As filed with the Securities and Exchange Commission on June 11, 1998
Registration Statement No. 333-
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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
(State or other jurisdiction
of incorporation or organization)
13-3191702
(I.R.S. Employer
Identification Number)
--------------------
119 Fourth Avenue
Needham, Massachusetts 02194
(781) 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 Executive Officer
T Cell Sciences, Inc.
119 Fourth Avenue
Needham, Massachusetts 02194
(781) 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.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
(617) 570-1000
--------------------
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>
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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(1) Fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value 1,968,494 Shares $ 2.9375 $ 5,782,452 $ 1,706
=================================================================================================================================
</TABLE>
(1) This estimate is made pursuant to Rule 457(c) and (h) under the
Securities Act of 1933, as amended (the "Securities Act"), solely for
the purposes of determining the registration fee and is based upon the
price at which outstanding securities were issued or may be exercised
and the market value of outstanding shares of Common Stock, $.001 par
value per share of T Cell Sciences, Inc. on June 9, 1998, utilizing the
average of the high and low sale prices reported on the Nasdaq National
Market System for that date.
-------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
PROSPECTUS
T CELL SCIENCES, INC.
1,968,494 Shares of Common Stock
This Prospectus relates to 1,968,494 shares (the "Shares") of common stock,
par value $.001 per share (the "Common Stock"), of T Cell Sciences, Inc. (the
"Company") to be sold by certain stockholders of the Company (the "Selling
Stockholders") from time to time. The Selling Stockholders may sell the Shares
from time to time in transactions on the Nasdaq National Market System, in
negotiated transactions or by a combination of these methods, at fixed prices
that may be changed, at market prices at the time of sale, at prices related to
market prices or at negotiated prices. The Selling Stockholders may effect these
transactions by selling the Shares to or through broker-dealers, who may receive
compensation in the form of discounts or commissions from the Selling
Stockholders or from the purchasers of the Shares for whom the broker-dealers
may act as an agent or to whom they may sell as a principal, or both. See
"Selling Stockholders" and "Plan of Distribution." The Common Stock of the
Company is traded under the symbol "TCEL" on the Nasdaq National Market. On June
9, 1998, the reported closing price for the Common Stock on the Nasdaq National
Market was $2.875.
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear all of the expenses in connection with
the registration and sale of the Shares (other than underwriting discounts and
selling commissions).
See "Risk Factors" beginning on page 3 for a discussion of certain special
factors which should be considered by prospective investors in purchasing the
shares of Common Stock offered hereby.
--------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------
The date of this Prospectus is June __, 1998
<PAGE>
AVAILABLE 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 Securities Act of 1933 (the "Securities 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. 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. 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.C. 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, and copies may be obtained at the prescribed rates from
the Public Reference section of the Commission at its principal office in
Washington, D.C. The Commission also maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
Commission. 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 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
Commission. Such proxy statements, reports and other information filed by the
Company may be inspected and copied at prescribed rates at the aforementioned
public reference facilities maintained by the Commission. 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.
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 on Form 10-K and 10-K/A for
the fiscal year ended December 31, 1997; (2) the Company's Quarterly Report on
Form 10-Q and 10-Q/A for the quarter ended March 31, 1998; (3) the definitive
Proxy Statement of the Company for the Annual Meeting of Stockholders held May
12, 1998; and (4) the description of the Common Stock of the Company contained
in the Company's Registration Statement on Form 8-A, filed on 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: 119 Fourth Avenue, Needham,
Massachusetts 02194, Attention: Corporate Secretary (telephone number (781)
433-0771).
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<PAGE>
This Prospectus, including the information incorporated herein by
reference, contains forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. The Company's actual
results could differ materially from those projected in the forward-looking
statements set forth in this Prospectus including the information incorporated
herein by reference. Investors should carefully consider the discussion of risk
factors below, in addition to the other information contained in this
Prospectus, in connection with an investment in the Shares offered hereby.
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.
THE PURCHASE OF THE SHARES OF COMMON STOCK ENTAILS VERY SIGNIFICANT RISKS
INCLUDING THE FOLLOWING FACTORS WHICH SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS
MEMORANDUM:
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 these 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 United States Food
and Drug Administration (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 $71.7 million as of March 31, 1998. 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 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
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<PAGE>
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. As of March 31, 1998, the Company has raised net proceeds of
approximately $80.3 million through equity financings. 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
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 and
other materials necessary for clinical trials in addition to those currently
being conducted by the Company. 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 continuing 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
4
<PAGE>
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 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
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 also enter into strategic
partnerships for the 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 the Company,
if at all.
Competition and Risk of Technological Obsolescence. Biotechnology,
pharmaceuticals and therapeutics 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, therapeutics 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 therapeutics 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
materially 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
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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.
Dependence on Reimbursement. In both the United States and elsewhere,
sales, if any, of most of the Company's products 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
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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 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 future business,
financial condition and results of operations.
Liquidity; Shares Eligible for Future Sale. The Shares offered for sale
hereby have not been registered under the Securities Act or any state securities
laws, and as a result, they may not be transferred or resold except as permitted
under the Act and applicable state securities laws pursuant to registration or
an exemption therefrom. The Company has agreed to file with the Securities and
Exchange Commission a registration statement for the resale from time to time of
the Shares by purchasers thereof.
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 2.0 million
shares of Common Stock are presently eligible for sale upon exercise of
currently outstanding options.
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.
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THE COMPANY
T Cell Sciences, Inc., a Delaware corporation (the "Company"), is a
biopharmaceutical company engaged in the discovery and development of innovative
drugs targeting diseases of the immune, inflammatory and vascular systems. The
Company's technology platforms are based on its understanding of the ways in
which the body triggers it natural defense mechanisms. The Company's lead
therapeutic program is focused on developing compounds that inhibit the
inappropriate activation of the complement cascade, a vital part of the body's
immune defense system. The Company has also established a program for the
discovery and development of small-molecule immunoregulatory therapeutic
compounds, for the prevention of immune rejection of transplanted organs and the
treatment of autoimmune disorders. The Company's third program targets the
development of a therapeutic vaccine for the prevention and treatment of
atherosclerosis.
The Company's lead therapeutic program is focused on developing compounds
that inhibit a part of the immune system called the complement system. The
complement system is a series of proteins that are important initiators of the
body's acute inflammatory response against disease, infection and injury.
