67
As filed with the Securities and Exchange Commission on February 23, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE LIPOSOME COMPANY, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-2370691
(State or other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification Number)
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540
(609) 452-7060
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Charles A. Baker
Chairman and Chief Executive Officer
The Liposome Company, Inc.
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08540
(609) 452-7060
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications to:
Mark R. Baker, Esq. Mark Kessel, Esq.
Dewey Ballantine David J. Beveridge, Esq.
1301 Avenue of the Americas Shearman & Sterling
New York, New York 10019-6092 599 Lexington Avenue
(212) 259-8000 New York, New York 10022
(212) 848-4000
Approximate date of commencement of proposed sale to the public: As soon as
practicable on or 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 being offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box ____. If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering ____. If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering ____. If delivery of the
prospectus is expected to be made pursuant to Rule 434, please check the
following box .
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTEREDTO BE OFFERING PRICE AGGREGATE REGISTRATION FEE
REGISTERED PER SHARE(1) OFFERING PRICE(1)
Common Stock(1) 2,659,012 $19.875 $52,847,864 $18,223.40
(1) Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for
the purpose of calculating the amount of the registration fee based on the
average of the high and low sales prices of the Common Stock on February 20,
1996 on the Nasdaq National Market.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
2,659,012 Shares
THE LIPOSOME COMPANY, INC.
COMMON STOCK
The 2,659,012 shares of Common Stock, par value $0.01 per share ("Common
Stock"), of The Liposome Company, Inc. (the "Company") offered hereby are the
number of shares of Common Stock issuable either (i) upon conversion of 50% of
the issued and outstanding Depositary Shares (the "Depositary Shares") of the
Company or (ii) to the Purchasers (as defined below) under the standby
arrangements described herein. Each Depositary Share represents ownership of
1/10th of a share of the Series A Cumulative Convertible Exchangeable Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), of the Company and
entitles the holder to all proportionate rights and preferences of the
underlying Preferred Stock. Any reference herein to conversion of the
Depositary Shares shall also relate to conversion of the Preferred Stock
represented by the Depositary Shares.
The Company has called 50%, on a pro rata basis, of the total number of
shares of issued and outstanding Preferred Stock (the "Redeemed Preferred Stock"
and the Depositary Shares representing interests therein, the "Redeemed
Depositary Shares") for redemption on March 25, 1996 (the "Redemption Date") at
a redemption price of $26.40 per Redeemed Depositary Share, plus accrued and
unpaid dividends thereon in the amount of $0.4519 per Redeemed Depositary Share
to the Redemption Date, for a total redemption price of $26.8519 per Redeemed
Depositary Share (the "Redemption Price"). Although the Company is only
redeeming the Redeemed Preferred Stock representing 50% of the total issued and
outstanding number of shares of Preferred Stock, it is possible that holders of
a greater number of shares will surrender their Depositary Shares for
conversion. It is also possible that the Company will, in the future, call the
remaining 50% of the Preferred Stock for redemption, although there can be no
assurances if or when the Company will do so, nor whether any such redemption
will be subject to standby arrangements with a purchaser as described herein.
No dividends will accrue on the Redeemed Preferred Stock from and after the
Redemption Date. Prior to 5:00 p.m. New York City time on the Redemption Date,
Redeemed Depositary Shares may be converted into shares of Common Stock at the
rate of 1.9455 shares of Common Stock for each whole Redeemed Depositary Share.
Cash will be paid in lieu of any fractional share on conversion of the Preferred
Stock. In the event of conversion, no payment or adjustment in respect of
accrued and unpaid dividends on the Redeemed Depositary Shares will be made.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol LIPO. On February 21, 1996, the last reported sale price for the Common
Stock was $19.125 per share.
