscriber, the number of shares subscribed for
and the amount paid therefor and an I.R.S. Form W-9 completed and executed by
each subscriber. Escrow Holder shall have no obligation to accept monies,
documents or instructions from any party other than the Company with respect
to the Escrow. All monies so deposited will be in the form of a subscriber's
personal check in favor of "City National Bank - Alliance Pharmaceutical
Corp." or by wire transfer. Should any such check be returned to Escrow
Holder as uncollectable for any reason, Escrow Holder will charge the amount
of such unpaid check to Escrow, notify the Company of the amount of such
return check, the name of the subscriber and the reason for return, and hold
such check subject to further instructions from the Company or the Placement
Agent. Escrow Holder will hold all monies and other property in the escrow
free from any lien, claim or offset, except as set forth herein, and such
monies and other property shall not become the property of the Company, nor
subject to the debts thereof, unless the conditions set forth in these
instructions to disbursement of such monies to the Company have been fully
satisfied.
3. INVESTMENT: All funds will be held by Escrow Holder in a Money Market
Investment Account bearing interest at Escrow Holder's then applicable rate.
No funds will earn interest until Escrow Holder receives an I.R.S. Form W-9
completed and executed by the Company and the subscriber's check has been
collected in good funds.
4. (a) CANCELLATION BY THE COMPANY: The Company may reject or cancel any
subscription in whole or in part. If the Subscription Price for such rejected
or cancelled subscription has been delivered to Escrow Holder, the Company
will inform Escrow Holder of
1.
<PAGE>
the rejection or cancellation, and Escrow Holder upon receiving such notice
will refund to the subscriber the Subscription Price.
(b) CANCELLATION BY SUBSCRIBERS: All Subscriptions are irrevocable, and
no subscriber will have any right to cancel or rescind the subscription,
except as required under the law of any jurisdiction in which the shares are
sold.
5. CLOSING: The Escrow will remain open and the Escrow Holder will continue to
receive subscriptions until the earliest to occur of the following (the "Closing
Date"):
(a) The effective date for closing of the Escrow set forth in a written
instruction from the Company and the Placement Agent to the Escrow Holder after
the Escrow Holder has received aggregate Subscription Prices for at least
6,000,000 shares ("Minimum Subscriptions"); or
(b) June 30, 1999.
On the Closing Date, the Escrow Holder will disburse all monies, instruments
and other documents in the Escrow to the Company or as otherwise instructed
by the Company. If the Minimum Subscriptions have not been received by the
Escrow Holder or the Escrow Holder receives written notice from the Company
or the Placement Agent that the offering has been terminated prior to
Closing, the Escrow Holder will refund all the monies in the Escrow, to the
subscribers without further notice to the Company. Under no circumstances
will Escrow Holder be required to disburse any monies until the check
therefor has been collected in good funds.
6. INSTRUCTIONS AND AMENDMENTS: All notices and instructions to Escrow
Holder must be in writing and may be delivered personally or mailed,
certified or registered mail, return receipt requested, addressed to City
National Bank, 400 N. Roxbury Dr., 6th Floor, Beverly Hills, California,
90210, Attention: Sue Behning/CNI. All such notices and instructions will be
deemed given when received by Escrow Holder, as shown on the receipt
therefor. All Instructions from the Company will be signed by Ted Roth or Tim
Hart and all instructions from the Placement Agent will be signed by Lisa
Walters or Joe Schimmelpfennig. Unless otherwise provided herein, these
instructions may be amended or further instructions given only to the extent
that such amendments or instructions are consistent with, and do not add
materially to, the description of the Escrow contained in the Registration
Statement, unless consented to in writing by all subscribers whose
Subscription Prices have been received by Escrow Holder therefore and unless
disclosed to all subscribers thereafter.
7. FEES: Escrow Holder shall be entitled to an initial, non refundable,
set-up fee of $2,000 payable concurrently with its acceptance, and upon
opening of this Escrow, plus actual expenses incurred in performing its
duties hereunder. The Company or partnership will pay Escrow Holder's fees
and expenses provided that upon the close of the escrow, Escrow Holder may
withhold from any amounts disbursed to the Company the amount of its then
earned but unpaid fees and expenses. Fees will be charged pursuant to the fee
schedule attached hereto and incorporated herein by reference.
2.
<PAGE>
8. EXCULPATION: Escrow Holder will not be liable for:
(a) The genuineness, sufficiency, correctness as to form, manner of
execution or validity of any instrument deposited in the Escrow, nor the
identity, authority or rights of any person executing the same.
(b) Any misrepresentation or omission in the Registration Statement or any
failure to keep or comply with any of the provisions of any agreement, contract,
or other instrument referred to therein; or
(c) The failure of the Company to transmit, or any delay in transmitting
any subscriber's Subscription Price to Escrow Holder.
Escrow Holder's duties hereunder shall be limited to the safekeeping of
monies, instruments or other documents received by the Escrow Holder into the
Escrow, and for the disposition of same in accordance with this Escrow
Agreement and any further instructions pursuant to this Escrow Agreement.
9. INTERPLEADER: In the event conflicting demands are made or notices served
upon Escrow Holder with respect to the Escrow, Escrow Holder shall have the
absolute right at its election to do either or both of the following:
(a) Withhold and stop all further proceedings in, and performance of, this
escrow; or
(b) File a suit in interpleader and obtain an order from the court
requiring the parties to litigate their several claims and rights among
themselves. In the event such interpleader suit is brought, Escrow Holder
shall be fully released from any obligation to perform any further duties
imposed upon it hereunder, and the Company shall pay Escrow Holder all costs,
expenses and reasonable attorney's fees expended or incurred by Escrow
Holder, (or allocable to its in-house counsel), the amount thereof to be
fixed and a judgment thereof to be rendered by the court in such suit.