Excessive complement activation also plays a role in chronic inflammatory
conditions. When the complement is activated, it helps to identify and eliminate
damaged tissue. In certain situations, however, excessive complement activation
may destroy viable and healthy tissue which, though damaged, might recover. This
excessive response compounds the effects of the initial injury or introduces
unwanted tissue destruction in clinical situations such as organ transplants,
other surgeries and treatment for heart attacks. 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 the complement system could have therapeutic and prophylactic
applications in several acute and chronic conditions, including adult
respiratory distress syndrome, reperfusion injury, organ transplant, multiple
sclerosis, Alzheimer's disease, rheumatoid arthritis and lupus. In the U.S.,
several million people are afflicted with these complement-medicated conditions.
In October 1997, the Company announced positive preliminary results with
respect to efficacy from a Phase I/II clinical trial of TP10 in patients
undergoing lung transplantation. A goal of the trial was to determine the
ability of TP10 to reduce reperfusion injury and improve lung function in
patients with end-stage pulmonary disease who were undergoing lung transplant
surgery. The results showed that at 24 hours after surgery, significantly fewer
of the patients receiving TP10 required ventilation as compared to those
receiving placebo. The patients receiving TP10 tended to have shorter time
intubated and on ventilator, and shorter stays in the ICU. Additionally, those
patients who received TP10 and also underwent cardiopulmonary by-pass as part of
the transplantation procedure showed significantly decreased intubation time and
time on ventilation.
In October 1997, the Company announced it had entered into a collaborative
agreement with Novartis Pharma AG, Basel, Switzerland ("Novartis") relating to
the development of TP10 for use in xenotransplantation (animal organs into
humans) and allotransplantation (human to human organ transplantation). Under
the agreement, the Company may receive annual option fees and supplies of TP10
for clinical trials, the combination of which is valued at up to approximately
$5 million, in return for granting Novartis a two-year option to license TP10
with exclusive worldwide (except Japan) marketing rights. Should Novartis
exercise its option to license TP10 and continue development, the Company may
receive an equity investment, licensing fees and milestone payments based upon
attainment of certain development and regulatory goals, which has an approximate
aggregate value of up to $25 million. The Company may also receive funding for
research as well as royalty payments on eventual product sales.
In April 1998, the Company announced positive results with respect to
efficacy from a Phase I/II clinical trial of TP10 in patients undergoing lung
transplantation. A goal of the trial was to determine the ability of TP10 to
reduce reperfusion injury and improve lung function in patients with end-stage
pulmonary disease who were undergoing lung transplant surgery. The results
showed that one day after surgery, significantly fewer of the patients receiving
TP10 required ventilation as compared to those receiving placebo. The patients
receiving TP10 tended to have shorter time intubated and on ventilator, and
shorter stays in the ICU. Additionally, those patients who received TP10 and
also underwent cardiopulmonary by-pass as part of the transplantation procedure
showed significantly decreased intubation time and time on ventilation.
As a direct result of over thirteen (13) years of experience working with T
cells and building on the Company's evaluation capabilities in molecular and
cellular immunology and small-animal immunology models, the Company has
developed a proprietary screening platform that it uses to identify
small-molecule compounds which can regulate T cell activation. These whole cell
screens are based on signal transduction and gene regulation directed to
cytokine gene targets. 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 Cyclosporin and FK506, which due to their toxicity, have limited
8
<PAGE>
application in chronic conditions. Despite this limitation, worldwide sales of
Cyclosporin in 1995 exceeded $1 billion. The Company's basic approach is to
combine the biological skills and proprietary screens it has developed with the
small-molecule libraries created by other biotechnology companies.
The Company is developing a therapeutic vaccine against endogenous
cholesteryl ester transfer protein ("CETP"), which may be useful in reducing
risk factors for atherosclerosis. CETP is a key intermediary in the balance of
high-density lipoprotein ("HDL" or "good" cholesterol) and low-density
lipoprotein ("LDL" or "bad" cholesterol). The Company 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 atherosclerosis. The Company has
conducted studies using animal models that demonstrate the Company's ability to
break immune tolerance, produce autoreactive antibodies to CETP, elevate HDL
levels and reduce blood vessel lesions.
RECENT DEVELOPMENTS
On May 12, 1998, the Company entered into a definitive merger agreement
whereby it will acquire Virus Research Institute, Inc. ("VRI"). Under the terms
of the merger agreement, which is subject to shareholder and regulatory
approval, the Company will issue 1.55 shares of its common stock and 0.2
warrants for each share of VRI common stock. Each warrant represents the right
to purchase a share of the Company's common stock for $6.00 per share and will
expire five years from the closing date. The number of shares of common stock
outstanding on May 12, 1998 was 28,531,285 and 9,039,355 for T Cell Sciences and
VRI, respectively.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
REGISTRATION RIGHTS
The registration of the Shares pursuant to the Registration Statement of
which this Prospectus is a part will discharge a portion of the Company's
obligations under the terms of a Stock Purchase Agreement dated March 20, 1998.
Pursuant to the Stock Purchase Agreement, the Company has agreed to pay all
expenses of registering the Shares (other than brokerage and underwriting
commissions, taxes of any kind and any legal, accounting and other expenses
incurred by a holder thereunder). The Company also has agreed under the Stock
Purchase Agreement to indemnify each Selling Stockholder and its officers,
directors and other affiliated persons and any person who controls any Selling
Stockholder against losses, claims, damages and expenses arising under the
securities laws in connection with the Registration Statement or this
Prospectus, subject to certain limitations. In addition, each Selling
Stockholder under the Stock Purchase Agreement severally agreed to indemnify the
Company and its respective directors, officers and any person who controls the
Company against all losses, claims, damages and expenses arising under the
securities laws insofar as such loss, claim, damage or expense relates to
information furnished to the Company by such Selling Stockholder for use in the
Registration Statement or Prospectus or an amendment or supplement thereto or
the failure by such Selling Stockholder (through no fault of the Company) to
deliver or cause to be delivered this Prospectus or any amendment or supplement
thereto to any purchaser of Shares covered by the Registration Statement from
such Selling Stockholder.
9
<PAGE>
SELLING STOCKHOLDERS
The Shares are to be offered by and for the respective accounts of the
Selling Stockholders. The following table sets forth the name and number of
shares of Common Stock owned by each Selling Stockholder as of March 20, 1998.
The Shares offered by this Prospectus may be offered from time to time by the
Selling Stockholders. Because the Selling Stockholders may sell all, some or
none of the Shares, the Company has assumed that the Selling Stockholders will
sell all of the Shares in determining the number and percentage of shares of
Common Stock that each Selling Stockholder will own upon completion of the
offering to which this Prospectus relates. The amounts set forth below are based
upon information provided by the Selling Stockholders and are accurate to the
best knowledge of the Company.
