<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1996
REGISTRATION STATEMENT NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
T CELL SCIENCES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3191702
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
--------------------
119 FOURTH AVENUE, NEEDHAM, MASSACHUSETTS 02194 (617) 433-0771
(Address, including zip code and telephone number, including
area code, of Registrant's principal executive offices)
--------------------
UNA S. RYAN, PH.D., PRESIDENT AND CHIEF OPERATING OFFICER
T CELL SCIENCES, INC.
119 FOURTH AVENUE
NEEDHAM, MASSACHUSETTS 02194 (617) 433-0771
(Name, address, including zip code, and telephone number,
including area code of agent for service)
--------------------
Copies of all communications should be sent to:
STUART M. CABLE, ESQ. LIOR O. NUCHI, ESQ.
GOODWIN, PROCTER & HOAR LLP MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
EXCHANGE PLACE, 24TH FLOOR ONE EMBARCADERO PLACE, SUITE 200
BOSTON, MASSACHUSETTS 02109-2881 2100 GENG ROAD
(617) 570-1000 PALO ALTO, CALIFORNIA 94303-0913
(415) 846-4000
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Proposed
Title of Each Class of Amount Maximum Maximum Amount of
Securities to Be to Offering Price Aggregate Registration
Registered Be Registered Per Share (1) Offering Price Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 5,000,000 Shares $2.75 $13,750,000 $4,741.38
=========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 23, 1996.
PROSPECTUS
5,000,000 SHARES
T CELL SCIENCES, INC.
COMMON STOCK
$.001 par value
This Prospectus relates to up to 5,000,000 shares of common stock (the
"Common Stock"), $.001 par value per share, of T Cell Sciences, Inc. ("T Cell
Sciences" or the "Company") offered by the Company. The shares of Common Stock
offered hereby are being offered at a single, negotiated price. The shares of
Common Stock offered hereby may be offered and sold to different purchasers at
different times. The Company may sell shares of Common Stock offered hereby
through an exclusive selling agent (the "Selling Agent"), and may also sell
shares of Common Stock directly to purchasers. See "Plan of Distribution."
The Common Stock of the Company is traded under the symbol "TCEL" on
the Nasdaq National Market. On July 18, 1996, the reported closing price for the
Common Stock on the Nasdaq National Market was $2.9375 per share.
--------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
<TABLE>
<CAPTION>
======================================================================================================================
PRICE TO SELLING AGENT PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................... $ $ $
- ----------------------------------------------------------------------------------------------------------------------
Total............................... $ $ $
======================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Selling Agent against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Plan of Distribution."
(2) Before deducting estimated expenses of approximately $159,000 payable
by the Company. See "Plan of Distribution."
---------------------
GENESIS MERCHANT GROUP
SECURITIES
THE DATE OF THIS PROSPECTUS IS JULY , 1996.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files proxy statements, reports and other information with
the Securities and Exchange Commission (the "Commission"). Such proxy
statements, reports and other information filed by the Company may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
the Regional Offices of the Commission at Room 3190, John C. Kluczynski
Building, 230 South Dearborn Street, Chicago, Illinois 60604, and Room 1400, 75
Park Place, New York, New York 10007. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Common Stock of the Company is traded on the Nasdaq National Market System.
Reports and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities covered hereby, reference is made to the Registration Statement and
to the exhibits thereto filed as a part thereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in, and made a part of, this Prospectus by reference as of their
respective dates: (1) the Company's Annual Report to Stockholders on Form 10-K
for the fiscal year ended December 31, 1995; (2) the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1996; (3) the Company's
Current Reports on Form 8-K, filed on March 5, 1996 and May 29, 1996; (4) the
definitive Proxy Statement of the Company for the Annual Meeting of Stockholders
held May 21, 1996; and (5) the description of the Common Stock of the Company
contained in the Company's Registration Statement on Form 8-A, filed September
22, 1986, including all amendments and reports updating such description.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and shall be a part hereof from the date of filing of such
document. The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon request, a copy of
any or all of the documents that have been incorporated by reference to the
Registration Statement of which this Prospectus is a part, other than exhibits
to such documents. Requests should be addressed to: T Cell Sciences, Inc., 119
Fourth Avenue, Needham, Massachusetts 02194, Attention: Investor Relations
(telephone number (617) 433-0771).
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and the notes thereto appearing elsewhere
in this Prospectus and incorporated herein by reference. Investors should
carefully consider the information set forth under the heading "Risk Factors"
beginning on page 7 of this Prospectus. This Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such a difference are
discussed under the heading "Risk Factors" beginning on page 7 of this
Prospectus.
THE COMPANY
T Cell Sciences, Inc. ("T Cell Sciences" or the "Company") is a
biopharmaceutical company engaged in the discovery and development of innovative
drugs targeting the immune and inflammatory systems. The Company's lead
therapeutic program is focused on developing compounds that inhibit the
inappropriate activity of the complement cascade, which is a vital part of the
body's immune defense system. The Company is currently conducting two Phase II
clinical trials for its lead product candidate, TP10, in patients at risk for
the adult respiratory distress syndrome ("ARDS") and reperfusion injury
following lung transplantation. In addition to its complement program, the
Company is engaged in the discovery and development of T cell activation
inhibitors for the prevention of immune rejection of transplanted organs and the
development of a therapeutic vaccine for the treatment of atherosclerosis.
The Company has realigned certain of its operations. In the first
quarter of 1996, the Company sold and licensed the majority of its diagnostic
business. During the second quarter of 1996, the Company suspended internal
funding of the research and development of its T cell antigen receptor program
pending completion of negotiations with Astra AB ("Astra") regarding the
transfer of certain of its rights to such technology. See "The Company--T Cell
Regulation" below. In connection with the realignment of its operations, in June
1996 the Company appointed Una S. Ryan, Ph.D., the Chief Scientific Officer of
the Company, to the additional positions of President and Chief Operating
Officer. See "Recent Developments."
Complement Inhibition. The complement cascade consists of a series of
proteins that can be activated by antibodies or microorganisms to undergo a
cascade of reactions whose end result is the activation of the immune and
inflammatory systems, as well as the assembly of membrane attack complexes that
destroy cells. Complement is a principal component of the body's defense system
but when activated at the wrong time or as a result of the wrong stimuli may
result in injury or death. Many independent published studies have reported that
the Company's lead compound TP10, a soluble form of naturally occurring
Complement Receptor 1 ("sCR1"), effectively inhibits the activation of the
complement cascade in animal models. The Company believes that regulation of
complement could have therapeutic and prophylactic applications in several acute
and chronic conditions, including ARDS, reperfusion injury, multiple sclerosis,
Alzheimer's disease, rheumatoid arthritis and lupus. In the United States,
several million people are afflicted with these complement-mediated conditions.
In 1995, the Company completed two clinical trials of TP10 in patients
with ARDS and reperfusion injury. These trials were the first clinical trials of
a complement-inhibiting therapeutic. In both trials, TP10 exhibited excellent
safety and pharmacokinetic profiles and a dose-dependent ability to inhibit
complement activity for more than one day with a single injection. Based on
these favorable results, the Company in January 1996 initiated a Phase IIa
clinical trial to evaluate the use of TP10 in patients with ARDS. This trial is
an open label, single dose trial to determine preliminary efficacy of TP10 in
reducing neutrophil accumulation in the lung and improved clinical outcome of
patients with ARDS. In July 1996, the Company initiated a placebo controlled and
blinded Phase I/II clinical trial to prevent reperfusion injury in patients
receiving lung transplants. The Company anticipates completing both of these
trials in the second half of 1997. T Cell Sciences has retained all
development, marketing and manufacturing rights to compounds in its complement
inhibition program worldwide, excluding Japan and Taiwan.
The Company has developed a second generation of complement inhibiting
compounds, the lead candidate of which is a form of sCR1 modified to include the
sLe(x) carbohydrate, a sugar structure that binds to adhesion receptors known as
selectins which are expressed on endothelial cells, platelets, and neutrophils
during inflammation. The
3
<PAGE> 5
Company believes that this second generation of compounds has the added
advantages of localization of drug to the site of inflammation and additional
functionality that inhibits the cell adhesion process.
T Cell Regulation. The Company is also developing small molecule
compounds for the inhibition of T cell activation. T cell activation plays an
important role in solid organ transplant rejection, as well as in certain
autoimmune diseases. The Company is seeking to develop an alternative treatment
to existing immunosuppressants such as cyclosporine which, due to toxicity, have
limited application in chronic conditions. Despite this limitation, worldwide
sales of cyclosporine in 1995 exceeded $1 billion. A critical component of the
Company's T cell activation program is its internally developed, proprietary,
whole cell-based, smart screening system that is used to identify potentially
relevant compounds. In order to accelerate its research, T Cell Sciences in
March 1996 entered into agreements with ArQule, Inc. and MYCOsearch, Inc. to
provide T Cell Sciences with synthetic and natural product libraries for drug
screening. The Company to date has identified several lead molecules which the
Company believes may be effective in inhibiting T cell activation without
apparent signs of cellular toxicity. The Company has conducted animal studies
with two of these molecules which indicate the potential effectiveness of these
molecules in inhibiting T cell activity.
T Cell Sciences, in conjunction with Astra, has also identified,
developed and tested in animal models, a humanized monoclonal antibody and a
peptide that inhibit a specific subset of T cells related to the autoimmune
disease multiple sclerosis. The Company has suspended internal funding of the
research and development of its T cell antigen receptor program pending the
conclusion of negotiations which the Company believes will result in the
transfer of certain of its rights to this technology to Astra.
CETP Vaccine. The Company is also developing a therapeutic vaccine
against cholesteryl ester transfer protein ("CETP") which may be useful in
reducing risk factors for atherosclerosis. CETP is a key intermediary in the
balance of "good" cholesterol ("HDL") and "bad" cholesterol ("LDL"). T Cell
Sciences is developing a vaccine to stimulate an immune response against CETP,
which it believes may improve the ratio of HDL to LDL and reduce the potential
of heart disease. The Company has conducted studies of rabbits fed a
high-cholesterol, high-fat diet which had been administered T Cell Sciences'
CETP vaccine. In these studies, treated rabbits exhibited a decrease in the
level of HDL over 70-day and 108-day periods and exhibited relatively
lesion-free blood vessels, while untreated rabbits showed no decrease in HDL
levels and developed significant blood vessel lesions. In 1995, the market for
cholesterol-lowering drugs exceeded $4 billion worldwide.
TRAx Diagnostics. Although it has sold a significant portion of its
diagnostics division, the Company retained its rights to the TRAx diagnostics
technology, including the TRAx CD4 and TRAx CD8 diagnostic kits for cell
enumeration, the most prevalent use of which is in monitoring HIV-infected
individuals. The Company has entered into agreements with third parties for the
manufacture, sale and distribution of TRAx kits to clinical and diagnostic
laboratories in exchange for certain royalty payments.