10. INDEMNITY: The Company further agrees to pay on demand, and to indemnify and
hold Escrow Holder harmless from and against, all cost, damages, judgments,
attorney's fees, expenses, obligations and liabilities of any kind or nature
which, in good faith, Escrow Holder may incur or sustain in connection with or
arising out of the Escrow other than such that arise as a result of the Escrow
Holder's gross negligence or willful misconduct, and Escrow Holder is hereby
given a lien upon all the rights, titles, interest of the Company in monies and
other property deposited in the Escrow, to protect Escrow Holder's rights to
indemnity and to indemnify and reimburse Escrow Holder under these Escrow
Instructions.
11. RESIGNATION OF ESCROW HOLDER: Escrow Holder may resign herefrom upon
thirty (30) days' written notice to the Company and shall thereupon be fully
released from any obligation to perform any further duties imposed upon it
hereunder; provided that a replacement escrow holder shall have been
appointed by the Company. Escrow Holder will transfer all files and records
relating to the Escrow to any successor escrow holder upon receipt of a copy
of executed escrow instructions designating such successor.
3.
<PAGE>
12. FACSIMILE: The Company agrees that Escrow Holder may, but need not, honor
and follow instructions, amendments or other orders ("orders") which shall be
provided by telephone facsimile transmission ("faxed") to Escrow Holder in
connection with this escrow and may act thereon without further inquiry and
regardless of by whom or by what means the actual or purported signature of the
Company may have been affixed thereto if such signature in Escrow Holder's sole
judgment resembles the signature of the Company. The Company indemnifies and
holds Escrow Holder free and harmless from any and all liability, suits, claims
or causes of action which may arise from loss or claim of loss resulting from
any forged, improper, wrongful or unauthorized faxed order. The Company agrees
to pay all attorney fees and cost incurred by Escrow Holder (or allocable to its
in-house counsel), in connection with said claim(s).
13. OTHER:
(a) Time is of the essence of these and all additional or changed
instructions.
(b) These Escrow Instructions may be executed in counterparts, each of
which so executed shall, irrespective of the date of its execution and
delivery, be deemed an original, and said counterparts together shall
constitute one and the same instrument.
(c) These Escrow Instructions shall be governed by, and shall be construed
according to, the laws of the State of California.
(d) The Company will not make any reference to City National Bank in
connection with the Offering except with respect to its role as Escrow Holder
hereunder, and in no event will the Company state or imply the Escrow Holder
has investigated or endorsed the offering in any manner whatsoever.
IN WITNESS WHEREOF, The parties have executed these Escrow Instructions as of
the date set forth besides such parties' signature below.
"COMPANY"
ALLIANCE PHARMACEUTICAL CORP.
a New York corporation
By: ________________________________
Its________________________________
Date: _____________
Address: 6175 Lusk Boulevard, San Diego, CA 92121
Phone Number: (619) 558-4300
Fax Number: (619) 558-5306
4.
<PAGE>
"PLACEMENT AGENT"
CRUTTENDEN ROTH INCORPORATED
a California corporation
By: ________________________________
Its________________________________
Date: _____________
Address: 4350 La Jolla Village Drive, Suite 220, San Diego, CA 92122
Phone Number: (619) 678-3064
Fax Number: (619) 558-1522
"ESCROW HOLDER"
CITY NATIONAL BANK,
a national banking Association
By: _________________________________
Its_________________________________
Date: _______________
5.
<PAGE>
Exhibit 5
STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, New York 10038-4982
May 17, 1999
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, CA 92121
Re: ALLIANCE PHARMACEUTICAL CORP.
REGISTRATION STATEMENT ON FORM S-3, FILE NO. 333-76343
Ladies and Gentlemen:
We have acted as counsel to Alliance Pharmaceutical Corp., a New York
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), of a Registration Statement on
Form S-3 (the "Registration Statement") filed with the Securities and Exchange
Commission on May 17, 1999 (File No. 333-76343), as amended, relating to
12,000,000 shares of common stock of the Company, $.01 par value (the "Shares")
to be offered by the Company.
As counsel to the Company, we have examined copies of the Amended Certificate of
Incorporation and Bylaws of the Company, each as in effect as of the date
hereof, and the Registration Statement. We also have examined the original or
reproduced or certified copies of all such records of the Company, all such
agreements, certificates of officers and representatives of the Company and
others, and such other documents, papers, statutes and authorities as we deemed
necessary to form the basis of the opinions hereinafter expressed. In such
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of copies of documents supplied to us by the Company and
others. As to certain matters of fact relevant to the opinions hereinafter
expressed, we have relied upon statements and certificates of officers of the
Company and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not purport to be experts on, or to
express any opinion herein concerning, any law other than the laws of the State
of New York and the federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that the Shares
to be offered by the Company, when sold under the circumstances contemplated in
the Registration Statement, will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the prospectus forming a
part of the Registration Statement. In giving such consent, we do not admit
hereby that we come within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
/s/ STROOCK & STROOCK & LAVAN LLP
STROOCK & STROOCK & LAVAN LLP
<PAGE>
Exhibit 23.(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No.1 to the Registration Statement (Form S-3, File No. 333-76343)
and related Prospectus of Alliance Pharmaceutical Corp. for the registration
of 12,000,000 shares of its common stock and to the incorporation by
reference therein of our report dated July 31, 1998, except for Note 8, as to
which the date is August 14, 1998 and the second paragraph of Note 1, as to
which the date is April 12, 1999, with respect to the consolidated financial
statements of Alliance Pharmaceutical Corp. included in its Annual Report
(Form 10 K/A) for the year ended June 30, 1998, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
San Diego, California
May 14, 1999