The Company has made standby arrangements with Hambrecht & Quist LLC and
UBS Securities Inc. (the "Purchasers") pursuant to which the Purchasers have
agreed, severally but not jointly, subject to certain conditions, to purchase
from the Company such number of shares of Common Stock as would have been
issuable upon conversion of Redeemed Depositary Shares which either have been
surrendered for redemption or have not been surrendered for conversion prior to
5:00 p.m. New York City time on the Redemption Date. The purchase price of such
shares of Common Stock will be an amount equal to the aggregate Redemption Price
of such Redeemed Depositary Shares excluding accrued and unpaid dividends
thereon. The Purchasers may also purchase Depositary Shares in the open market
or otherwise prior to the Redemption Date, and have agreed to convert into
Common Stock all Depositary Shares so purchased and all other Depositary Shares
they beneficially own but will not be compensated by the Company upon any
subsequent sale of such shares of Common Stock. See "Standby Arrangements" for
a further description of the Purchasers' compensation arrangements.
Prior to and after the Redemption Date, the Purchasers may offer Common
Stock, including Common Stock acquired through the purchase and conversion of
Depositary Shares, directly to the public at prices set from time to time by the
Purchasers. In effecting such transactions, the Purchasers may realize profits
or losses independent of the compensation referred to under "Standby
Arrangements" herein. The Purchasers may also make sales to dealers at prices
which represent concessions from the prices at which such shares are then being
offered to the public. The amount of such concessions is to be determined from
time to time by the Purchasers. Prior to the Redemption Date, it is intended
that each such price when set will not exceed the greater of the last sale or
current asked price of the Common Stock on the Nasdaq Stock Market plus a
dealer's concession, and the offering price will not be increased more than once
in any calendar day. After the Redemption Date, the Purchasers may offer Common
Stock at a price or prices to be determined, but which it is presently intended
will be determined in conformity with the preceding sentence. Sales of Common
Stock by the Purchasers may be made on the Nasdaq Stock Market in block trades
or in privately negotiated transactions. Any Common Stock so offered is offered
subject to prior sale, when, as and if received by the Purchasers, and subject
to its right to reject orders in whole or in part. It is expected that delivery
of the Common Stock acquired by the Purchasers from the Company will be made at
the offices of Hambrecht & Quist LLC in New York, New York.
_________________________
THE SHARES REGISTERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 4 HEREIN.
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________________________
HAMBRECHT & QUIST UBS SECURITIES INC.
February 23, 1996
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
Additional information regarding the Company and the shares offered hereby
is contained in the Registration Statement on Form S-3 and the exhibits thereto
filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to the Company and the
shares, reference is made to the Registration Statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's Common
Stock and Depositary Shares are quoted on the Nasdaq National Market, and such
reports, proxy statements and other information can also be inspected at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 filed by the Company with the Commission, the Company's Quarterly
Reports on Form 10-Q for the three month periods ended March 31, 1995, June 30,
1995 and September 30, 1995, and the Company's Reports on Form 8-K for July 28,
1995, August 1, 1995, and February 22, 1996 each previously filed with the
Commission (File No. 0-14887), are incorporated in this Prospectus by reference
(the "Incorporated Documents"). All documents filed by the Company with the
Commission pursuant to section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of the shares offered hereby shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as modified
or superseded, to constitute a part of this Prospectus. The Company will
provide without charge to each person, including any beneficial owner, to whom
this Prospectus is delivered, upon written or oral request of such person, a
copy of any and all of the documents that have been or may be incorporated by
reference herein (other than exhibits to such documents which are not
specifically incorporated by reference into such documents). Such requests
should be directed to Carol J. Gillespie, Vice President, General Counsel and
Secretary, at the Company's principal executive offices at One Research Way,
Princeton Forrestal Center, Princeton, New Jersey 08540 (telephone (609) 452-
7060).