Patents and Proprietary Rights. The Company has an extensive portfolio
of patents and pending applications supporting its therapeutic efforts and TRAx
technology. Patent rights in the area of complement molecules include an issued
U.S. patent which claims the nucleic acid sequences of recombinant TP10 and its
fragments. The Company also owns rights to a number of other patent applications
relating to TP10, sCR1sLe(x) and other complement inhibitor molecules.
The Company was incorporated in Delaware in 1983 and its principal
executive offices are located at 119 Fourth Avenue, Needham, Massachusetts,
02194, telephone number (617) 433-0771.
RECENT DEVELOPMENTS
In the first half of 1996, the Company reorganized senior management
and refocused its business operations to emphasize its therapeutic drug
development program. In March 1996, the Company sold the operations and research
product line of its wholly owned subsidiary, T Cell Diagnostics, Inc. ("TCD"),
excluding the TRAx diagnostic product franchise, to Endogen, Inc. ("Endogen")
for $2.9 million. In 1995, TCD received clearance from the U.S. Food and Drug
Administration (the "FDA") to market TRAx CD4 for CD4 cell enumeration, which is
4
<PAGE> 6
primarily used in the monitoring of HIV infected patients. In December 1995, TCD
signed an exclusive sales and distribution agreement for TRAx CD4 and CD8 with
Diamedix Corporation in the United States.
In addition, the Company has suspended internal funding of the research
and development of its T Cell antigen receptor program pending the conclusion of
negotiations for the transfer of certain of its commercialization rights to this
technology to Astra. In connection with the suspension of the internal
development of this program, the Company incurred a $1.8 million write-off of
related patents in the second quarter of 1996.
In June 1996, the Company appointed Una S. Ryan, Ph.D., the Company's
Chief Scientific Officer, to the additional positions of President and Chief
Operating Officer, and named James D. Grant, who serves as a director of the
Company, as Chief Executive Officer. In May 1996, the Company also added Norman
W. Gorin, a former Senior Vice President of US Trust of Boston, as Chief
Financial Officer. In connection with the departure of Alan Tuck, former
President and Chief Executive Officer, the Company and Mr. Tuck executed an
agreement containing certain severance benefits. In connection with the
agreement, the Company incurred a charge of approximately $425,000 in the second
quarter of 1996. The agreement accelerated the exercisability of Mr. Tuck's
stock options and extended the period during which they may be exercised to one
year.
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered......................... 5,000,000 shares
Common stock outstanding after the offering........ 24,946,601 shares(1)
Use of proceeds.................................... The Company anticipates using the net proceeds from this
offering (i) to fund ongoing clinical trials for TP10 and the
manufacture of clinical supplies of TP10, (ii) to fund the
Company's research and development programs for its other
product candidates, and (iii) for general corporate purposes,
including working capital. See "Use of Proceeds."
Nasdaq National Market symbol...................... TCEL
</TABLE>
- ----------------
(1) Based on the number of shares outstanding at June 30, 1996. This number
does not include 2,382,476 shares of Common Stock issuable upon the
exercise of options outstanding at such date with a weighted average
exercise price of $5.95 per share. See "Risk Factors -- Dilution."
5
<PAGE> 7
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
---------------------------------- ---------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Product development and
distribution agreements ....... $ 5,624 $ 3,737 $ 1,609 $ 1,137 $ 271
Product sales .................... 3,394 3,231 2,354 1,207 506
-------- -------- -------- -------- --------
Total operating revenue ...... 9,018 6,968 3,963 2,344 777
OPERATING EXPENSE:
Cost of product sales ............ 2,317 2,008 1,879 942 352
Research and development ......... 9,438 8,697 8,005 3,994 2,928
General and administrative ....... 4,515 4,346 4,217 2,047 3,936
Sales and marketing .............. 2,009 1,412 1,598 737 283
Facility relocation .............. -- 1,599 127 -- --
-------- -------- -------- -------- --------
Total operating expense ...... 18,279 18,062 15,826 7,720 7,499
-------- -------- -------- -------- --------
Operating loss ....................... (9,261) (11,094) (11,863) (5,376) (6,722)
Non-operating income (expense), net... 1,193 (490) 3,605 381 562
-------- -------- -------- -------- --------
Net loss before minority interest..... (8,068) (11,584) (8,258) (4,995) (6,160)
Minority interest share of loss ...... 310 -- -- -- --
-------- -------- -------- -------- --------
Net loss ............................. $ (7,758) $(11,584) $ (8,258) $ (4,995) $ (6,160)
======== ======== ======== ======== ========
Net loss per common share............. $ (0.56) $ (0.68) $ (0.47) $ (0.29) $ (0.31)
======== ======== ======== ======== ========
Weighted average common shares
outstanding......................... 13,931 17,053 17,482 17,055 19,924
======== ======== ======== ======== ========
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1996
----------------- --------------------------
Actual As Adjusted(1)
------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and securities(2) ......... $ 12,275 $ 6,727 $ 20,374
Working capital ................ 11,208 6,038 19,685
Total assets ................... 18,532 11,745 25,392
Accumulated deficit ............ (46,339) (52,498) (52,498)
Total stockholders' equity ..... 16,000 10,181 23,828
</TABLE>
- -----------
(1) Adjusted to give effect as of June 30, 1996 for the sale of 5,000,000
shares of Common Stock offered hereby at an assumed offering price of
$2.9375 per share, the closing price of the Common Stock reported on
the Nasdaq National Market on July 18, 1996, net of offering expenses.
See "Use of Proceeds."
(2) Excludes $850,000 at December 31, 1995 and June 30, 1996, which was
restricted as collateral pledged in accordance with the Company's
operating lease agreement.
6
<PAGE> 8
RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus, the following factors should be considered
carefully in evaluating an investment in the shares of Common Stock offered by
this Prospectus.
EARLY STAGE OF PRODUCT DEVELOPMENT; UNCERTAINTIES RELATING TO CLINICAL
TRIALS AND PRODUCT DEVELOPMENT. All of the Company's therapeutic product
candidates are in various stages of research and development and no revenues
have been generated from the commercialization of those products. There can be
no assurance that any of the Company's therapeutic product candidates which are
under development will prove to be safe or effective in clinical trials, will be
approved by regulatory authorities, can be manufactured at acceptable cost with
appropriate quality, or can be successfully marketed. The Company's therapeutic
product candidates will require substantial additional development, including in
the areas of preclinical and clinical testing, regulatory approvals and
manufacturing processes prior to their commercialization. The Company has
performed only limited preclinical and clinical testing of certain of its
product candidates and technologies under development. Preclinical studies of
product candidates may not predict and do not ensure safety or efficacy in
humans and are not necessarily indicative of the results that may be achieved in
clinical trials with humans. There can be no assurance that unacceptable side
effects will not be discovered during preclinical and clinical testing of the
Company's potential products. Even after being cleared by the FDA or the
regulatory authorities of other countries, a product may later be shown to be
unsafe or to not have its purported effect, thereby preventing its widespread
use or requiring its withdrawal from the market. The rate of completion of the
Company's clinical trials depends on, among other factors, the rate of patient
enrollment. Patient enrollment is a function of many factors, including the size
of the patient population, the nature of the clinical protocol, the proximity of
patients to clinical sites and the eligibility criteria for the trial. Delays in
planned patient enrollment may result in increased costs, delays or termination
of clinical trials, which could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company may rely on third parties to assist it in overseeing and monitoring
clinical trials, which may result in delays in completing, or failure to
complete, clinical trials if such third parties fail to perform under their
agreements with the Company or fail to meet regulatory standards in the
performance of their obligations under such agreements.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. The Company has
incurred operating losses since its inception and had accumulated net losses of
approximately $52.5 million as of June 30, 1996. The continued development of
the Company's products will require the commitment of substantial resources to
conduct research and preclinical and clinical programs, to establish
manufacturing capabilities and sales and marketing capabilities, and to
establish additional quality control, regulatory and administrative
capabilities. The Company may incur substantial and increasing operating losses
over the next several years as its product development programs and clinical
testing expand. The amount of net losses and the time required by the Company to
reach sustained profitability are highly uncertain and to achieve profitability
the Company must, among other things, successfully complete development of its
products, obtain regulatory approvals and establish manufacturing and marketing
capabilities. There can be no assurance that the Company will be able to achieve
profitability at all or on a sustained basis.
NEED FOR ADDITIONAL FUNDS. The Company has funded its operations and
capital expenditures to date primarily through equity financing, strategic
alliances with commercial partners, and sales of reagent and diagnostic
products. With the sale of the Company's diagnostic business to Endogen, the
Company will no longer receive revenues from sales of diagnostic products other
than the TRAx business. Since inception, the Company has raised net proceeds of
approximately $63.1 million through equity financings. The Company currently
anticipates that its existing capital resources, including the net proceeds of
this offering, if all of the shares of Common Stock offered hereby are sold at
the assumed offering price of $2.9375 per share, will be adequate to satisfy its
capital requirements through the end of 1997. The Company anticipates that it
will need to raise substantial additional funds, through additional equity or
debt financings, research and development financings, collaborative
relationships or otherwise, prior to the commercialization of its products.
There can be no assurance that any such additional funding will be available to
the Company or, if available, that it will be on reasonable terms. Any such
additional funding may result in significant dilution to existing stockholders.
If adequate funds are not available, the Company may be required to
7
<PAGE> 9
significantly curtail its research and development programs or obtain funds
through arrangements with collaborative partners that may require the Company to
relinquish certain material rights to its products.
DEPENDENCE ON THIRD PARTIES FOR CLINICAL SUPPLIES. The Company is
dependent on sourcing from a third party manufacturer for suitable quantities of
sCR1 necessary for clinical trials in addition to those currently being
conducted by the Company. The Company is also dependent upon Endogen for
supplies of TRAx products for sale in the United States. The inability to have
suitable quality and quantities of material produced in a timely manner would
result in significant delays in the clinical development and sale of products,
which could adversely affect the Company's business, financial condition and
results of operations.
NO ASSURANCE OF FDA APPROVAL; COMPREHENSIVE GOVERNMENT REGULATION. The
Company's research, development and clinical programs are subject to extensive
regulation by numerous governmental authorities in the United States and other
countries. Most of the Company's products will require governmental approvals
for commercialization which have not yet been obtained and are not expected to
be obtained for several years. Preclinical and clinical trials and manufacturing
and marketing of many of the Company's products will be subject to the rigorous
testing and approval processes of the FDA and corresponding foreign regulatory
authorities. The regulatory process, which includes preclinical, clinical and
post-clinical testing of many of the Company's products to establish their
safety and efficacy, can take many years and requires the expenditure of
substantial resources. Data obtained from preclinical and clinical activities
are susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. In addition, delays or rejection may be encountered based
upon changes in, or additions to, regulatory policies for drug approval during
the period of product development and regulatory review, which may result in
limitations or restrictions on the Company's ability to utilize its technology
or develop its products. Delays in obtaining such approvals could adversely
affect the marketing of products developed by the Company and the Company's
ability to generate commercial product revenues. There can be no assurance that
requisite regulatory approvals will be obtained within a reasonable period of
time, if at all, or that the Company will not encounter problems in clinical
trials that will cause the Company or governmental authorities to delay or
suspend such trials. Moreover, if regulatory approval of a product is granted,
such approval may impose limitations on the indicated uses for which such
product may be marketed which may restrict the patient population for which any
product may be prescribed. Further, even if such regulatory approval is
obtained, a marketed product, its manufacturer and its manufacturing facilities
are subject to continual review and periodic inspections, and later discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on such product or manufacturer, including withdrawal of the
product from the market. Failure to comply with the applicable regulatory
requirements can, among other things, result in fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal prosecution.