<TABLE>
<CAPTION>
Shares of Shares of
Common Stock Shares of Common Stock Owned
Beneficially Owned Common Stock After the Offering (2)
Selling Stockholder as of March 31, 1998 Offered Hereby Number(1) Percent (2)
- ------------------- -------------------- -------------- --------- -----------
<S> <C> <C> <C> <C>
SMALLCAP World Fund, Inc..................... 1,500,000 200,000 1,300,000 4.6%
Lombard Odier & Cie.......................... 1,053,631 1,052,631 1,000 *
Lindfield Management Inc. ................... 353,469 353,469 0 *
Pierre Alan Mathier.......................... 317,036 317,036 0 *
Sequest Foundation........................... 35,191 35,191 0 *
Anisfield Investments, Ltd................... 10,167 10,167 0 *
Total........................................ 3,269,494 1,968,494 1,301,000 4.6%
</TABLE>
- -----------------
* Less than 1%.
(1) Assumes that all Shares hereby offered by the Selling Stockholders are sold.
(2) Based on 28,531,285 outstanding shares of Common Stock of the Company as of
March 31, 1998.
PLAN OF DISTRIBUTION
Shares of Common Stock covered hereby may be offered and sold from time to
time by the Selling Stockholders. The Selling Stockholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made in transactions on the
Nasdaq National Market or otherwise at prices related to the then current market
price or in negotiated transactions. The Selling Stockholders may also make
private sales either directly or through a broker or brokers. The Shares may be
sold by one or more of the following methods: (a) purchases by the broker-dealer
as principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (b) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (c) block trades in which the broker-dealer
so engaged will attempt to sell the Shares as agent, but may position and resell
a portion of the block as principal to facilitate the transaction. In effecting
sales, broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate. Broker-dealers will receive commissions or
discounts from the Selling Stockholders in amounts to be negotiated immediately
prior to the sale.
In offering the shares of Common Stock covered hereby, the Selling
Stockholders and any broker-dealers who execute sales for the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales, and any profits realized by the
Selling Stockholders and the compensation of such broker-dealer may be deemed to
be underwriting discounts and commissions under the Securities Act.
The Company has agreed to indemnify each Selling Stockholder against any
liabilities, under the Securities Act or otherwise, arising out of or based upon
any untrue or alleged untrue statement of a material fact in the Registration
Statement or this Prospectus or by any omission of a material fact required to
be stated therein except to the extent that such liabilities arise out of or are
based upon any untrue or alleged untrue statement or omission in any information
furnished in writing to the Company by the Selling Stockholder expressly for use
in the Registration Statement.
10
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will be passed
upon for the Company by its counsel, Goodwin, Procter & Hoar LLP, Boston,
Massachusetts.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1997, have been so incorporated in reliance upon the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
11
<PAGE>
================================================================================
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any other person. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of Common Stock to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. 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 or that information
contained herein is correct as of any time subsequent to the date hereof.
---------------------------
TABLE OF CONTENTS
---------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information............................ 2
Incorporation of Certain Documents by Reference.. 2
Risk Factors..................................... 3
The Company...................................... 8
Recent Developments.............................. 9
Use of Proceeds.................................. 9
Registration Rights.............................. 9
Selling Stockholders............................. 10
Plan of Distribution............................. 10
Legal Matters.................................... 11
Experts.......................................... 11
</TABLE>
---------------------------
================================================================================
1,968,494 Shares
T CELL SCIENCES, INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
June 11, 1998
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution. (1)
The following are the estimated expenses of the distribution of the Shares
registered hereunder on Form S-3:
<TABLE>
<S> <C>
SEC Registration Fee .......................................... $ 1,706
Legal Fees and Expenses ....................................... 20,000
Placement Fees & Expenses ..................................... 182,655
---------
Total................................................. $ 204,361
=========
</TABLE>
(1) The amounts set forth above, except for the SEC Registration Fee, are
estimated.
Item 15. Indemnification of Directors and Officers.
The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law (the "DGCL"), which enables a corporation
to eliminate or limit the personal liability of a director for monetary damages
for violations of the director's fiduciary duty, except for liability (i) for
any breach of the director's duty of loyalty to the Company, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under to Section 145 or (iv) for any transaction from
which a director derived an improper personal benefit. The Company has adopted
such provisions in the Company's Amended and Restated Bylaws (the "Bylaws").
The DGCL permits, but does not require, a corporation to indemnify its
directors, officers, employees or agents and expressly provides that the
indemnification provided for under the DGCL shall not be deemed exclusive of any
indemnification right under any bylaw, vote of stockholders or disinterested
directors, or otherwise. The DGCL permits indemnification against expenses and
certain other liabilities arising out of legal actions brought or threatened
against such persons for their conduct on behalf of the corporation, provided
that each such person acted in good faith and in a manner that he or she
reasonably believed was in or not opposed to the corporation's best interests
and in the case of a criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. The DGCL does not allow indemnification of
directors in the case of an action by or in the right of the corporation
(including stockholder derivative suits) unless the directors successfully
defend the action or indemnification is ordered by the court. The Bylaws of the
Company provide for indemnification to the fullest extent authorized by the DGCL
and, therefore, these statutory indemnification rights are available to the
directors, officers, employees and agents of the Companies. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act") may be permitted to directors and officers of the
Company pursuant to the foregoing provision or otherwise, the Company has been
advised that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and is therefore, unenforceable.
The Company currently carries a directors' and officers' liability
insurance policy which provides for payment of expenses of the Company'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 Bylaws and the DGCL.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
4.1 Form of Stock Purchase Agreements dated as of March 20, 1998,
between the Company and the Selling Shareholders
5.1 Opinion of Goodwin, Procter & Hoar LLP
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
</TABLE>
II-1
<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:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the Registration Statement is on Form S-3, Form S-8
or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time 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.
(4) If the Registrant is a foreign issuer, to file a
post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19 of this
chapter at the start of any delayed offering or throughout a
continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Securities Act
need not be furnished, provided, that the registrant includes
in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph
(a)(4) and other information necessary to ensure that all
other information in the prospectus is at least as current as
the date of those financial statements. Notwithstanding the
foregoing, with respect to the registration statements on Form
F-3, a post-effective amendment need not be filed to include
financial statements and information required by Section
10(a)(3) of the Securities Act or Rule 3-19 of this chapter if
such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by
the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Form
F-3.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each
filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement
II-2
<PAGE>
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 may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions,
the Registrant has been informed that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Needham, Commonwealth of Massachusetts, on May 29,
1998.
T CELL SCIENCES, INC.