IN CONNECTION WITH THIS OFFERING, THE PURCHASERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND DEPOSITARY SHARES OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
THE COMPANY
The Liposome Company, Inc. (the "Company") is a leading biotechnology
company engaged in the discovery, development, manufacturing and marketing of
proprietary lipid and liposome-based pharmaceuticals for the treatment,
prevention and diagnosis of inadequately treated, life-threatening illnesses.
ABELCETTM (amphotericin B lipid complex injection), the Company's first
commercialized product, has been approved for marketing for certain indications
in the United States, United Kingdom, Spain, Luxembourg and Iceland and is the
subject of marketing application filings in several other countries. The
Company's U.S. sales force is currently marketing ABELCETTM to major hospitals
throughout the nation for the treatment of aspergillosis in patients refractory
to or intolerant of amphotericin B.
In addition to ABELCETTM, the Company's other lead products are TLC C-53
and TLC D-99. TLC C-53, liposomal prostaglandin E1, is being developed by the
Company primarily for the treatment of acute respiratory distress syndrome
("ARDS"). In October, 1995, the Company commenced a pivotal Phase III double-
blind, placebo-controlled clinical study of TLC C-53 in ARDS. TLC D-99,
liposomal doxorubicin, is being developed in conjunction with Pfizer Inc.
("Pfizer") primarily as a first line treatment of metastatic breast cancer, and
is undergoing Phase III clinical testing. The Company also has a continuing
discovery research program which concentrates primarily on the treatment of
cancer and inflammatory conditions.
ABELCETTM is for the treatment of systemic fungal infections such as
aspergillosis, candidiasis and cryptococcal meningitis occurring primarily in
immunocompromised patients such as cancer chemotherapy patients, organ and bone
marrow transplant recipients and people with AIDS. In May, 1995, the Company
filed a New Drug Application ("NDA") with the U.S. Food and Drug Administration
("FDA") for ABELCETTM. Following a priority review, in November, 1995 the FDA
cleared ABELCETTM for marketing to treat patients with aspergillosis who have
failed on, or who are intolerant of amphotericin B. In February, 1995, the
Company received approval to market ABELCETTM in the United Kingdom for the
treatment of severe systemic fungal infections in patients who have not
responded to conventional amphotericin B, or to other systemic antifungal
agents, and to patients who have renal impairment or other contraindications to
conventional amphotericin B. During 1995, the Company received similar
approvals in Spain, Luxembourg and Iceland. The Company's strategy is to
promote ABELCETTM with its own marketing and sales force in most markets, as it
is currently doing in the United States and the United Kingdom, and, where
appropriate, to enter into marketing and distribution agreements with
established local partners, as the Company has done with Laboratorios Esteve,
S.A. in Spain and, upon receipt of regulatory approval, in Portugal.
TLC C-53, liposomal prostaglandin E1, is being developed for the treatment
of severe acute inflammatory and vaso-occlusive conditions. In November, 1994,
the Company completed a 25 patient Phase II study of TLC C-53 as a treatment for
ARDS, the results of which were presented to the Society of Critical Care
Medicine at its February, 1995 conference and at several other forums. The
results of this study demonstrated, with statistical significance, that TLC C-
53, when compared to a placebo, reduces a patient's dependence on mechanical
ventilation and improves lung compliance and oxygenation, and also displayed a
favorable trend in mortality. As a result, the Company initiated a pivotal
Phase III study of TLC C-53 in October, 1995 for the treatment of ARDS.
Approximately 350 patients are expected to be enrolled in the study, which is
anticipated to be completed in the first half of 1997.
TLC D-99, liposomal doxorubicin, is targeted for the treatment of a variety
of solid tumors, most importantly metastatic breast cancer. TLC D-99 is being
jointly developed by the Company and Pfizer pursuant to an agreement entered
into in 1990. In May, 1995, researchers from the M.D. Anderson Cancer Center
presented results of a Phase II study where TLC D-99 was given in combination
with cyclophosphamide and 5-fluorouracil (anti-tumor drugs) to metastatic breast
cancer patients. The researchers reported that, of the 41 evaluable patients in
the trial, there was an overall response rate of 73% (30 patients). Two Phase
III clinical trials by Pfizer are continuing to test TLC D-99 as a first line
treatment of metastatic breast cancer. These trials are expected to continue
patient accrual during 1996 and into 1997.