To commercialize any product and prior to submitting the application
for marketing approval in the United States, the Company must sponsor and file
an Investigational New Drug application ("IND") for each proposed product and
must be responsible for initiating and overseeing the clinical studies to
demonstrate the safety and efficacy that are necessary to obtain FDA approval of
such product. There can be no assurance that the Company will be able to obtain
the necessary clearances for clinical trials or approvals for manufacturing or
marketing any of its product candidates. After completion of clinical trials of
a new product, FDA marketing approval must be obtained. At that time, the
Company must submit relevant data, including the results of product development
activities, preclinical studies and clinical trials, in addition to detailed
manufacturing information. Notwithstanding the submission of relevant data, the
FDA may withhold marketing approval and may require additional clinical trials.
DEPENDENCE ON MANUFACTURING, SALES, DISTRIBUTION AND MARKETING
PARTNERS. To be successful, the Company's therapeutic and diagnostic products
must be manufactured in commercial quantities, within regulatory requirements
and at competitive costs. There can be no assurance that the Company will be
able to obtain access to suitable therapeutic and diagnostic product
manufacturing facilities. Except for research reagents and certain diagnostic
products, the Company has limited experience in sales, marketing and
distribution of commercial products. To market any of its products directly, the
Company must develop a substantial marketing and sales force with technical
expertise and a supporting distribution capability. There can be no assurance
that the Company will be able to establish sales and distribution capabilities
without undue delays or expenditures or that it will be successful in gaining
market acceptance for its products. The Company may enter into strategic
partnerships for the
8
<PAGE> 10
manufacturing, sales, distribution and marketing of its products. There can be
no assurance the Company will be able to enter into successful strategic
partnership agreements on terms acceptable to T Cell Sciences, if at all.
COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE. Biotechnology,
pharmaceuticals and medical diagnostics are rapidly evolving fields in which
developments are expected to continue at a rapid pace. Competitors of the
Company in the United States and abroad are numerous and include, among others,
pharmaceuticals, medical diagnostics and biotechnology companies as well as
universities and other research institutions. The Company's success depends upon
developing and maintaining a competitive position in the development of products
and technologies in its area of focus. Competition from other biotechnology,
pharmaceuticals and medical diagnostics companies is intense and expected to
increase as new products enter the market and new technologies become available.
The Company's competitors may also succeed in developing technologies and
products that are more effective than any which have been or are being developed
by the Company or that render the Company's technologies or products obsolete or
noncompetitive. The Company's competitors may also succeed in obtaining patent
protection or other intellectual property rights that would block the Company's
ability to develop its potential products, or in obtaining regulatory approval
for the commercialization of their products more rapidly or effectively than the
Company. Finally, many of these competitors have substantially greater research
and development capabilities, clinical, manufacturing, regulatory and marketing
experience and financial and managerial resources than the Company.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY. The Company's success
will depend in part on the ability of the Company and its licensors to obtain
and maintain patent protection for the Company's technology and to preserve its
trade secrets and operate without infringing on the proprietary rights of
others, both in the United States and in other countries. The failure of the
Company or its licensors to obtain and maintain patent protection for the
Company's technology could have a material adverse effect on the Company's
business, financial condition and results of operations. Patent positions in the
biotechnology field are highly uncertain and involve complex legal, scientific
and factual questions. To date, there has emerged no consistent policy regarding
the breadth of claims allowed in biotechnology patents, particularly in regard
to human therapeutic uses. There can be no assurance that patent applications
relating to the technology used by the Company will result in patents being
issued or that, if issued, the patent will not be subjected to further
proceedings limiting the scope of the rights under the patent or that such
patent will provide a competitive advantage or will afford protection against
competitors with similar technology, or will not be challenged successfully,
invalidated or circumvented by competitors. Moreover, because patent
applications in the United States are maintained in secrecy until patents issue
and patent applications in certain other countries generally are not published
until more than 18 months after they are filed, and since publication of
discoveries in scientific or patent literature often lags behind actual
discoveries, the Company cannot be certain that it or any licensor was the first
creator of inventions covered by pending patent applications or that it or such
licensor was the first to file patent applications for such inventions. In
addition, the Company could incur substantial costs in defending itself in suits
brought against it or in suits in which the Company may assert its patents
against others. If the outcome of any such litigation is adverse to the Company,
the Company's business, financial condition and results of operations could be
adversely affected. In addition to any potential liability for significant
damages, the Company may be required to obtain licenses to patents or other
proprietary rights of third parties. Costs associated with any licensing
arrangement may be substantial and could include ongoing royalties. No assurance
can be given that any licenses required under any such patents or proprietary
rights would be made available on terms acceptable to the Company, if at all. If
the Company does not obtain such licenses, it could encounter delays in product
market introductions while it attempts to design around such patents or other
rights, or be prevented from manufacturing and marketing such products. In
either case, the failure to obtain such licenses on acceptable terms, if at all,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company also seeks to protect its proprietary technology, including
technology which may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors' rights agreements with its
collaborators, advisors, employees and consultants. There can be no assurance
that these agreements will not be breached, that the Company will have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
be disclosed to, or discovered by, competitors. Moreover, the Company conducts a
significant amount of research through academic advisors and collaborators who
are prohibited from entering into confidentiality or inventors' rights
agreements by their academic institutions.
9
<PAGE> 11
DEPENDENCE ON REIMBURSEMENT. In both the United States and elsewhere,
sales of most of the Company's products, if any, will be dependent in part on
the availability of reimbursement from third party payors, such as government
and private insurance plans. Third party payors are increasingly challenging the
prices charged for medical products and services. Moreover, the federal
government of the United States has made the containment of health care costs a
top priority. If the Company succeeds in bringing one or more products to
market, there can be no assurance that these products will be considered
cost-effective, that reimbursement will be available or, if available, that the
level of reimbursement will be sufficient to allow the Company to sell its
products on a profitable basis.
EXPOSURE TO PRODUCT LIABILITY CLAIMS. The Company's business exposes it
to inherent risks of product liability claims, product recalls and associated
adverse publicity which are inherent in the testing, manufacturing, marketing
and sale of human therapeutic products. The Company currently has liability
insurance of limited coverage. There can be no assurance that it will be able to
maintain such insurance or obtain general product liability insurance on
acceptable terms or at reasonable costs or that such insurance will be in
sufficient amounts to provide the Company with adequate coverage against
potential liabilities. A product liability claim or product recall could inhibit
or prevent commercialization of products being developed by the Company. Any
product liability claim or product recall could have a material adverse effect
on the Company's business, financial condition and results of operations.
HEALTH CARE REFORM. The health care industry in the United States and
in Europe is undergoing fundamental changes as the result of political, economic
and regulatory influences. Reforms proposed from time to time include mandated
basic health care benefits, controls on health care spending through limitations
on the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and fundamental
changes to the health care delivery system. The Company anticipates that
alternative health care delivery systems and methods of payment will continue to
be reviewed and assessed, and public debate of these issues will likely
continue. The Company cannot predict whether any reform initiatives will result
or, if adopted, what impact they might have on the Company, and there can be no
assurance that the adoption of reform proposals will not have a material adverse
effect on the Company's business, financial condition and results of operations.
Announcements of reform proposals and the investment community's reaction to
such proposals, announcements by competitors and third-party payors of their
strategy in responding to reform initiatives, and general industry conditions
could produce volatility in the trading and market price of the Common Stock.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS. The Company's research and
development activities involve the controlled use of hazardous materials,
chemicals, biological materials and radioactive compounds. The Company is
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by such
laws and regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident, the
Company could be held liable for any resulting damages, and any such liability
could exceed the Company's resources. The Company may be required to incur
significant costs to comply with environmental laws and regulations in the
future. Current or future environmental laws or regulation may have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE UPON KEY PERSONNEL. The Company is dependent on the members
of its management and scientific staff, the loss of one or more of whom could
have a material adverse effect on the Company. The Company also depends on its
scientific collaborators and advisors, all of whom have commitments that may
limit their availability to the Company. In addition, the Company believes that
its future success will depend in large part upon its ability to attract and
retain highly skilled scientific, managerial and marketing personnel,
particularly as the Company expands its activities in clinical trials, the
regulatory approval process and sales and manufacturing. The Company faces
significant competition for such personnel and from other companies, research
and academic institutions, government entities and other organizations. There
can be no assurance that the Company will be successful in hiring or retaining
the personnel it requires for continued growth. The failure to hire and retain
such personnel could materially and adversely affect the Company's prospects.
10
<PAGE> 12
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of Common Stock in the
public market by existing stockholders could have an adverse effect on the price
of the Common Stock. In addition, the Company has registered the shares of
Common Stock to be issued under its 1985 Incentive Stock Option Plan and its
Amended and Restated 1991 Stock Compensation Plan on a Registration Statement on
Form S-8 and approximately 2.4 million shares of Common Stock are presently
eligible for sale upon exercise of currently outstanding options. The Company,
its officers and directors and certain other stockholders, including the former
President and Chief Executive Officer of the Company who in the aggregate, hold
approximately 3.2% of the Common Stock to be outstanding after this offering
assuming the sale of all shares of Common Stock offered hereby, have agreed not
to offer, sell or otherwise dispose of their shares of Common Stock, with
certain limited exceptions, for a period of 90 days after the date of this
Prospectus without the prior written consent of Genesis Merchant Group
Securities.
VOLATILITY OF STOCK PRICE. The market price of the shares of the Common
Stock, like that of the common stock of many other early-stage biotechnology
companies, may be highly volatile. Factors such as announcements of
technological innovations or new commercial products by the Company or its
competitors, disclosure of results of clinical testing or regulatory
proceedings, governmental regulation and approvals, developments in patent or
other proprietary rights, public concern as to the safety of products developed
by the Company and general market conditions may have a significant effect on
the market price of the Common Stock. In addition, the stock market has
experienced and continues to experience extreme price and volume fluctuations
which have effected the market price of many biotechnology companies and which
have often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political conditions,
may adversely effect the market price of the Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the shares of Common
Stock will incur an immediate and substantial dilution in the net tangible book
value of the Common Stock of $2.0265 per share, at an assumed public offering
price of $2.9375 per share. See "Dilution."