By: /s/ Una S. Ryan
--------------------------------------
Una S. Ryan, Ph.D
President, Chief Executive Officer and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, each of the undersigned officers and
directors of T Cell Sciences, Inc. hereby severally constitutes Una S. Ryan,
Ph.D his or her true and lawful attorney with full power to her, to sign for the
undersigned and in his or her name in the capacity indicated below, the
Registration Statement filed herewith and any and all amendments to said
Registration Statement, and generally to do all such things in his or her name
and in his or her capacity as an officer or director to enable T Cell Sciences,
Inc. to comply with the provisions of the Securities Act of 1933, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming his or her signature as it may be signed by his or her said attorney,
or any of them, to said Registration Statement and any and all amendments
thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Una S. Ryan President, Chief Executive May 29, 1998
- ---------------------------- Officer and Director
Una S. Ryan, Ph.D (Principal Executive Officer)
/s/ Norman W. Gorin Vice President, Finance, May 29, 1998
- ---------------------------- Chief Financial Officer
Norman W. Gorin and Secretary (Principal
Financial Officer and Principal
Accounting Officer)
/s/ Harry H. Penner, Jr. Director June 9, 1998
- ----------------------------
Harry H. Penner, Jr.
/s/ Patrick C. Kung Director May 26, 1998
- ----------------------------
Patrick C. Kung, Ph.D
/s/ Thomas R. Ostermueller Director May 29, 1998
- ----------------------------
Thomas R. Ostermueller
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
4.1 - Form of Stock Purchase Agreement dated as of March 20, 1998,
between the Company and each of the Selling Stockholders
5.1 - Opinion of Goodwin, Procter & Hoar LLP
23.1 - Consent of Price Waterhouse LLP
23.2 - Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1)
24.1 - Power of Attorney (included on signature page)
</TABLE>
Exhibit 4.1
-------------------
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of the day of March, 1998, between T Cell
Sciences, Inc. (the "Company"), a corporation organized under the laws of the
State of Delaware with its principal offices at 119 Fourth Avenue, Needham,
Massachusetts 02194, and the purchaser whose name and address is set forth on
the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Stock Purchase
Agreement, the Company and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms and
conditions of this Stock Purchase Agreement, the Company has authorized the sale
of up to twenty percent (20%) of its outstanding shares of common stock, par
value $.001 per share of the Company (the "Common Stock"). The shares of Common
Stock, and the Penalty Shares (as defined in Section 7.5) are referred to herein
collectively as the "Shares."
SECTION 2. Agreement to Sell and Purchase Shares.
(a) At the Closing Date (as defined in Section 3), the Company will
sell to the Purchaser, and the Purchaser will buy from the Company, upon the
terms and conditions hereinafter set forth, ________ shares of Common Stock at
the purchase price per Share of $______(the "Stock Purchase Price").
(b) The Company proposes to enter into a similar form of Stock Purchase
Agreement ("Other Stock Purchase Agreements") with certain other investors (the
"Other Purchasers"). The Purchaser and the Other Purchasers are hereinafter
sometimes collectively referred to as the "Purchasers," and this Stock Purchase
Agreement and the Other Stock Purchase Agreements are hereinafter sometimes
collectively referred to as the "Agreements."
SECTION 3. Delivery of Shares on the Closing Date.
(a) The closing for the purchase and sale of the shares of Common Stock
(the "Closing") shall occur on approximately March 13, 1998 (the "Closing Date")
at the offices of Anisfield Investments Ltd. c/o Kenneth Sirlin, P.C., the Trump
Building, 40 Wall Street, 59th Floor, New York, New York 10005. On or prior to
the Closing Date, the Purchaser shall have executed both the Stock Purchase
Agreement and the Registration Statement Questionnaire. The Closing shall be
when the following have occurred: (i) the Purchaser has placed an amount equal
to the Stock Purchase Price multiplied by the number of shares of Common Stock,
as set forth in Section 2 above (the "Aggregate Purchase Price"), in an escrow
account established by Kenneth Sirlin, P.C. at Chase Manhattan Bank (the "Escrow
<PAGE>
Account"); and (ii) the Company shall have delivered to the Escrow Account one
or more certificates for the shares of Common Stock to be issued to the
Purchaser on the Closing Date. On the Closing Date, there shall be released from
the Escrow Account to the Purchaser one or more certificates registered in the
name of the Purchaser representing the number of shares of Common Stock as
provided in Section 2 above, and all funds in the Escrow Account shall be
released to the Company, pursuant to the Company's instructions. Stock
certificates evidencing the shares of Common Stock will be delivered to each
Purchaser on the Closing Date with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT OR
(II) RULE 144 OR 144A UNDER SUCH ACT OR ANY OTHER AVAILABLE EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO DISPOSITION OF SECURITIES."
The name(s) in which the stock certificates are to be registered are set forth
in the Stock Certificate Questionnaire attached hereto as part of Appendix I.
(b) The Company's obligation to complete the purchase and sale of the
shares of Common Stock and deliver such stock certificate(s) to the Purchaser on
the Closing Date shall be subject to the following conditions, any one or more
of which may be waived by the Company: (i) execution by the Purchaser of a Stock
Purchase Agreement (including the Stock Certificate Questionnaire in Appendix I)
and the Registration Statement Questionnaire, (ii) delivery by the Purchaser of
the Aggregate Stock Purchase Price for the number of shares of Common Stock
purchased as set forth in Section 2 above, to the Escrow Account; (iii) release
to the Company of such funds held in the Escrow Account in the full amount of
the Aggregate Stock Purchase Price for number of shares of Common Stock set
forth in Section 2; and (iv) the accuracy of the representations and warranties
made by the Purchasers and the fulfillment of those undertakings of the
Purchasers to be fulfilled prior to the Closing Date.
(c) The Purchaser's obligation to accept delivery of such stock
certificates(s) and to pay for the shares of Common Stock evidenced thereby on
the Closing Date shall be subject to the following conditions, any of which may
be waived by the Purchaser: (i) the accuracy in all material respects as of the
Closing Date of the representations and warranties made by the Company herein as
if made on the Closing Date; (ii) the fulfillment in all material respects of
those undertakings of the Company to be fulfilled prior to the Closing Date;
(iii) release from the Escrow Account to the Purchaser, against receipt by the
Company of the Aggregate Stock Purchase Price simultaneously released from the
Escrow Account, of the certificates for the number of shares of Common Stock as
provided in Section 2; and (iv) receipt by the Purchasers of an opinion of
counsel to the Company, dated as of the Closing Date and addressed to the
Purchaser, in substantially the form attached hereto as Exhibit 1.
2
<PAGE>
The Purchaser's obligations hereunder are expressly not conditioned on the
purchase by any or all of the Other Purchasers of the shares of Common Stock
that they have agreed to purchase from the Company.
SECTION 4. Representations, Warranties and Covenants. The Company hereby
represents and warrants to, and covenants with, the Purchaser as follows:
4.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted.