The Company's principal executive offices are located at One Research Way,
Princeton Forrestal Center, Princeton, New Jersey 08540 and its telephone number
is (609) 452-7060. Unless the context otherwise requires, the "Company" refers
to The Liposome Company, Inc. and its wholly-owned subsidiaries.
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus in evaluating an investment
in the shares of Common Stock registered hereby
MANAGEMENT OF GROWTH. The Company is currently experiencing a period of
rapid growth which has placed and could continue to place a strain on the
Company's financial, management and other resources. The Company's ability to
manage its staff and facilities growth effectively will require it to continue
to improve its operational, financial and other internal systems and to train,
motivate and manage its employees. If the Company's management is unable to
manage growth effectively and new employees are unable to achieve anticipated
performance levels, the Company's business and results of operations could be
adversely affected.
EARLY STAGE OF COMMERCIALIZATION. The Company's first commercial sales of
ABELCETTM commenced in the United Kingdom in the second quarter of 1995 and in
the United States toward the end of the fourth quarter of 1995. In various
additional foreign countries the Company has filed marketing applications with
respect to ABELCETTM. There can be no assurance that such applications will be
accepted or, if approved, that there will not be restrictions which might lead
the Company to refrain from marketing and selling in some or all of these
jurisdictions. The Company's long-term viability and growth will depend on
successful commercialization of products resulting from its research activities.
No assurance can be given that any of the Company's products currently under
development will be successfully commercialized or that the required regulatory
approvals will be obtained. Additionally, the Company is developing a marketing
and sales staff, and significant additional expenditures, management resources
and time are required in connection therewith. There can be no assurance that
such sales force will be successful in gaining market acceptance for the
Company's products. To the extent that the Company determines not to, or is
unable to, expand its sales force, it will be dependent on third parties for the
marketing and distribution of its products.
HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT. The Company has
incurred losses in each year since its inception and anticipates that operating
losses will continue for at least one year. The Company's accumulated deficit
at December 31, 1995 was approximately $144,520,000. The Company will need to
commit significant financial and other resources to the commercial
manufacturing, marketing and working capital requirements of its products in the
United States and other countries where product approvals have been obtained.
LIMITED MANUFACTURING CAPABILITIES. The Company currently manufactures its
products at its facility in Princeton, New Jersey. The Company also owns a
manufacturing facility in Indianapolis, Indiana for the manufacture of its
commercial products on a scale the Company believes to be sufficient to meet
worldwide demand and is refitting this facility to manufacture ABELCETTM. The
Company expects the Indianapolis facility to commence shipments of ABELCETTM in
1997. However, any delay would require the Company to continue production of
ABELCETTM at its Princeton facility, which in turn could impair the Company's
ability to satisfy demand for the product. In addition, should fire or other
natural disaster strike the Princeton manufacturing facility prior to the
Indianapolis facility becoming operational, the Company has no alternative
source for the manufacture of ABELCETTM. TLC D-99, being developed by the
Company under a licensing and development agreement with Pfizer, may be
manufactured by the Company, or Pfizer, at Pfizer's option. In order to be
successful, the Company's current and future products, if any, must be
manufactured in commercial quantities, in compliance with regulatory
requirements, at an acceptable cost and with sufficient stability. There can be
no assurance that facilities and staff will be adequate to produce quantities of
such products sufficient to satisfy demand.