11
<PAGE> 13
USE OF PROCEEDS
Because there is no minimum for the number of shares of Common Stock
offered hereby, the Company cannot determine the net proceeds from the sale of
the shares of Common Stock offered hereby. However, the net proceeds from the
sale of all of the 5,000,000 shares of Stock offered hereby would be
approximately $13.6 million (assuming an offering price of $2.9375 per share,
the closing price of the Common Stock reported on the Nasdaq National Market on
July 18, 1996), after deducting estimated commissions and underwriting discounts
and expenses payable by the Company. The Company anticipates using the net
proceeds from this offering (i) to fund ongoing clinical trials for TP10 and the
manufacture of clinical supplies of TP10, (ii) to fund the Company's research
and development programs for its other product candidates, and (iii) for general
corporate purposes, including working capital. Pending such uses, the Company
plans to invest such funds in short-term interest-bearing obligations of
investment grade.
The amounts and timing of actual expenditures for each of these
purposes could vary significantly depending upon the progress of the Company's
research and development programs, the results of pre-clinical and clinical
studies, the timing of any regulatory approvals, the performance by the
Company's corporate partners of their obligations, technological advances, the
status of competitive products and the Company's determinations as to the
commercial potential of its products. In addition, the Company's research and
development expenditures will vary as programs are added, expanded or abandoned
and as a result of variations in funding from existing or future corporate
partners. If the net proceeds of the sale of the shares of Common Stock are
approximately $13.6 million (assuming all of the 5,000,000 shares of Common
Stock offered hereby are sold at the assumed offering price of $2.9375 per
share, after deducting estimated commissions and underwriting discounts and
expenses payable by the Company), the Company believes that its existing capital
resources, including the ongoing research support activities of its corporate
partners and such assumed amount of net proceeds of the sale of shares of Common
Stock offered hereby, would be sufficient to satisfy its capital needs through
the end of 1997. In order to fund its capital needs after that time, the Company
will require significant levels of additional capital and intends to raise the
necessary capital through additional equity or debt financings, arrangements
with corporate partners or from other sources. No assurance can be given that
the necessary funds will be available for the Company to finance its development
on acceptable terms, if at all. If adequate funds are not available from
operations or additional sources of financing, the Company's business will be
materially and adversely affected.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
In an effort to focus its business operations on its therapeutic drug
programs, the Company recently realigned certain of its operations. On March 5,
1996, the Company sold the operations and research product line of its wholly
owned subsidiary TCD, excluding the TRAx product franchise and related assets,
to Endogen for a purchase price of approximately $2,900,000. While the Company
will continue the development of its TRAx product franchise, its present plan is
to defer filing a 510(k) application with the FDA for clearance to market TRAx
CD8 in the United States while it focuses on establishing a partnership for
international distribution of its TRAx technology. Furthering its focus toward
the development of proprietary therapeutic products, the Company reorganized its
senior management in June 1996, with the appointment of Una S. Ryan Ph.D., its
Chief Scientific Officer, to the position of President and Chief Operating
Officer, and its Chairman, James D. Grant, as Chief Executive Officer. The
Company also appointed Norman W. Gorin as Chief Financial Officer.
The Company has in the past developed and produced both therapeutic and
diagnostic products, including the development of T cell receptor therapeutics
in collaboration with Astra. The Company has recently suspended internal funding
of the research and development of its T cell receptor therapeutic programs
pending the conclusion of negotiations with Astra to transfer certain of its
rights to the technology. In conjunction with these developments, the Company
has written off certain captialized patent costs related to the T cell receptor
technology, incurring a $1,752,000 charge to earnings.
The Company is now focusing its resources on the discovery and
development of innovative drugs targeting the immune and inflammatory systems.
The Company's lead therapeutic program is focused on developing compounds that
inhibit complement activation which is part of the body's immune defense system.
In January 1996, the Company initiated Phase II clinical trials for the
evaluation of the Company's lead therapeutic compound, TP10, in patients with
ARDS. In July 1996, the Company initiated a Phase I/II clinical trial to prevent
reperfusion injury in patients receiving lung transplants.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30,
1995. For the six months ended June 30, 1996, the Company reported a
consolidated net loss of $6,160,000 or $.31 per share, compared with a net loss
of $4,995,000 or $.29 per share for the six months ended June 30, 1995. The
increased loss for the six months ended June 30, 1996 compared to the same
period last year was primarily due to the $1,752,000 write-off of certain
capitalized patent costs, a $425,000 charge resulting from a severance agreement
with the Company's former President and Chief Executive Officer, lower product
development revenue from Astra and lower product sales resulting from the sale
of the research products and operations of the Company's diagnostic division in
March 1996.
Product development revenue decreased 76.2% or $866,000 for the six
months ended June 30, 1996 compared to the same period last year. The decrease
reflected the anticipated lower revenue from Astra. In accordance with its
agreement with Astra, the Company will not receive additional research and
development revenue funding. For the six months ended June 30, 1996, product
development revenue included a $100,000 non-refundable execution fee associated
with an agreement granting CytoTherapeutics, Inc. a worldwide, nonexclusive
license to the Company's technology and patent rights relating to Compliment
Receptor 1 for a series of milestone payments and royalties.
Product sales revenue for the six months ended June 30, 1996 decreased
58.1% to $506,000 compared to $1,207,000 for the comparable period last year.
The decrease in product sales for the six months ended June 30, 1996 is
attributable to the sale of the research products and operations of TCD to
Endogen, partially offset by an increase in TRAx product sales. As a result of
the sale of the research products and operations of TCD to Endogen, the
Company's product sales revenue for the period included research product sales
for the first two months of the
13
<PAGE> 15
year only, compared with six months last year. The Company does not anticipate
having additional research product sales in the foreseeable future.
For the six months ended June 30, 1996, research and development
expenses were $2,928,000 compared to $3,994,000 for the same period last year.
The decrease is primarily attributable to the restructuring program implemented
in the second half of 1995 which further focused the Company on priority
projects combined with the sale of the research products and operations of TCD
on March 5, 1996. In January 1996, the Company announced the start of a Phase
IIa clinical trial evaluating the use of TP10 in patients with ARDS.
General and administrative expenses increased to $3,936,000 for the six
months ended June 30, 1996 from $2,047,000 for the comparable period last year.
Excluding the $425,000 charge resulting from the severance agreement with the
Company's former President and Chief Executive Officer in June 1996 and the
$1,752,000 write-off of capitalized patent costs, general and administrative
costs decreased 14.1% or $288,000 for the six months compared to last year. The
decrease is mainly attributable to staff reductions combined with the
implementation of discretionary spending controls across all functional areas.
Non-operating income of $562,000 for the six months ended June 30, 1996
includes a gain of $310,000 recognized from the sale of the research products
and operations to Endogen. Interest income decreased 33.9% to $252,000 for the
six months ended June 30, 1996 compared with $381,000 for the six months ended
June 30, 1995. The decrease in interest income is primarily the result of lower
cash balances during the six months ended June 30, 1996 compared to the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at June 30, 1996 decreased
$5,548,000 to $6,727,000 from $12,275,000 at December 31, 1995. The decrease is
primarily due to the net operating loss of $6,160,000 for the six months ended
June 30, 1996 adjusted for the non-cash write-off of capitalized patent costs of
$1,752,000. Cash used in operations was $5,330,000 for the six months ended June
30, 1996 compared to $5,483,000 for the six months ended June 30, 1995. The
$153,000 decrease in cash used is primarily due to a $831,000 decrease in net
operating loss, adjusted for the write-off of capitalized patent costs and a
charge resulting from a severance agreement with the Company's former President
and Chief Executive Officer.
The Company received a convertible subordinated note receivable in the
principal amount of $1,900,000 in connection with the sale of the research
products and operations of TCD to Endogen. Payments are due in ten semi-annual
installments commencing September 1, 1996 with interest receivable thereon at
the rate of 7% per annum. The outstanding principal amount of the note is
convertible at any time at the option of the Company into shares of common stock
of Endogen.
The Company has no long-term debt. During 1994, the Company entered
into an operating lease agreement with a five year term to lease up to $2
million of equipment. The lease arrangement requires that the Company maintain
certain restrictive financial covenants, determined at the end of each fiscal
quarter. At September 30, 1995, the Company's cash, cash equivalents and
short-term investment balances were below the minimum covenant requirement. In
November 1995, in accordance with the lease agreement, the Company pledged as
collateral cash equal to the amount outstanding on the lease. At June 30, 1996,
the Company had approximately $850,000 outstanding on the lease.
The Company believes its current cash and cash equivalents combined
with anticipated net cash provided by operations will be adequate to meet the
Company's cash requirements for operations through 1996; if all 5,000,000 shares
of Common Stock offered hereby are sold at an assumed public offering price of
$2.9375, the Company anticipates that it will have sufficient cash to fund its
operations through the end of 1997. The Company is considering alternative
sources of funding and capital such as through partnering and financing
opportunities.
14
<PAGE> 16
Certain of the statements set forth above and elsewhere in this
Prospectus, including statements regarding anticipated revenue, expenses and
cash projections, are forward-looking and are based upon the Company's current
belief about future activities and events. Actual results may differ materially
from anticipated results.
15
<PAGE> 17
DILUTION
As of June 30, 1996, the Company had a net tangible book value of
$9,079,000, or $.4552 per share. Net tangible book value per share is determined
by dividing the net tangible book value (tangible assets less liabilities) of
the Company by the number of shares of Common Stock of the Company outstanding
at that date. Adjusting such net tangible book value to give effect to the sale
of all of the shares of Common Stock offered hereby at an assumed public
offering price of $2.9375 per share, and the receipt and application of the net
proceeds therefrom, but without taking into account any other changes in net
tangible book value after June 30, 1996, the pro forma net tangible book value
of the Company as of June 30, 1996 would have been $.9110 per share. This
represents an immediate increase in the net tangible book value of $.4558 per
share to existing stockholders and an immediate dilution of $2.0265 per share to
new investors. The following table illustrates this per share dilution.
<TABLE>
<S> <C>
Assumed public offering price per share.................... $2.9375
Net tangible book value per share as of
June 30, 1996 ..................... .4552
Increase in net tangible book value per share
attributable to the offering(1)................ .4558
Pro forma net tangible book value per share
after the offering............................. .9110
-------
Dilution per share to new investors........................ $2.0265
=======
</TABLE>
- ---------------------
(1) Assuming the sale of all of the 5,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $2.9375 per share
and after deducting estimated commissions or discounts payable to
agents, underwriters or dealers, and expenses payable by the Company in
connection with sale of the shares of Common Stock offered hereby and
after giving effect to the application of the net proceeds of such
sale.
PLAN OF DISTRIBUTION
The Company is selling the shares of Common Stock offered hereby
through Genesis Merchant Group Securities (the "Selling Agent"), in its capacity
as exclusive selling agent. The Selling Agent will be acting on a best efforts
basis pursuant to the terms of a selling agency agreement, dated the date of
this Prospectus (the "Selling Agency Agreement"), between the Company and the
Selling Agent.