4.2 Authorized Capital Stock. As of December 31, 1997, the authorized
capital stock of the Company consisted of (a) 50,000,000 shares of Common Stock,
$.001 par value per share, of which 26,478,864 shares were validly issued and
outstanding, fully paid and non-assessable; (b) 1,163,102 shares of Class B
Preferred Stock, $2.00 par value per share, of which no shares were issued and
outstanding; and (c) 3,000,000 shares of Class C Preferred Stock, $.01 par value
per share, of which no shares were issued and outstanding. As of January 1,
1998, 8,552 shares of Common Stock were held in the treasury of the Company.
When issued and delivered to the Purchaser by the Company against payment of the
consideration set forth herein, the shares of Common Stock and the Additional
Shares (as defined herein), if any, will be validly issued, fully paid and
non-assessable.
The Common Stock is authorized for trading on the Nasdaq National Market
and no suspension of trading in the Common Stock is in effect.
4.3 Due Execution, Delivery and Performance of the Agreements. The
Company's execution, delivery and performance of the Agreements (a) have been
duly authorized by all requisite corporate action by the Company, (b) will not
violate any law or the Certificate of Incorporation or By-laws of the Company or
any provision of any material indenture, mortgage, agreement, contract or other
material instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their properties or
assets is bound as of the date hereof, and (c) will not result in a breach of or
constitute (upon notice or lapse of time or both) a default under any such
indenture, mortgage, agreement, contract or other material instrument or the
creation or imposition of any lien, security interest, mortgage, pledge, charge
or other encumbrance, of any material nature whatsoever upon any properties or
assets of the Company or any of its subsidiaries. Upon their execution and
delivery, and assuming the valid execution thereof by the respective Purchasers,
this Agreement will constitute the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
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<PAGE>
equity or at law) and except as the indemnification and contribution agreements
of the Company in Section 7.11 hereof may be legally unenforceable.
4.4 Additional Information. The Company represents and warrants that the
information contained in the following documents, which the Company has
furnished to the Purchaser, taken as a whole, does not contain any untrue
statement of material fact or omit to state any material fact necessary in order
to make the statements therein not misleading as of the respective final dates
of the documents.
(a) the Company's Annual Report to Stockholders on Form 10-K for the
fiscal year ended December 31, 1996 (without exhibits);
(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997;
(c) Notice to Shareholders and Proxy Statement for its Annual Meeting
of Shareholders held May 13, 1997;
(d) the Company's Current Report on Form 8-K dated August 26, 1997;
(e) the Company's Press Release dated October 15, 1997 (1 of 2);
(f) the Company's Press Release dated October 15, 1997 (2 of 2);
(g) the Company's Press Release dated November 3, 1997;
(h) the Company's Press Release dated January 21, 1998; and
(i) the Company's Press Release dated February 23, 1998.
4.5 No Material Change. There has been no material adverse change in the
financial condition or business or results of operations of the Company since
September 30, 1997.
4.6 Approvals. No authorization, approval or consent of any governmental
body or the stockholders of the Company is required to be obtained by the
Company for the issuance and sale of the Shares as contemplated by this Stock
Purchase Agreement.
4.7 Absence of Litigation. Except as disclosed in the documents referred to
in Section 4.4, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the business,
4
<PAGE>
financial condition or results of operations of the Company and its subsidiaries
taken as a whole or the transaction contemplated by this Stock Purchase
Agreement or any of the documents contemplated hereby or which would adversely
affect in any material respect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under this Stock
Purchase Agreement or any of such other documents.
SECTION 5. Representations, Warranties and Covenants of the Purchaser.
(a) The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser is knowledgeable, sophisticated and experienced
in making, and is qualified to make decisions with respect to investments in
securities presenting an investment decision like that involved in the purchase
of shares of Common Stock, including investments in securities issued by the
Company and investments in development stage companies, and has requested,
received, reviewed and considered all information it deems relevant in making an
informed decision to purchase the shares of Common Stock; (ii) the Purchaser is
acquiring the Shares pursuant to this Stock Purchase Agreement in the ordinary
course of its business and for its own account for investment only and with no
present intention of distributing any of such Shares or in any arrangement or
understanding with any other persons regarding the distribution of such Shares;
(iii) the Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act of 1933, as amended (the "Securities Act") and the rules
and regulations promulgated thereunder; (iv) the Purchaser has completed or
caused to be completed the Prospective Investor Questionnaire, the Registration
Statement Questionnaire and the Stock Certificate Questionnaire, each attached
hereto as Appendix I and the answers thereto are true and correct as of the date
hereof and will be true and correct as of the effective date of the Registration
Statement; (v) the Purchaser has, in connection with its decision to purchase
the number of shares of Common Stock set forth in Section 2 above, relied solely
upon the representations and warranties of the Company contained herein; and
(vi) the Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act; and (vii) that the Purchaser
will hold the Shares for a period of thirty (30) days following the Closing
Date.
(b) The Purchaser hereby covenants with the Company not to make any
sale of the Shares without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied or otherwise complying with
the Securities Act, and the Purchaser acknowledges and agrees that the Shares
are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Shares is accompanied by (1) a
separate certificate (i) in the form of Appendix II hereto, (ii) executed by an
officer of, or other authorized person designated by, the Purchaser, and (iii)
to the effect that (A) the Shares have been sold in accordance with the
Registration Statement and (B) the requirement of delivering a current
prospectus has been satisfied; (2) an opinion of counsel reasonably satisfactory
to the Company stating that registration is not required under the Securities
Act; or
5
<PAGE>
(3) evidence reasonably satisfactory to the Company that all applicable
requirements of Rule 144 promulgated under the Securities Act with respect to
such proposed transfer have been satisfied.
(c) The Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and
capacity to enter into this Stock Purchase Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Stock Purchase Agreement, and
(ii) upon the execution and delivery hereof, this Stock Purchase Agreement shall
constitute a valid and binding obligation of the Purchaser enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification and contribution agreements of the Purchaser
in Section 7.11 hereof may be legally unenforceable.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Stock Purchase
Agreement, all covenants, agreements, representations and warranties made by the
Company and the Purchaser herein and in the certificates for the shares of
Common Stock delivered pursuant hereto shall survive for a period of one year
following the execution of this Stock Purchase Agreement, the delivery to the
Purchaser of the shares of Common Stock being purchased and the payment
therefor.