COMPETITION. The Company is aware of various products under development or
manufactured by competitors that are used for the prevention, diagnosis or
treatment of certain diseases the Company has targeted for product development,
some of which use therapeutic approaches that compete directly with certain of
the Company's product candidates. Many of the Company's competitors have
substantially greater financial and technical resources and production and
marketing capabilities than the Company. In addition, many of the Company's
competitors have significantly greater experience than the Company in
preclinical testing and human clinical trials of new or improved pharmaceutical
products and in obtaining FDA and other regulatory approvals on products for use
in health care. In particular, the Company is aware that other companies are
developing lipid-based or liposomal amphotericin B products and have obtained
regulatory approvals for such products in certain international markets. In
addition, other companies are also developing liposome anthracycline products
similar to TLC D-99, one of which has been cleared by the FDA for treatment of
Kaposi's Sarcoma. The Company is also competing with respect to manufacturing
efficiency and marketing capabilities, areas in which the Company has limited
experience.
RISK OF TECHNOLOGICAL CHANGE. The biopharmaceutical industry is
characterized by extensive research and development efforts, and is subject to
rapid and significant technological change. The Company has numerous
competitors, including major pharmaceutical and chemical companies, specialized
biotechnology firms, other companies developing liposomes or other lipid-based
products, universities and other research institutions. New developments in
lipid and liposome research as well as new pharmaceutical products and other
drug-delivery systems are expected to continue at a rapid pace. Competitors may
succeed in developing technologies and products that are more effective than any
that are being developed by the Company or that would render the Company's
technology and products non-competitive.
UNCERTAINTY OF GOVERNMENT REGULATORY REQUIREMENTS; LENGTHY APPROVAL
PROCESS. Human therapeutic products, vaccines and in vivo diagnostic products
are subject to rigorous preclinical and clinical testing and approval by the FDA
and comparable agencies in other countries and, to a lesser extent, by state
regulatory authorities prior to marketing. The process of obtaining such
approvals, especially for human therapeutic products, is likely to take a number
of years and will involve the expenditure of substantial resources. If the FDA
requests additional data, these time periods can be materially increased. Even
after such additional data is submitted, there can be no assurance of obtaining
FDA approval. In addition, product approvals may be withdrawn or limited for
noncompliance with regulatory standards or the occurrence of unforeseen problems
following initial marketing. The Company and its licensees may encounter
significant delays or excessive costs in their respective efforts to secure
necessary approvals or licenses. Future federal, state, local or foreign
legislative or administrative acts could also prevent or delay regulatory
approval of the Company's or its licensees' products. Failure to obtain or
maintain requisite governmental approvals, or failure to obtain approvals of the
intended clinical uses requested, could delay or preclude the Company or its
licensees from further developing particular products or from marketing their
products, or limit the commercial use of the products and thereby have a
material adverse effect on the Company's liquidity and financial condition. No
assurance can be given with respect to any future NDA submitted to the FDA by
the Company that such NDA will be accepted for consideration, that it will be
promptly reviewed, that the FDA will find the data submitted adequate or that
such NDA will ultimately be approved.
THE COMPANY'S DEPENDENCE ON AND THE UNCERTAINTY OF PROTECTION OF PATENTS
AND PROPRIETARY RIGHTS. The protection provided to the Company by its patents
and proprietary rights is key. The Company has a number of United States and
foreign patents and patent applications relating to various aspects of lipid and
liposome technologies. The patent position of biopharmaceutical companies
generally is highly uncertain and involves complex legal and factual questions.
The Company currently holds 59 United States patents and may be issued
additional patents in the future. There can be no assurance that any patents
will afford the Company commercially significant protection for its proprietary
technology or have commercial application, and litigation may be necessary to
determine the validity and scope of the Company's proprietary rights. Moreover,
the patent laws of foreign countries and the enforcement of such laws may afford
less protection than comparable U.S. laws. The Company may not have adequate
funds to defend or prosecute the patents in question. In Europe, several of the
Company's granted patents are being opposed by other companies. Loss of some of
these oppositions may result in decreased patent protection for the Company's
products.