The Selling Agency Agreement provides that the obligations of the
Selling Agent are subject to approval of certain legal matters by counsel and
various other conditions, including the absence of any material adverse change,
or development involving a prospective change, in the condition (financial or
other), business, properties, net worth or results of operations of the Company
subsequent to the effective date of the Selling Agency Agreement. The nature of
the Selling Agent's obligations is limited to a best efforts undertaking to
place the Common Stock as agent for the Company. Pursuant to the Selling Agency
Agreement, the Selling Agent may terminate its obligations thereunder at any
time and without further liability by giving notice to the Company.
Pursuant to the Selling Agency Agreement, the Company has agreed to
reimburse the Selling Agent for all costs and actual accountable out-of-pocket
expenses incurred by or on behalf of the Selling Agent in connection with the
performance of its obligations under the Selling Agency Agreement for up to
$37,500 of such costs and expenses. The Company has also agreed to indemnify the
Selling Agent against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Selling Agent may be required
to make in respect thereof.
The Selling Agent has in the past provided, and may in the future
provide, investment banking, financial advisory and other services to the
Company. Subject to certain conditions, the Company has agreed to use reasonable
efforts to cause the Selling Agent to be included as placement agent or
co-manager, as the case may
16
<PAGE> 18
be, in connection with subsequent securities offerings by the Company prior to
January 12, 1998 in which the Company uses the services of a financial advisor
or intermediary.
The directors, executive officers of the Company and certain
stockholders who, in the aggregate, hold 5,786,496 shares of Common Stock, or
approximately 23.2% of the Common Stock to be outstanding after this offering
assuming the sale of all shares of Common Stock offered hereby, have agreed not
to offer, sell or otherwise dispose of their shares, with certain limited
exceptions, for a period of 90 days after the date of this Prospectus without
the prior written consent of Genesis Merchant Group Securities. Except for the
shares of Common Stock to be sold in this offering, the Company has agreed not
to offer, sell, contract to sell or otherwise issue any Common Stock or other
capital stock, with limited exceptions, prior to the expiration of 90 days from
the date of this Prospectus without the prior written consent of Genesis
Merchant Group Securities.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by its counsel, Goodwin, Procter &
Hoar LLP, Exchange Place, 24th Floor, Boston, Massachusetts 02109. Certain legal
issues related to the shares of Common Stock will be passed upon for the Selling
Agent by its counsel, McCutchen, Doyle, Brown & Enersen LLP, One Embarcadero
Place, 2100 Geng Road, Suite 200, Palo Alto, California 94303-0913.
EXPERTS
The consolidated financial statements and schedules of T Cell Sciences,
Inc. and subsidiary included in the Company's Annual Report to Stockholders on
Form 10-K for the year ended December 31, 1993 have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KMPG Peat Marwick, LLP, independent certified public accountants, and upon
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements as of December 31, 1994 and 1995
and for each of the two years in the period ended December 31, 1995 incorporated
by reference in this Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent public accountants, given on the authority
of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form S-3 under
the Act with respect to the shares of Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission, to which Registration Statement reference is hereby made. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
may be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.D. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
17
<PAGE> 19
- -----------------------------------------------------
- -----------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------------------
TABLE OF CONTENTS
PAGE
----
Available Information............................ 2
Incorporation of Certain
Documents by Reference.......................... 2
Prospectus Summary................................ 3
Risk Factors...................................... 7
Use of Proceeds................................... 12
Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 13
Dilution.......................................... 16
Plan of Distribution.............................. 16
Legal Matters..................................... 17
Experts........................................... 17
Additional Information............................ 17
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
5,000,000 SHARES
T CELL SCIENCES, INC.
COMMON STOCK
------------------
PROSPECTUS
------------------
GENESIS MERCHANT GROUP
SECURITIES
July , 1996
- -----------------------------------------------------
- -----------------------------------------------------
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1)
The following are the estimated expenses of issuance and distribution of
the shares registered hereunder on Form S-3:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee............................... $ 4,741.38
Nasdaq Listing Fee................................. $ 17,500.00
NASD Filing Fee.................................... $ 14,250.00
Legal Fees and Expenses............................ $ 50,000.00
Accounting Fees and Expenses....................... $ 20,000.00
Blue Sky Qualification Fees and Expenses........... $ 7,500.00
Transfer Agent's Fee .............................. $ 2,500.00
Miscellaneous ..................................... $ 42,500.00
---------------
Total........................................ $ 158,991.38
===============
</TABLE>
(1) The amounts set forth above, except for the SEC Registration Fee, the
Nasdaq Listing Fee and the NASD Filing Fee, are in each case estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware permits
indemnification of directors, officers and employees of a corporation under
certain conditions and subject to certain limitations. Article FIFTH of the
registrant's Amended and Restated By-Laws contains provisions for the
indemnification of directors, officers and employees within the limitations
permitted by Section 145.
The registrant carries a directors' and officers' liability insurance
policy which provides for payment of expenses of the registrant's directors and
officers in connection with threatened, pending or completed actions, suits or
proceedings against them in their capacities as directors and officers, in
accordance with the registrant's Amended and Restated By-Laws and the Delaware
General Corporation Law. In addition, Article SIXTH of the Third Restated
Certificate of Incorporation of the registrant protects a director of the
registrant against any personal liability to the registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the registrant
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived any improper benefit.
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1 Selling Agency Agreement.
5 Opinion of Goodwin, Procter & Hoar LLP.
23.1 Consent of Price Waterhouse LLP
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5).
24 Power of Attorney (included on signature page).
ITEM 17. UNDERTAKINGS.
A. 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. To include any material
information with respect to the plan of distribution
not previously disclosed in the registration
statement or any material change to such information
in the registration statement.
II-1
<PAGE> 21
2. That, for the purposes of determining any liability
under the Securities Act of 1933, each 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.
B. 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.
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
provisions described under Item 15 above, 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 Act 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 Act and will be governed by the final adjudication of such
issue.
D. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability
under the Securities Act of 1933, the information omitted from
the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, as amended,
(the "Securities Act") the registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Boston, Massachusetts, on July 19, 1996.
T CELL SCIENCES, INC.
By: /s/ Una S. Ryan
---------------------------
Una S. Ryan, Ph.D.
President, Chief Operating Officer and
Director
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that we, the undersigned officers and
directors of T Cell Sciences, Inc. hereby severally constitute Una S. Ryan,
Ph.D., James D. Grant and Norman W. Gorin and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Registration
Statement filed herewith and any and all amendments to said Registration
Statement (or any registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act), and
generally to do all such things in our names and in our capacities as officers
and directors to enable T Cell Sciences, Inc. to comply with the provisions of
the Securities Act, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorneys, or any of them, to said Registration Statement and any
and all amendments thereto.
Pursuant to the requirements of the Securities Act, this report has
been signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Una S. Ryan President, Chief Operating July 22, 1996
- ----------------------------------------- Officer and Director
Una S. Ryan, Ph.D.
/s/ James D. Grant Chief Executive Officer July 22, 1996
- ----------------------------------------- and Chairman of the Board
James D. Grant of Directors
/s/ Norman W. Gorin Chief Financial Officer and July 22, 1996
- ----------------------------------------- Vice President, Finance
Norman W. Gorin
/s/ Patrick C. Kung Director July 22, 1996
- -----------------------------------------
Patrick C. Kung, Ph.D.
Director , 1996
- ----------------------------------------- -------
John P. Munson
/s/ Thomas R. Ostermueller Director July 22, 1996
- -----------------------------------------
Thomas R. Ostermueller
/s/ John Simon Director July 22, 1996
- -----------------------------------------
John Simon
</TABLE>
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Description Numbered Page
- ----------- -------------
<S> <C>
1 Selling Agency Agreement
5 Opinion of Goodwin, Procter & Hoar LLP
23.1 Consent of Price Waterhouse LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5)
24 Power of Attorney (included in signature page)
</TABLE>
<PAGE> 1
Exhibit 1
5,000,000 SHARES
T-CELL SCIENCES, INC.
COMMON STOCK
SELLING AGENCY AGREEMENT
------------------------
July ____, 1996
GENESIS MERCHANT GROUP SECURITIES
909 Montgomery Street, Suite 600
San Francisco, CA 94133
Ladies and Gentlemen:
This letter shall set forth the agreement between T-Cell Sciences, Inc., a
Delaware corporation (the "COMPANY"), and the undersigned, Genesis Merchant
Group Securities, an Illinois partnership (the "SELLING AGENT"), in connection
with the Company's engagement of the Selling Agent to offer and sell on behalf
of the Company to prospective purchasers (the "PURCHASERS") up to [5,000,000]
shares (the "SHARE") of the Common Stock, par value $.001 per share (the "COMMON
STOCK"), of the Company, on the terms and subject to the conditions set forth
below.
The Company wishes to confirm its agreement with the Selling Agent as
follows:
1. ENGAGEMENT OF SERVICES. Subject to the terms and conditions set
forth herein, the Selling Agent shall provide to the Company, and the Company
shall retain the Selling Agent to provide on an exclusive basis, financial
advisory and placement services in connection with the arrangement of the
offering with purchasers of the Shares on behalf of the Company (the
"OFFERING").
2. AGENCY AND BEST EFFORTS. The Company understands and agrees that the
Selling Agent will be acting as the Company's agent, and not as principal, in
placing the Shares in compliance with the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "ACT"), and that the
Selling Agent's responsibility in this transaction is limited to the "best
efforts" undertaking to consummate the Offering, and the Company acknowledges
and agrees that the Selling Agent has no express or implied obligation to
purchase or place the Shares beyond such best efforts basis. The Selling Agent
shall make reasonable efforts to assist the Company in obtaining performance by
each purchaser whose offer to purchase shares of Common Stock has been solicited
by the Selling Agent and accepted by the Company, but the Selling Agent shall
not have any liability to the Company in the event any such purchase is not
consummated for any reason. The Shares shall be sold at such price as shall be
agreed to by the Company.
<PAGE> 2
3. EXCLUSIVE ENGAGEMENT.
(a) The Selling Agent's engagement hereunder shall be on an
exclusive basis and the Company agrees to refer promptly to the Selling Agent
all offers, inquiries and proposals relating to the Offering.
(b) In order to induce the Selling Agent to act as exclusive selling
agent for the Company with respect to the Offering, the Company agrees that it
shall not, directly or indirectly, and shall not permit its employees, agents or
representatives to, directly or indirectly, solicit, encourage or participate in
discussions in connection with or supply information relating to, the Offering
to any financing source, broker, dealer, finder, financial adviser, investment
banker or other similar person or entity.