SECTION 7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures. The Company shall use its best efforts:
(a) subject to Section 7.5 below, to prepare and file with the
Commission within thirty (30) business days of the Closing Date a
Registration Statement on Form S-3 (the "Registration Statement")
for the resale of the Shares by the Purchaser from time to time
through the automated quotation system of the Nasdaq National
Market System or in privately-negotiated transactions;
(b) to cause the Registration Statement to become effective as soon as
possible after filing thereof, subject to receipt of necessary
information from the Purchaser;
(c) subject to Section 7.5 below, to promptly prepare and file with
the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may
be
6
<PAGE>
necessary to keep the Registration Statement effective for a
period not exceeding the third anniversary of the Closing Date as
is required for the intended method of distribution, or such
shorter period which will terminate when all the Shares covered by
such Registration Statement have been sold pursuant to such
Registration Statement or withdrawn; provided, however, that in no
event shall the Company be obligated to keep the Registration
Statement effective once the Shares are no longer subject to
restrictions as to volume under Rule 144 of the Securities Act of
1933, as amended;
(d) to promptly furnish to the Purchaser with respect to the Shares
registered under the Registration Statement (and to each
underwriter, if any, of such Shares) such number of copies of the
Registration Statement and any amendment thereof and of
prospectuses and preliminary prospectuses in conformity with the
requirements of the Securities Act and such other documents as the
Purchaser may reasonably request, in order to keep the Purchaser
apprised of the progress of the registration process and to
facilitate the public sale or other disposition of all or any of
the Shares by the Purchaser; and
(e) to promptly inform the Purchaser when any stop order by the
Commission has been issued with respect to the Purchaser's Shares
and use its best efforts to promptly cause such stop order to be
withdrawn.
A questionnaire related to the Registration Statement to be completed by
the Purchaser is attached hereto as a part of Appendix I.
7.2 State Securities Laws. The Company shall use its best efforts to
promptly file documents required of the Company for normal blue sky clearance in
states specified in writing by the Purchaser and reasonably required by the
Purchaser in order to resell its Shares, provided, however, that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented.
7.3 Expenses and No Brokers.
(a) Expenses. The Company shall bear all expenses in connection with
the procedures in paragraphs (a) through (e) of this Section 7.1, Section 7.2
and the registration of the Shares pursuant to the Registration Statement, other
than fees and expenses, if any, of counsel or other advisors to the Purchaser,
provided that the Company shall pay at the Closing, all of the attorneys fees
and travel expenses incurred by Anisfield Investments Ltd. up to a maximum of
$10,000 in connection with the placement of the shares.
7
<PAGE>
(b) No Brokers. Neither the Company nor the Purchaser(s) have taken any
action which would give rise to any claim by any person(s) or brokerage
commissions, finder's fees or similar payments by the Company or the
Purchaser(s) for the transaction contemplated herein, except for dealings with
Anisfield Investments Ltd., whose fees will be paid by the Company.
7.4 Listing. The Company shall use its best efforts to take such action as
may be necessary to cause all Shares to be listed or otherwise eligible for full
trading privileges on the Nasdaq National Market ("Nasdaq") or, if the Common
Stock is not listed on Nasdaq, on such other securities exchange or quotation
system on which the Common Stock is traded. The Company shall use its best
efforts to continue the listing or trading privilege for all Shares on each such
exchange or quotation system.
7.5 Penalty for Delay of Registration Statement's Effective Date. In the
event the Registration Statement has not become effective within 90 days after
initial filing thereof, for each thirty (30) day period (a "Penalty Period")
during which the Shares remain unregistered, the Company shall issue or pay, as
applicable, to the Purchaser within three (3) trading days of the end of each
such Penalty Period, at the Company's election, either: (i) a number of
additional shares of Common Stock equal to 1 1/2% (the "Payment Amount") of the
aggregate purchase price paid for all Shares purchased by such Purchaser
hereunder, divided by the Market Value (as defined hereinafter), as of the last
trading day of the Penalty Period, of a share of Common Stock (the "Penalty
Shares") or (ii) a cash payment equal to the Payment Amount; provided, however,
that in no event will the number of Shares issued pursuant to the Agreements in
the aggregate exceed 19.9% of the total number of shares of Common Stock
outstanding on the Closing Date (the "Maximum Percentage"), and if such number
of Shares to be issued pursuant to the Agreements in the aggregate exceeds the
Maximum Percentage, the Company shall pay the Purchaser a cash payment equal to
the Market Value, as of the last trading day of the Penalty Period, of a share
of Common Stock multiplied by the number of Penalty Shares which would have
resulted in exceeding the Maximum Percentage; and provided further, however,
that in no event shall the total amount of all payments under this Section
exceed 7.5% of the aggregate purchase price paid for all shares purchased by
such Purchaser hereunder, with Penalty Shares valued as of the date of issuance
as provided herein. For purposes of this Agreement, the "Market Value" of a
share of Common Stock shall be the average high and low sales prices of the
Common Stock on the Nasdaq National Market on the last trading day in the
relevant Penalty Period.
7.6 Suspension of Registration Requirement.
(a) The Company shall promptly notify the Purchaser of, and confirm in
writing, the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose. The Company shall use reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment.
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<PAGE>
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to file a Registration
Statement and cause any filings with any state securities commission to be made
and to use reasonable efforts to cause a Registration Statement or any such
state securities commission filings to become effective or to amend or
supplement a Registration Statement shall be suspended in the event and during
such period pending negotiations relating to, or consummation of, a transaction
or the occurrence of an event that would require additional disclosure of
material information by the Company in the Registration Statement or such
filing, as to which the Company has a bona fide business purpose for preserving
confidentiality or which renders the Company unable to comply with SEC
requirements (such circumstances being hereinafter referred to as a "Suspension
Event") that would make it impractical or unadvisable to cause the Registration
Statement or such filings to be made or to become effective or to amend or
supplement the Registration Statement, but such suspension shall continue only
for so long as such event or its effect is continuing but in no event will the
total number of days of suspension exceed 120 days in any twelve month period
(the period of any suspension, a "Suspension Period"). The Company shall notify
promptly each of the Purchaser in writing of the existence of any Suspension
Event.
(c) The Purchaser agrees, if requested by the Company's underwriters or
financial advisors (the "Advisors") in an offering of the Company's securities
pursuant to a registration statement filed with the SEC (an "Offering"), not to
effect any public sale or distribution of any shares of Common Stock of the
Company, including a sale pursuant to Rule 144 or Rule 144A under the Securities
Act, during the 15-day period prior to, and during the 90-day period beginning
on, the date of pricing of each Offering.