Other public and private concerns, including universities, may have filed
applications for, or have been issued, patents with respect to technology
potentially useful or necessary to the Company. If any of the Company's
proprietary technology in these areas were to conflict with the rights of
others, the Company's ability to commercialize products using such technologies
could be materially and adversely affected. The scope and validity of such
patents, the extent to which the Company may wish or need to acquire licenses
under such patents, and the cost or availability of such licenses, are currently
unknown.
On May 17, 1993, NeXstar Pharmaceuticals, Inc. ("NeXstar," formerly Vestar,
Inc.) filed suit against the Company in the United States District Court for the
District of Delaware, seeking a declaratory judgment that one of the Company's
patents (U.S. Patent No. 4,880,635, the "635 Patent") was invalid, unenforceable
and not infringed by NeXstar's AmBisome product. A stay has been granted by the
court while the 635 Patent is reexamined by the United States Patent and
Trademark Office (the "PTO"). The PTO has issued a Final Rejection and the
Company has filed an Amendment. The Company has not received an Advisory Action
as to its Amendment and has filed a Notice of Appeal to preserve its rights.
The Company does not intend to rely on the 635 Patent as the primary means of
protection for any of its products currently on the market or in development.
In addition, the Company relies on unpatented proprietary know-how, and
there can be no assurance that others will not obtain access to or independently
develop such know-how. Although employees, corporate sponsors, research
partners and consultants are not given access to proprietary know-how of the
Company until they have executed confidentiality agreements, these agreements
may not provide meaningful protection for the Company's proprietary know-how in
the event of any unauthorized use or disclosure of such know-how.
NEED FOR ADDITIONAL FINANCING AND UNCERTAIN ACCESS TO CAPITAL FUNDING. The
Company's capital requirements depend upon numerous factors, including the
progress of the Company's product development programs; the time required to
obtain regulatory approvals; the resources that the Company devotes to the
development, manufacturing and marketing of products; and the demand for its
products if and when approved. It is possible that the Company may require
additional financing to complete the clinical testing and to manufacture and to
market its products. There can be no assurance that such financing will be
available or will be available on acceptable terms.
PRODUCT LIABILITY. The testing, manufacturing and marketing of the
Company's products entail an inherent risk of adverse events that could expose
the Company to product liability claims. The Company has obtained insurance
against the risk of product liability claims. However, there is no guarantee
that this insurance will be adequate, that the amount of this insurance can be
increased, or that the policy can be renewed. Moreover, the amount and scope of
any coverage obtained may be inadequate to protect the Company in the event of a
successful product liability claim.
DEPENDENCE ON KEY PERSONNEL. The Company's ability to successfully
develop, manufacture and market products and to maintain a competitive position
will depend in large part on its ability to attract and retain highly qualified
scientific and management personnel and to develop and maintain relationships
with leading research institutions and consultants. Competition for such
personnel and relationships is intense, and there can be no assurance that the
Company will be able to continue to attract and retain such personnel.
DEPENDENCE ON CORPORATE SPONSORS. Prior to 1995, a significant portion of
the Company's revenues were generated by payments under collaborative research
and development contracts and from interest on invested cash. During 1995, two
of the Company's collaborative agreements were terminated by the Company's
corporate sponsors. In April, 1995, Wyeth-Ayerst Laboratories, a division of
American Home Products Corporation ("Wyeth-Ayerst"), to whom the Company had
licensed the use of TLC A-60 as an adjuvant for an influenza vaccine, returned
its rights to TLC A-60 to the Company. In March, 1995, Schering AG, Berlin
("Schering AG"), with whom the Company had entered into a collaborative research
and development agreement with respect to TLC I-16, a non-ionic contrast agent
for use in connection with CT scanning of the liver, terminated this agreement.