4. FEES. In consideration of the Selling Agent's services hereunder,
the Company shall pay to the Selling Agent a commission (the "FEE") in an amount
equal to 6% of the gross proceeds of the Offering, the payment of which Fee
shall be payable out of the proceeds from the sale of the Shares on or prior to
the consummation of the sale of such Shares or portion thereof.
5. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Act a Registration Statement on Form S-3
(File No. __________) under the Act (the "REGISTRATION STATEMENT"), including a
prospectus subject to completion relating to the Shares. The term Registration
Statement as used in this Agreement means the Registration Statement (including
all financial schedules and exhibits), as amended at the time it becomes
effective, or, if the Registration Statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the Registration Statement will be
filed and must be declared effective before the offering of the Shares may
commence, the term "Registration Statement" as used in this Agreement means the
Registration Statement as amended by said post-effective amendment. The term
"PROSPECTUS" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by (i) any prospectus supplement relating to the
Shares and (ii) the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b). The term
"PRELIMINARY PROSPECTUS" as used in this Agreement means the prospectus subject
to completion in the form included in the Registration Statement at the time of
the initial filing of the Registration Statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. Any reference in this Agreement to the registration statement,
the Registration Statement, any Preliminary Prospectus 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 Act, as of the date of the
registration statement, the Registration Statement, such Preliminary Prospectus
or the Prospectus, as the case may be. As used herein, the term "INCORPORATED
DOCUMENTS" means the documents which at the time are incorporated by reference
in the registration statement, the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto.
2
<PAGE> 3
6. AGREEMENTS OF THE COMPANY. The Company agrees with the Selling Agent
as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the shares of Common Stock may
commence, the Company will endeavor to cause the Registration Statement or such
post-effective amendment to become effective as soon as possible and will advise
the Selling Agent promptly and, if requested by the Selling Agent, will confirm
such advice in writing, when the Registration Statement or such post-effective
amendment has become effective.
(b) The Company will advise the Selling Agent promptly and, if
requested by the Selling Agent, will confirm such advice in writing: (i) of any
request by the Commission for amendment of or a supplement to the Registration
Statement, any Preliminary Prospectus or the Prospectus or for additional
information and shall provide the Selling Agent with a reasonable opportunity to
comment thereon; (ii) when each amendment or supplement to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be in final form
for circulation to prospective purchasers of the Shares; (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the threatening of any proceeding for
such purpose; and (iv) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations thereunder
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to the Selling Agent, without charge
(i) one signed copy of the Registration Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the Registration Statement, (ii) such number of conformed copies of
the Registration Statement as originally filed and of each amendment thereto,
but without exhibits, as the Selling Agent may request, (iii) such number of
copies of the Incorporated Documents, without exhibits, as the Selling Agent may
request, and (iv) two copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus, or, prior to
the end of the period of time referred to in the first sentence in subsection
(f) below, file any document which upon filing becomes an Incorporated Document,
of which the Selling Agent shall not previously have been advised or to which,
after the Selling Agent shall have received a copy of the document proposed to
be filed, the Selling Agent shall reasonably object.
3
<PAGE> 4
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to the Selling Agent, without charge, in such quantities
as the Selling Agent has requested, copies of each form of the Preliminary
Prospectus. The Company consents to the use, in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the Selling Agent, prior to the date of the
Prospectus, of each Preliminary Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Selling Agent a prospectus is required by the Act to be
delivered in connection with offers or sales by the Selling Agent, the Company
will expeditiously deliver to the Selling Agent, without charge, as many copies
of the Prospectus (and of any amendment or supplement thereto) as the Selling
Agent may request. If during such period of time any event shall occur that in
the judgment of the Company or in the reasonable opinion of counsel for the
Selling Agent is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus (or to
file under the Exchange Act any document which, upon filing, becomes an
Incorporated Document) in order to comply with the Act or any other law, the
Company will forthwith prepare and, subject to the provisions of paragraph (d)
above, file with the Commission an appropriate supplement or amendment thereto
(or to such document), and will expeditiously furnish to the Selling Agent a
reasonable number of copies thereof. In the event that the Company and the
Selling Agent agree that the Prospectus should be amended or supplemented, the
Company, if requested by the Selling Agent, will reasonably consider promptly
issuing a press release announcing or disclosing the matters to be covered by
the proposed amendment or supplement.
(g) The Company will cooperate with the Selling Agent and with
counsel for the Selling Agent in connection with the registration or
qualification of the Shares for offering and sale by the Selling Agent under the
securities or Blue Sky laws of such jurisdictions as the Selling Agent may
reasonably request and will file such consents to service of process or other
documents necessary or appropriate in order to effect such registration or
qualification; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified or
to take any action which would subject it to service of process in suits, other
than those arising out of the offering or sale of the Shares, or taxation in any
jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(i) During the period of five years hereafter, the Company will
furnish to the Selling Agent (i) as soon as available, a copy of each report of
the Company mailed to shareholders or filed with the Commission, and (ii) from
time to time such other information concerning the Company as the Selling Agent
may reasonably request.
4
<PAGE> 5
(j) The Company will apply the net proceeds from the sale of the
Shares substantially in accordance with the description set forth in the
Prospectus.
(k) If Rule 430A of the Act is employed, the Company will timely
file the Prospectus pursuant to Rule 424(b) under the Act and will advise the
Selling Agent of the time and manner of such filing.
(l) Except as stated in this Agreement and in the Preliminary
Prospectus and Prospectus, the Company has not taken, nor will it 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.
(m) The Company will use its best efforts to have the shares of
Common Stock which it agrees to sell under this Agreement, subject to notice
issuance, listed on the NASDAQ National Market on or before the Closing Date.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Selling Agent that:
(a) Each Preliminary Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Preliminary Prospectus.
(b) The Company and the transactions contemplated by this Agreement
meet the requirements for using Form S-3 under the Act and Rule 415 promulgated
thereunder ("Rule 415"). The Registration Statement in the form in which it
became or becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the prospectus and
any supplement or amendment thereto when filed with the Commission under Rule
424(b) under the Act, complied or will comply in all material respects with the
provisions of the Act and the rules and regulations of the SEC promulgated
pursuant to the Act or the Exchange Act, as the case may be (the "Rules and
Regulations"), and will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed, when
such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the Rules and Regulations thereunder, any
further Incorporated Documents so filed will, when they are filed, conform in
all material respects with the requirements of the Exchange Act and the Rules
and Regulations thereunder; no Incorporated Document when it was filed (or, if
an amendment with respect to any such document was filed, when such amendment
was filed), contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further Incorporated Document,
when it is filed, will contain an untrue statement of a material fact or will
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
5
<PAGE> 6
(d) All the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights; the Shares have been duly
authorized and, when issued and delivered to the purchasers of such Shares
against payment therefor in accordance with the terms on which the Shares are
offered by the Company to such purchasers will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the Registration
Statement and the Prospectus.
(e) The Company is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries (as hereinafter defined) taken as
a whole.
(f) The Company has no subsidiary or subsidiaries and does not
control, directly or indirectly, any corporation, partnership, joint venture,
association or other business organization.
(g) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company, or to which the
Company or any of its properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement that
are not described or filed as required by the Act or the Exchange Act.
(h) The Company is not in violation of its certificate of
incorporation or bylaws, or, except as described in the Registration Statement
or the Prospectus, the Company is not in default in any material respect in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any material
agreement, indenture, lease or other instrument to which the Company is a party
or by which it or any of its properties may be bound. Except as described in the
Registration Statement or the Prospectus, to the Company's knowledge, the
Company is not in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or of any decree other
than with respect to patent, trademark or other similar intellectual property
issues of any court or governmental agency or body having jurisdiction over the
Company which would have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company.
(i) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company, nor the consummation
by the Company of the transactions contemplated hereby (i) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required for the registration of the Shares
under the Act and the Exchange Act, compliance with the securities or Blue Sky
laws of
6
<PAGE> 7
various jurisdictions and the listing of the Shares on the NASDAQ National
Market, all of which have been or will be effected in accordance with this
Agreement) or conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, the certificate of incorporation or bylaws of
the Company or (ii) conflicts or will conflict with in any material respect or
constitutes or will constitute a material breach of, or a default under, or
require any consent or waiver under, any material agreement, indenture, lease or
other instrument to which the Company is a party or by which it or any of its
properties may be bound, or violates or will violate in any material respect any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of its properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to the terms of any agreement or instrument to
which it is a party or by which it may be bound or to which any its property or
assets is subject, except for (A) such consents or waivers which have already
been obtained and are in full force and effect, or (B) such breaches, defaults,
consents, waivers, violations or liens the occurrence or non-receipt of which
would not, singly or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business, properties, net worth or results
of operations of the Company.
(j) The accountants, Price Waterhouse, LLP, who have certified or
shall certify the financial statements at [June 30, 1996] and for the three
years in the period ended [December 31, 1995] included or incorporated by
reference in the Registration Statement and the Prospectus (or any amendment or
supplement thereto) are independent public accountants as required by the Act.
(k) The financial statements, together with related schedules and
notes, set forth in the Registration Statement and the Prospectus (and any
amendment or supplement thereto) comply as to form in all material respects with
the requirements of the Act. Such financial statements fairly present the
financial position of the Company at the respective dates indicated and the
results of its operations and their cash flows for the respective periods
indicated, in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout such periods except, in the case of financial
statements for interim periods, (i) as stated herein and (ii) the absence of the
notes thereto meeting the requirements of GAAP. The other financial and
statistical information and data included or incorporated by reference in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(l) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or public policy underlying such laws, and
subject to the qualification that the enforceability of the Company's
obligations hereunder may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and by general equitable principles.
(m) Except as disclosed in the Registration Statement and the
Prospectus subsequent to the respective dates as of which such information is
given in the Registration Statement and the Prospectus, the Company has not
incurred any liability or obligation, direct or
7
<PAGE> 8
contingent, or entered into any transaction, not in the ordinary course of
business, that is material to the Company, and there has not been any change in
the capital stock, or material increase in the short-term debt or long-term
debt, of the Company, or any material adverse change, or any development
involving or which may reasonably be expected to involve, a prospective material
adverse change, in the condition (financial or other), business, net worth or
results of operations of the Company.
(n) The Company has good and marketable title to all property (real
and personal) described in the Prospectus as being owned by it, free and clear
of all material liens, claims, security interests or other encumbrances except
such as are described in the Registration Statement and the Prospectus or in a
document filed as an exhibit to the Registration Statement and all the property
described in the Prospectus as being held under lease by the Company is held by
it under valid, subsisting and enforceable leases.
(o) The Company has not distributed and, except as provided in
Section 6 of this Agreement, prior to the latest to occur of (i) the date of the
closing of the purchase and sale of the Shares (the "CLOSING DATE") by the
prospective purchasers and (ii) completion of the distribution of the Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares other than the Registration Statement, the Preliminary
Prospectus, the Prospectus or other material, if any, permitted by the Act.