7.7 Black-Out Period. Following the effectiveness of any Registration
Statement and the filings with any state securities commissions, the Purchaser
agrees that it will not effect any sales of any of the shares of Common Stock
pursuant to the Registration Statement or any such filings at any time after it
has received notice from the Company to suspend sales as a result of the
occurrence or existence of any Suspension Event or any Offering, or so that the
Company may correct or update the Registration Statement or such filing (a
"Black-Out Period"); provided that the total number of days of all Black-Out
Periods during any 12-month period shall not exceed 120. The Purchaser may
recommence effecting sales of the Registrable Shares pursuant to the
Registration Statement or such filings following further notice to such effect
from the Company, which notice shall be given by the Company as soon as
practicable but in no event later than five (5) business days after the
conclusion of any such Suspension Event.
7.8 Additional Shares. The Company, at its option, may register, under any
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
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<PAGE>
7.9 Exchange of Legended Certificates. Following the effective date of the
Registration Statement, unless at such time a stop order is imposed by the
Commission or the effectiveness of the Registration Statement is for any other
reason suspended as permitted by Section 5(b) herein, all requirements with
respect to legends on the certificates evidencing the Shares will cease to apply
on the sale thereof, and certificated Shares without legends will be available
to the Purchaser within three (3) trading days after the Company's receipt of a
request for such unlegended certificates and Purchaser's surrender of the legend
certificate to the Company's transfer agent.
7.10 Transfer of Shares. The Purchaser agrees that it will not effect any
disposition of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 7.1 or
pursuant to an exemption from registration under the Securities Act. The
Purchaser agrees that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Purchaser or
its Plan of Distribution.
7.11 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Purchaser and
its respective officers, directors, agents, representatives and affiliates (an
"Indemnitee") from and against any losses, claims, damages or liabilities to
which such Indemnitee may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any prospectus contained therein or in any information
incorporated by reference therein, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or arise out of any failure by the Company to
fulfill any undertaking included in the Registration Statement, and the Company
will reimburse such Indemnitee for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, provided, however, that the Company shall not be
liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, any such untrue statement or omission made in
such Registration Statement, any preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Indemnitee specifically for use in preparation of the Registration Statement, or
the failure of such Indemnitee to comply with the covenants and agreements
contained in Sections 5(b) or 7.10 hereof respecting sale of the Shares or any
statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser.
(b) The Purchaser agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning of Section
15 of the
10
<PAGE>
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) that arise out of, or are based upon, any
failure to comply with the covenants and agreements contained in Sections 5(b)
or 7.10 hereof respecting sale of the Shares, or any untrue statement of a
material fact contained in the Registration Statement on the effective date
thereof if such untrue statement was made in reliance upon and in conformity
with written information furnished by or on behalf of the Purchaser specifically
for use in preparation of the Registration Statement, provided, however, that
such Purchaser shall not be liable in any such case to the extent that the
Purchaser has furnished in writing to the Company information expressly for use
in such Registration Statement or any amendment thereof or supplement thereto
which corrected or made not misleading, information previously furnished to the
Company prior to the filing of the Registration Statement, and if thereafter,
has notified the Company of such information immediately upon its occurrence or
the Purchaser's knowledge of its occurrence. The Purchaser will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim. In no event shall
the liability of the Purchaser hereunder be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Shares
giving rise to such indemnification obligation.
Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.11, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action (but the failure to so notify the indemnifying
person will not relieve the indemnifying person from any liability except to the
extent that the indemnifying person shall have been prejudiced as a result of
the failure or delay in giving such notice), and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall be entitled to participate
therein, and, to the extent it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
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<PAGE>
If the indemnification provided for in this Section 7.11 from the
indemnifying person is unavailable to an indemnified person hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein, then
the indemnifying person, in lieu of indemnifying such indemnified person, shall
contribute to the amount paid or payable by such indemnified person as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying person and
indemnified persons in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying person and
indemnified persons shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by,
such indemnifying person or indemnified persons, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in this Section 7.11, any
reasonable legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.11 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.11, no Purchaser shall be
required to contribute any amount in excess of the dollar amount of the proceeds
received by such Purchaser upon the sale of the Shares giving rise to such
contribution obligation. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7.12 Termination of Conditions and Obligations. The conditions precedent
imposed by Section 5 or this Section 7 upon the transferability of the Shares
shall cease and terminate as to any particular number of the Shares when such
Shares shall have been effectively registered under the Securities Act and sold
or otherwise disposed of in accordance with the intended method of disposition
set forth in the Registration Statement covering such Shares or at such time as
an opinion of counsel satisfactory to the Company shall have been rendered to
the effect that such conditions are not reasonably necessary in order to comply
with the Securities Act.
7.13 Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchaser, the Company will
furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Shareholders, within one hundred twenty
(120) days
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<PAGE>
after the end of each fiscal year of the Company), one copy of (i)
its Annual Report to Shareholders (which Annual Report shall
contain financial statements audited in accordance with generally
accepted accounting principles by a national firm of certified
public accountants), (ii) if not included in substance in the
Annual Report to Shareholders, its Annual Report on Form 10-K,
(iii) its Quarterly Reports to Shareholders, (iv) if not included
in substance in its Quarterly Reports to Shareholders, its
quarterly reports on Form 10-Q, and (v) a full copy of the
particular Registration Statement covering the Shares (the
foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Purchaser, all exhibits
excluded by the parenthetical to subparagraph (a)(v) of this
Section 7.14 and all other information that is made available to
shareholders; and
(c) upon the reasonable request of the Purchaser, an adequate number
of copies of the prospectuses to supply to any other party
requiring such prospectuses.
7.14 No Other Obligation to Register. Except as otherwise expressly
provided in this Agreement, the Company shall have no obligation to the
Purchaser to register the Shares.
SECTION 8. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so mailed and shall be
delivered as addressed as follows:
(a) if to the Company, to:
T Cell Sciences, Inc.
119 Fourth Avenue
Needham, Massachusetts 02194
Attn: Chief Financial Officer
(b) with a copy mailed to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Stuart M. Cable, Esq.
or to such other person at such other place as the Company shall
designate to the Purchaser in writing;
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<PAGE>
(c) if to the Purchaser, at its address as set forth at the end of
this Stock Purchase Agreement, or at such other address or
addresses as may have been furnished to the Company in writing;
and
(d) with a copy mailed to:
Anisfield Investments Ltd.
c/o Kenneth Sirlin, P.C.
The Trump Building
40 Wall Street
59th Floor
New York, New York 10005
SECTION 9. Changes. This Stock Purchase Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Company and
the Purchaser.
SECTION 10. Headings. The headings of the various sections of this Stock
Purchase Agreement have been inserted for convenience of reference only and
shall not be deemed to be part of this Stock Purchase Agreement.
SECTION 11. Severability. In case any provision contained in this Stock
Purchase Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 12. Governing Law. This Stock Purchase Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts and the federal law of the United States of America.
SECTION 13. Counterparts. This Stock Purchase Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.