The Company could be adversely affected if Pfizer, its corporate sponsor for TLC
D-99, also exercised its right to terminate its agreement. In such event, the
Company might be required to seek alternate financing in order to continue the
development and testing of TLC D-99. If the Company's working capital or
alternate financing were inadequate to fund further development or testing, then
development of TLC D-99 might be delayed or canceled. Assuming the Company and
Pfizer are able to develop successfully TLC D-99, the Company's revenues from
sales of TLC D-99 will depend in large part upon the efforts and abilities of
Pfizer to perform clinical testing, to obtain regulatory approvals and to market
and manufacture TLC D-99. The amount and timing of resources devoted to these
activities will not be completely within the Company's control. Pfizer will
have certain discretion in deciding whether or not to commercialize TLC D-99,
and may develop or market products competitive with those of the Company. There
can be no assurance that the corporate interests and motivations of Pfizer will
remain consistent with those of the Company. If and when sales of TLC D-99
commence, the Company's revenues with respect to TLC D-99 will be limited to
royalties based on product sales and, at Pfizer's option, revenues from
manufacturing. Revenues from sales of products developed with future corporate
sponsors, if any, may be similarly limited.
UNCERTAINTY OF HEALTH CARE REIMBURSEMENT. The Company's ability to
generate significant revenues from its products may depend in part on the extent
to which reimbursement for the costs of such products and related treatments
will be available from government health administration authorities, private
health coverage insurers and other organizations. If purchasers or users of the
Company's products are not entitled to adequate reimbursement for the cost of
using such products, they may forego or reduce such use. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and there can be no assurance that adequate third party coverage will
be available.
DEPENDENCE UPON SUPPLIERS. The Company currently relies on a limited
number of suppliers to provide the materials used to manufacture its products,
certain of which materials are purchased only from one supplier. In the event
the Company could not obtain adequate quantities of necessary materials from its
existing suppliers, there can be no assurance that the Company would be able to
access alternative sources of supply within a reasonable period of time or at
commercially reasonable rates. In particular, the Company presently acquires
amphotericin B, a principal ingredient in ABELCETTM, from one supplier on what
the Company believes are favorable terms. Although the Company has qualified an
alternative supplier for amphotericin B, the loss of the Company's current
supplier could have a material adverse effect on the Company. Regulatory
requirements applicable to pharmaceutical products tend to make the substitution
of suppliers more costly and, unless a substitute supplier is previously
qualified as is the Company's alternate amphotericin B supplier, more
time-consuming. The unavailability of adequate commercial quantities, the
inability to develop alternative sources, a reduction or interruption in supply
or a significant increase in the price of materials could have a material
adverse effect on the Company's ability to manufacture and market its products.
RISKS ASSOCIATED WITH INTERNATIONAL SALES. There are significant
challenges and risks to the Company associated with conducting business in some
foreign countries, including, but not limited to, disparate governmental
regulation of pharmaceutical products, uncertain intellectual property
protections, delays in establishing international distribution channels and
difficulties in collecting international accounts receivable. The Company does
not have extensive experience in international sales. The Company's
international business and financial performance could also be adversely
affected by such matters as fluctuations in currency exchange rates, currency
controls, tariff regulations, foreign duties and taxes, pricing controls and
regulations and difficulties in obtaining export licenses.
VOLATILITY OF STOCK PRICE. There has been a history of significant
volatility in the market prices for shares of companies in a similar stage of
development to that of the Company, and the market price of the shares of the
Company's Common Stock has been volatile. Factors such as announcements of
technological innovations or new commercial products by the Company or its
competitors, developments relating to regulatory approvals, governmental
regulation, decisions made by corporate sponsors under collaborative research
and development agreements regarding product development activities,
developments or disputes relating to patent or proprietary rights, as well as
period-to-period fluctuations in revenues and financial results, may have a
significant impact on the market price of the Company's Common Stock. See
"Price Range of Common Stock and Dividend Policy."