(p) Except where the failure to obtain a permit, license, franchise
or authorization of a governmental or regulatory authority would not, singly or
in the aggregate, have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company,
(i) the Company has such permits, licenses, franchises and authorizations of
governmental or regulatory authorities ("PERMITS") as are necessary to own its
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the Prospectus
and all such Permits are valid and in full force and effect; (ii) the Company
has fulfilled and performed all its material obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each case
to such qualification as may be set forth in the Prospectus; and, (iii) except
as described in the Prospectus, none of such Permits contains any restriction
that is materially burdensome to the Company.
(q) The Company 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 authorization; (ii)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with GAAP and (B) 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.
(r) To the Company's knowledge, neither the Company nor any employee
or agent of the Company has made any payment of funds of the Company or received
or retained any funds in violation of any law, rule or regulation, which
payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
8
<PAGE> 9
(s) The Company has filed all tax returns required to be filed,
which returns are complete and correct, and the Company is not in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(t) No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the filing of the Registration Statement or consummation of
the transactions contemplated by this Agreement.
(u) Except as disclosed in the Prospectus, the Company owns all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by it or necessary for the
conduct of its businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company with
respect to the foregoing.
(v) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal Selling Agent" for, an "investment
company," as each term is defined in the Investment Company Act of 1940, as
amended.
(w) The Company (i) is in compliance in all material respects with
any and all applicable, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAW"),
(ii) has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business, except for such permits,
licenses or other approvals which, if not obtained, would not, singly or in the
aggregate, have a material adverse effect on the condition (financial or other),
business, properties, net worth, or results of operations of the Company. The
Company has not been named as a "potentially responsible party" under the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA").
(x) Except as disclosed in the Prospectus, the Company is not aware
of any costs or liabilities (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties) associated with Environmental Laws affecting the business,
operations and properties of the Company, which, singly or in the aggregate,
would have a material adverse effect on the condition (financial or other),
business, properties, net worth, or results of operations of the Company.
(y) (i) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary for companies of like size in a comparable stage of development in the
business in which it is engaged; (ii) all policies of insurance and fidelity or
surety bonds insuring the Company or its businesses, assets, employees, officers
and directors are in full force and effect; (iii) the Company is in compliance
with the terms of such policies and instruments in all material respects; and
(iv) there are no claims by the Company under an such policy or instrument as to
which any insurance company is denying liability or defending under a
reservation of rights clause.
9
<PAGE> 10
(z) The Company has not violated any federal, state or local law
relating to discrimination in the hiring, promotion or pay of employees nor any
applicable wage or hour laws, nor any provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA") or the rules and regulations promulgated
thereunder, nor has the Company engaged in any unfair labor practice, which
might result, singly or in the aggregate, in a material adverse effect in the
condition (financial or other), business, properties, net worth, or results of
operations of the Company. There is (i) no significant unfair labor practice
complaint pending against the Company or, to the best knowledge of the Company,
threatened against it, (ii) no significant strike, labor dispute, slowdown or
stoppage pending against the Company or, (iii) to the best knowledge of the
Company, no union representation question exists with respect to the employees
of the Company and, to the best knowledge of the Company, no union organizing
activities are taking place, except (with respect to any matter specified in
clause (i), (ii) or (iii) above, singly or in the aggregate) such as could not
have a material adverse effect on the condition (financial or other), business,
properties, net worth, or results of operations of the Company.
(aa) No offering, sale or other disposition of any Common Stock, or
any securities convertible into or exchangeable for shares of Common Stock, of
the Company will be made for a period of _____ days after the date of this
Agreement by the Company, other than hereunder or with the prior written consent
of the Selling Agent; provided, however, that the Company may issue and sell or
grant options to purchase Common Stock pursuant to any employee stock option
plan, stock ownership plan or other employee benefit plan of the Company in
effect on the date of this Agreement.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the Selling
Agent and each person, if any, who controls the Selling Agent within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus or in the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages liabilities or expenses arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
which has been made therein or omitted therefrom in reliance upon and in
conformity with the information relating to the Selling Agent furnished in
writing to the Company by or on behalf to the Selling Agent expressly for use in
connection therewith; PROVIDED, HOWEVER, that the indemnification contained in
this paragraph (a) with respect to any Preliminary Prospectus, the Registration
Statement or the Prospectus (or any supplement or amendment thereto) shall not
inure to the benefit of the Selling Agent (or to the benefit of any person
controlling the Selling Agent) on account of any such loss, claim, damage,
liability or expense arising from the offering the sale of Shares by the Selling
Agent to any person if a copy of the Prospectus (or any supplement or amendment
thereto) shall not have been delivered or sent to such person within the time
required by the Act and the regulations thereunder, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus or any
supplement or amendment thereto), PROVIDED that the Company has delivered the
Prospectus (and any supplement or amendment thereto) to the Selling Agent in
requisite quantity on a timely basis to permit such
10
<PAGE> 11
delivery or sending. The foregoing indemnity agreement shall be in addition to
any liability which the Company may otherwise have.
(b) If any action, suit, proceeding or investigation is commenced,
as to which the Selling Agent or any other person entitled to indemnification
under Section 8(a) proposes to demand indemnification, it shall notify the
Company with reasonable promptness; PROVIDED, HOWEVER, that any failure by the
Selling Agent or any such other person to notify the Company shall not relieve
the Company from its obligations hereunder, except to the extent that the
Company shall have been materially prejudiced in its ability to defend the
action, suit, proceedings or investigation for which such indemnification is
sought by reason of such failure. The Selling Agent shall have the right to
retain counsel of its own choice in its sole discretion, and the Company shall
pay the reasonable fees, reasonable expenses and reasonable disbursements of
such counsel; and such counsel shall to the extent consistent with its
professional responsibilities cooperate with the Company and any counsel
designated by the Company. The Company shall be liable for any settlement of any
claim against the Selling Agent made with the Company's written consent, which
consent shall not be unreasonably withheld. The Company shall not, without prior
written consent of the Selling Agent, settle or compromise any claim, or permit
a default or consent to the entry of any judgment in respect thereof, unless
such settlement, compromise or consent includes, as an unconditional term
thereof, the giving by the claimant to the Selling Agent of an unconditional
release from all liability in respect to such claim.
(c) The Selling Agent agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement, and
any person who controls the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Selling Agent, but only with respect to information
relating to the Selling Agent furnished in writing by or on behalf of the
Selling Agent expressly for use in the Registration Statement, the Prospectus or
any Preliminary Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company, any of its
directors, any such officer, or any such controlling person, based on the
Registration Statement, the Prospectus or any Preliminary Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against the Selling Agent pursuant to this paragraph (c), the Company shall have
the rights and duties given to the Selling Agent by paragraph (b) above, and the
Selling Agent, its directors, any such officer, and any such controlling person,
shall have the rights and duties given to the Company by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Selling Agent may otherwise have.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraph (a) or (c) hereof in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Selling Agent 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 the Company on the one hand and the Selling Agent on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable
11
<PAGE> 12
considerations. The relative benefits received by the Company on the one hand
and the Selling Agent on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (after deducting the Selling Agent's
commission and before deducting expenses) received by the Company bear to the
total commissions received by the Selling Agent. The relative fault of the
Company on the one hand and the Selling Agent on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by the Selling Agent on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and the Selling Agent agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, the Selling Agent
shall not be required to contribute any amount in excess of the amount by which
the total price of the Shares placed by it and distributed to the public exceeds
the amount of any damages which the Selling Agent has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(f) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of the Selling Agent or any person
controlling such Selling Agent, the Company, its directors or officers or any
person controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
the Selling Agent or any person controlling the Selling Agent, or to the
Company, its directors or officers, or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 8.
9. CONDITIONS OF SELLING AGENT'S OBLIGATIONS. The obligations of the
Selling Agent to perform hereunder are subject to the following conditions:
12
<PAGE> 13
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Registration Statement or such post-effective amendment shall have become
effective, and all filings, if any, required to be made prior to that time by
Rules 424 and 430A under the Act shall have been timely made; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Company or the Selling Agent, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the prospectus or otherwise) shall have been complied
with to the Selling Agent's satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any material change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company, which
in the Selling Agent's reasonable opinion would materially, adversely affect the
market for the Shares, or (ii) any event or development relating to or involving
the Company or any executive officer or director of the Company which makes any
statement made in the Prospectus untrue or which, in the reasonable opinion of
the Company and its counsel or the Selling Agent and its counsel, requires the
making of any addition to or change in the Prospectus in order to state a
material fact required by the Act or any other law to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in the
Selling Agent's reasonable opinion, materially adversely affect the market for
the Shares.
(c) The Selling Agent shall have received an opinion of Goodwin,
Proctor & Hoar, counsel for the Company, dated the Closing Date and addressed to
the Selling Agent to the effect that:
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered and
qualified to conduct its business and is in good standing in every state where
the failure to be so qualified could have a material adverse effect on the
Company.