[Remainder of Page Intentionally Left Blank]
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
T CELL SCIENCES, INC.
By:
---------------------------------------
Print or Type: Una S. Ryan, Ph.D., President and
Chief Executive Officer
[PURCHASERS]
Name of Purchaser
(Individual or Institution):
------------------------------------------
Nameof Individual representing
Purchaser (if an Institution):
------------------------------------------
Title of Individual representing Purchaser:
-------------------------------------------
Signature by: Individual Purchaser or Individual
representing Purchaser:
------------------------------------------
Address:
----------------------------------
Telephone:
--------------------------------
Fax:
--------------------------------------
<PAGE>
APPENDIX I
(one of three)
T CELL SCIENCES, INC.
PROSPECTIVE INVESTOR QUESTIONNAIRE
----------------------------------
The Shares are being offered for sale to "accredited investors" as that
term is defined in Rule 501 under the Securities Act of 1933, as amended (the
"Act").
The undersigned entity certifies that it (and each managed account on whose
behalf Investor Shares are being purchased by it) is an "accredited investor"
because it is (check one or more items below):
<TABLE>
<S> <C> <C>
- ---------- 1. a bank as defined in section 3(a)(2) of the Act whether acting
in its individual or fiduciary capacity;
- --------- 2. a savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity;
- --------- 3. a broker dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934, as amended;
- --------- 4. an insurance company as defined in section 2(13) of the Act;
- --------- 5. an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act");
- --------- 6. a business development company as defined in section 2(a)(48) of
the 1940 Act;
- --------- 7. a Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958;
- --------- 8. a plan established and maintained by a state or its political
subdivision for the benefit of its employees, provided that such
plan has total assets in excess of $5,000,000;
- --------- 9. a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring
the Investor Shares, with total assets in excess of $5,000,000;
</TABLE>
A-2
<PAGE>
- --------- 10. an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
provided that the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, and the plan
fiduciary is either a bank, savings and loan association,
insurance company or registered investment adviser or provided
that the employee benefit plan has total assets in excess of
$5,000,000; or if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
- --------- 11. a private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
- --------- 12. an organization described in section 501(c)(3) of the Internal
Revenue Code, not formed for the specific purpose of acquiring
the Investor Shares, with total assets in excess of $5,000,000;
- --------- 13. a director or executive officer, or general partner of the
Company;
- --------- 14. a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Investor Shares, and
the purchase of the Investor Shares is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) under
the Act;
- --------- 15. a natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his purchase exceeds
$1,000,000;
- --------- 16. a natural person who had an individual income in excess of
$200,000 in each of 1994 and 1995 or joint income with that
person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level
in 1996;
- --------- 17. an entity in which all of the equity owners are accredited
investors (described in any of (a) - (p) above).
INVESTOR:
By:
----------------------------------
Name:
Title:
A-1
<PAGE>
ANNEX II
Page 2
APPENDIX I
(two of three)
T CELL SCIENCES, INC.
STOCK CERTIFICATE QUESTIONNAIRE
-------------------------------
Pursuant to Section 3 of the Stock Purchase Agreement, please provide us
with the following information:
<TABLE>
<S> <C>
1. The exact name that your Shares are <C>
to be registered in (this is the name
that will appear on your stock
certificate(s)). You may use a
nominee name if appropriate: -------------------
2. The relationship between the Purchaser
of the Shares and the Registered Holder
listed in response to item 1 above: -------------------
3. The mailing address of the Registered
Holder listed in response to item 1 above: -------------------
4. The Social Security Number or Tax -------------------
Identification Number of the Registered -------------------
Holder listed in response to item 1 above: -------------------
-------------------
5. The address, telephone and fax number of
your escrow agent, and the name of a
contact person: -------------------
</TABLE>
A-2
<PAGE>
ANNEX II
--------
Page 3
APPENDIX I
(three of three)
T CELL SCIENCES, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
------------------------------------
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Shareholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the following information, as of ________________, 1998:
<TABLE>
<CAPTION>
(1) (2)
<S> <C>
Number of shares
Number of Shares if any, which will
which are being be owned after
included in the completion of sale
Registration of Shares included
Statement (if all in the Registration
purchased, put all) Statement
------------------- ---------
</TABLE>
2. Have you or your organization had any position, office or other material
relationship within the past three (3) years with the Company or its affiliates
other than as disclosed in the Prospectus included in the Registration
Statement?
___ Yes ___ No
If yes, please indicate the nature of any such relationship below:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
A-3
<PAGE>
ANNEX II
--------
Page 4
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
------------------------------------------
The undersigned, [an officer of, or other person duly authorized by]
_______________________ [fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the Purchaser of the shares
evidenced by the attached certificate, and as such, sold such shares on
________________________________ [date] in accordance with registration
statement number ______________________________ [fill in the number of or
otherwise identify registration statement] and the requirement of delivering a
current prospectus and current annual and quarterly reports by the Company has
been complied with in connection with such sale.
Print or Type:
Name of Purchaser
(Individual or
Institution) __________________________
Name of Individual
representing
Purchaser (if an
Institution): __________________________
Title of Individual
representing
Purchaser (if an
Institution): __________________________
Signature by:
Individual Purchaser or
Individual representing
Purchaser: __________________________
A-4
EXHIBIT 5.1
[Letterhead of Goodwin, Procter & Hoar LLP]
June 11, 1998
T Cell Sciences, Inc.
119 Fourth Avenue
Needham, Massachusetts 02194
Ladies and Gentlemen:
This opinion is furnished in our capacity as counsel to T Cell Sciences,
Inc., a Delaware corporation (the "Company"), in connection with the
registration, pursuant to the Securities Act of 1933 (the "Securities Act"), of
1,968,494 shares (the "Shares") of common stock, par value $.001 per share, of
the Company.
In connection with rendering this opinion, we have examined the Certificate
of Incorporation and the Bylaws of the Company, each as amended to date; such
records of the corporate proceedings of the Company as we have deemed material;
a registration statement on Form S-3 under the Securities Act relating to the
Shares and the prospectus contained therein; and such other certificates,
receipts, records and documents as we considered necessary for the purposes of
this opinion.
We are attorneys admitted to practice in the Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdiction other than the
laws of the United States of America and the Commonwealth of Massachusetts and
the Delaware General Corporation Law.
Based upon the foregoing, we are of the opinion that the Shares are duly
authorized, legally issued, fully paid and nonassessable by the Company under
the Delaware General Corporation Law.
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.
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,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of T Cell Sciences,
Inc. of our report dated March 25, 1998, appearing in the Annual Report on Form
10-K for the year ended December 31, 1997. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Boston, Massachusetts
June 11, 1998