(ii) The authorized capital stock of the Company conforms
in all material respects as to legal matters to the description thereof
contained in the Prospectus under the caption "Description of Capital Stock";
(iii) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly authorized and
validly issued, and are fully paid and nonassessable;
(iv) The Shares have been duly authorized and, when issued
and delivered to the prospective purchasers against payment therefor, will be
validly issued, fully paid and nonassessable and free of any preemptive, or to
the knowledge of such counsel, similar rights that entitle or will entitle any
person to acquire any Shares upon the issuance thereof by the Company;
13
<PAGE> 14
(v) The form of certificates for the Shares complies in
all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and bylaws of the Company and the
requirement of the NASDAQ Stock Market;
(vi) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the knowledge of
such counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose are pending before
or contemplated by the Commission; and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in accordance with Rule 424(b);
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver the Shares to the
prospective purchasers thereof, and this Agreement has been duly authorized,
executed and delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by the Selling Agent, is a valid, legal
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement of rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or
principles of public policy and subject to the qualification that the
enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles;
(viii) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance by the Company
with the provisions hereof, nor consummation by the Company of the transactions
contemplated hereby conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company or,
to the knowledge of such counsel, any material agreement, indenture, lease or
other instrument to which the Company is a party or by which any of its
properties is bound that is an exhibit to the Registration Statement or to any
Incorporated Document, or of which such counsel is aware, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company, nor will any such action result in any material violation
of any existing law, regulation, ruling (assuming compliance with all applicable
state securities and Blue Sky laws), judgment, injunction, order or decree known
to such counsel, applicable to the Company, or any of its properties which would
have a material adverse effect on the Company;
(ix) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act and the Exchange Act,
or such as may be required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares and such as have been obtained with
respect to the listing of Shares on the NASDAQ National Market) for the valid
issuance and sale of the Shares as contemplated by this Agreement;
(x) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act (except
with respect to the location in the Prospectus of the information required by
Items 502(a) and (c) of
14
<PAGE> 15
Regulation S-K under the Act as to which counsel need not express any opinion)
and each of the Incorporated Documents (except for the financial statements and
the notes thereto and the schedules and other financial and statistical data
included therein, as to which counsel need not express any opinion), at the time
it was first filed with the Commission complied as to form in all material
respects with the Exchange Act and the rules and regulations of the Commission
thereunder;
(xi) The statements in the Registration Statement,
Prospectus and the Incorporated Documents under the headings "Risk Factors,"
"Business" and "Description of Capital Stock," insofar as they are descriptions
of contracts, agreements or other legal documents or refer to statements of law
or legal conclusions, are accurate and present fairly the information required
by the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder to be disclosed therein;
(xii) The Company is not in violation of its certificate of
incorporation or bylaws, or, except as disclosed in the Prospectus or an
amendment or supplement thereto, is not in default in the performance of any
material obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness;
(xiii) Except as disclosed in the Prospectus, the Company has
full power and authority, and all necessary governmental authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental regulatory officials and bodies (except where the failure to so
have any such authorizations, approvals, orders, licenses, certificates,
franchises or permits, individually or in the aggregate, would not have a
material adverse effect on the business, properties, operations or financial
condition of the Company, to own its properties and to conduct its business as
now being conducted, as described in the Prospectus;
(xiv) To the knowledge of such counsel, (A) other than as
described or contemplated in the Prospectus (or any supplement thereto), there
are no legal or governmental proceedings pending or threatened against the
Company, or to which the Company or any of its property, is subject, which are
required to be described in the Registration Statement or Prospectus (or any
amendment or supplement thereto) and (B) there are no agreements, contracts,
indentures, leases or other instruments, that are required to be described in
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required, as the case
may be;
(xv) Except as disclosed in the Prospectus, the Company owns
all patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by it or necessary for the
conduct of its business, and such counsel is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company with
respect to the foregoing;
(xvi) Except as described or referred to in the Prospectus,
there are no outstanding options, warrants or other rights calling for the
issuance of, and such counsel does not know of any commitment, plan or
arrangement to issue, any shares of capital stock of the Company or any security
convertible into or exchangeable or exercisable for capital stock of the
Company;
15
<PAGE> 16
(xvii) Except as described in the Prospectus, there is no
holder of any security of the Company or any other person who has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, the Shares or the right to
have any Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company; and
(xviii) To the knowledge of such counsel, the Company is not
in material violation of any law, ordinance, administrative or governmental rule
or regulation, including all Environmental Laws, applicable to the Company or of
any decree of any court or governmental agency or body having jurisdiction over
the Company, except as disclosed in the Prospectus or a supplement or amendment
thereto; and the Company has not been named as a "potentially responsible
person" under CERCLA;
(xix) The Company is duly registered and qualified to conduct
its business and is in good standing each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure to so register or qualify can be cured
without having a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company;
(xx) The offer and sale of the Shares comply with the
requirements of Rule 415; and
(xxi) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review and discussion
of the contents thereof (including review and discussion of the contents of all
Incorporated Documents), and nothing has come to the attention of such counsel
that has caused them to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became effective,
or the Prospectus, as of its date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that any amendment or
supplement to the Prospectus, as of its respective date, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data included in
the Registration Statement or the Prospectus or any Incorporated Document).
(d) The Selling Agent shall have received agreements executed by all
officers, directors and holders of greater than five per cent (5%) of the
Company's Common Stock (collectively the "SIGNIFICANT SHAREHOLDERS") which
provide that for a period of 90 days after the effective date of the
Registration Statement, such Significant Shareholders shall not to directly or
indirectly, offer, sell, grant any options to purchase or otherwise dispose of
any shares of the Company's Common Stock held by them.
16
<PAGE> 17
(e) The Selling Agent shall have received letters addressed to the
Selling Agent, and dated the date hereof and the Closing Date from Price
Waterhouse LLP, independent certified public accountants, substantially in the
forms heretofore approved by the Selling Agent.
(f) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission; (ii) there shall not have been any change in the
capital stock of the Company nor any material increase in the short-term or
long-term debt of the Company (other than in the ordinary course of business)
from that set forth or contemplated in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); (iii) there shall not have
been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, net worth or results
of operations of the Company; (iv) the Company shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company, other than those reflected in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (v) all the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the date
hereof and on and the Closing Date as if made on and as of the Closing Date, and
the Selling Agent shall have received a certificate, dated such date and signed
by the chief executive officer and the chief financial officer of the Company,
to the effect set forth in this Section 9(g) and in Section 9(h) hereof.
(g) The Company shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein contained
and required to be performed or complied with by it hereunder at or prior to
such date.
(h) Prior to the time the Registration Statement is ordered
effective by the Commission, the Company shall have filed with the NASDAQ
National Market an additional listing notification for the Shares and all
supporting materials required by The NASDAQ Stock Market Inc.; and no reason or
set of facts shall exist which is likely to adversely affect the listing of the
Shares or the continued listing of the shares of Common Stock of the Company
presently listed on the NASDAQ National Market.
(i) The Company shall have furnished or caused to be furnished to
the Selling Agent such further certificates and documents as the Selling Agent
shall have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to the Selling Agent and its counsel.
Any certificate or document signed by any officer of the Company and
delivered to the Selling Agent, or to its counsel, shall be deemed a
representation and warranty by the Company to the Selling Agent.
10. EXPENSES. Regardless of the consummation of the Offering, the Company
agrees to pay all costs and expenses incident to the performance by it of its
obligations hereunder and all costs
17
<PAGE> 18
and actual accountable out-of-pocket expenses incurred by or on behalf of the
Selling Agent including, without limitation, the following: (i) the preparation,
printing (or reproduction), and filing with the Commission of the Registration
Statement (including financial statements and exhibits thereto), each
Preliminary Prospectus, the Prospectus, and each amendment or supplement to any
of them prior to or during the period specified in Section 6(f) hereof but not
exceeding nine months after the effective date of the Registration Statement;
(ii) the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, the
Incorporated Documents, and all amendments or supplements to any of them, as may
be reasonably requested for use in connection with the offering and sale of the
Shares during the period specified in Section 6(f) hereof but not exceeding nine
months after the effective date of the Registration Statement; (iii) the
preparation, printing, authentication, issuance and delivery of certificates for
the Shares, including any stamp taxes in connection with the original issuance
and sale of the Shares; (iv) the printing (or reproduction) and delivery of this
Agreement, the preliminary and supplemental Blue Sky Memoranda and all other
agreements or documents printed (or reproduced) and delivered in connection with
the offering of the Shares; (v) the listing of the Shares on the NASDAQ National
Market; (vi) the registration or qualification of the Shares for offer and sale
under the securities or Blue Sky laws of the several states as provided in
Section 6(g) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Selling Agent relating to the preparation, printing (or
reproduction), and delivery of the preliminary and supplemental Blue Sky
Memoranda and such registration and qualification); (vii) the filing fee and the
fees and expenses of counsel for the Selling Agent in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (viii) the transportation and other expenses incurred by or on behalf of
Selling Agent representatives in connection with presentations to prospective
purchasers of the Shares; and (ix) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company; provided, however, that the Company shall reimburse
the Selling Agent for its expenses only up to a maximum of [$__________].
11. EFFECTIVENESS OF AGREEMENT; TERMINATION. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the Registration Statement or such
post-effective amendment has been released by the Commission. This Agreement
shall be subject to termination in the absolute discretion of the Selling Agent,
without further liability in the part of the Selling Agent or the Company, by
notice to the Company at any time prior to the Closing Date. Notice of such
termination may be given by telegram, telecopy or telephone and shall be
subsequently confirmed by letter. Notwithstanding the foregoing, the provisions
of Sections 8, 10, 12 and 13 shall survive any termination under this Section
11.
12. MICELLANEOUS. Except as otherwise provided in Section 11, hereof,
notice given pursuant to any provision of this Agreement shall be in writing and
shall be delivered (i) if to the Company, at the office of the Company at T Cell
Sciences, Inc., 115 Fourth Avenue, Needham, MA 02194, Attention: Ms. Una Ryan,
President, Chief Scientific Officer, with a copy to Stuart Cable at Goodwin,
Proctor & Hoar; or (ii) if to the Selling Agent, at your office at 909
Montgomery Street, Suite 600, San Francisco, California 94133, Attention: Mr.
Will K. Weinstein, with a copy to Lior Nuchi at McCutchen, Doyle, Brown &
Enersen.
18
<PAGE> 19
This Agreement constitutes the entire understanding and agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
This Agreement has been and is made solely for the benefit of the Selling
Agent, the Company, its directors and officers, and the other controlling
persons referred to in Section 8 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successor and assigns" as used in this Agreement shall
include a purchaser from any Selling Agent of any of the Shares in his status as
such purchaser.
The Company will permit the Selling Agent, at the Selling Agent's expense
and subject to the Company's prior approval, such approval not unreasonably
withheld, to advertise with a public "tombstone" announcement of completion of
the Offering.
13. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and to be performed within the State of California.
This Agreement may be signed in various counterparts which together
constitute on and the same instrument. If signed in counterparts, this Agreement
shall not become effective unless at least one counterpart hereof shall have
been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Selling Agent.
Very truly yours,
T-CELL SCIENCES, INC.
By:
-------------------------------------------
Name:
Title:
Confirmed as of the date first above mentioned.
GENESIS MERCHANT GROUP SECURITIES
By:
-------------------------------------------
Name: Will K. Weinstein
Title: Senior Partner
19
<PAGE> 1
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
July 22, 1996
T Cell Sciences, Inc.
119 Fourth Avenue
Needham, MA 02194
Ladies and Gentlemen:
Re: Registration Statement on Form S-3
----------------------------------
This opinion is delivered in our capacity as counsel to T Cell
Sciences, Inc. (the "Company") in connection with the registration of up to
5,000,000 shares of the Company's common stock par value $.001 per share (the
"Common Stock") on a Registration Statement on Form S-3 (the "Registration
Statement") filed with Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act").
In connection with rendering this opinion, we have examined the
Articles of Incorporation, as heretofore amended and restated, the Amended and
Restated By-laws of the Company and such records of the corporate proceedings of
the Company as we deemed material.
We are attorneys admitted to practice in The Commonwealth of
Massachusetts. We express no opinion concerning the laws of any jurisdictions
other than the laws of the United States of America, the Commonwealth of
Massachusetts and the Delaware General Corporation Law.
Based upon and subject to the foregoing, we are of the opinion that the
shares of Common Stock offered pursuant to the Registration Statement will be,
when issued and delivered against payment therefor, legally issued, fully paid
and nonassessable shares of the Company's Common Stock.
The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of state
laws regulating the offer and sale of securities.
<PAGE> 2
GOODWIN, PROCTER & HOAR LLP
T Cell Sciences, Inc.
July 22, 1996
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
Exhibit 23.1
Consent of Independent Accountant
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated, March 5, 1996 appearing on page 11 of T Cell Sciences, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1995. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Boston, Massachusetts
July 22, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
July 18, 1996