POSSIBLE ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE
SALE. Sales of substantial amounts of Common Stock in the public market after
this offering could adversely affect the market price of the Common Stock and
the ability of the Company to raise capital through a public offering of equity
securities. In the event that the Purchasers purchase more than 132,950 shares
of Common Stock from the Company pursuant to the standby arrangements described
herein, certain officers of the Company, who own approximately 814,107 shares of
Common Stock (including currently exercisable options to purchase Common Stock)
have agreed with the Purchasers not to sell or otherwise dispose of any shares
of Common Stock for a period of 90 days from the date of this Prospectus. There
are options outstanding to purchase 3,935,400 shares of Common Stock (including
the options of the executive officers described above), as well as 2,733,500
Depositary Shares outstanding which are convertible into 5,318,024 shares of
Common Stock. While the Company is only redeeming the Redeemed Preferred Stock,
representing 50% of the total number of shares issued and outstanding, it is
possible that holders of a greater number of Depositary Shares will surrender
their shares for conversion. It is also possible that the Company will, in the
future, call the remaining 50% of the Preferred Stock for redemption.
Additional shares of Common Stock may also become available for sale in the
public market from time to time in the future. Exercise of such options and
conversion of the Depositary Shares would dilute the percentage ownership
interest of existing holders of Common Stock.
USE OF PROCEEDS
There will be no proceeds to the Company from the issuance of Common Stock
upon conversion of Redeemed Preferred Stock. The net proceeds from the sale of
any Common Stock to the Purchasers pursuant to the standby arrangements
described herein will be used to effect redemption of any Redeemed Depositary
Shares not tendered for conversion. Any additional proceeds to the Company as a
result of profit sharing upon resale of any shares of Common Stock acquired
pursuant to the standby arrangements described herein, will be added to the
Company's working capital and used for general business purposes. See "Standby
Arrangements."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq National Market System
under the symbol LIPO. The following table sets forth for the periods indicated
the high and low sale price for the Common Stock:
High Low
1996
1st quarter (through February 21, 1996) $25.125 $18.625
1995
4th Quarter 21.750 13.000
3rd Quarter 17.750 10.125
2nd Quarter 11.500 8.375
1st Quarter 13.375 7.875
1994
4th Quarter 10.750 6.375
3rd Quarter 8.125 4.750
2nd Quarter 6.500 4.875
1st Quarter 7.750 5.875
On February 21, 1996, the closing price for a share of the Company's Common
Stock was $19.125 per share.
The Company has not paid any cash dividends on its Common Stock since its
inception and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future. As of December 31, 1995, there were approximately
1,401 stockholders of record of Common Stock.
REDEMPTION OF THE PREFERRED STOCK
The Company has called for redemption at 5:00 p.m. New York City time on
the Redemption Date the Redeemed Preferred Stock representing 50%, on a pro rata
basis, of the total number of shares of issued and outstanding Preferred Stock
at a Redemption Price of $26.40 per Redeemed Depositary Share, plus accrued and
unpaid dividends thereon in the amount of $0.4519 per Redeemed Depositary Share
to the Redemption Date, for a total redemption price of $26.8519 per Redeemed
Depositary Share. Payment of the Redemption Price will be made by Midlantic
Bank, the Company's depositary for such purposes, on and after the Redemption
Date upon receipt of depositary receipts representing the Redeemed Depositary
Shares. After the Redemption Date, notwithstanding that depositary receipts
evidencing some Redeemed Depositary Shares may not have been surrendered, the
dividends on all the Redeemed Preferred Stock will cease to accrue, the shares
will no longer be deemed outstanding and all rights whatsoever with respect to
the Redeemed Preferred Stock and Redeemed Depositary Shares (except the right to
receive the Redemption Price, without interest, upon surrender of depositary
receipts) will terminate. Although the Company is only redeeming the Redeemed
Depositary Shares, it is possible that holders of a greater number of shares
will surrender their Depositary Shares for conversion.
The following alternatives to redemption are available to holders of
Redeemed Depositary Shares:
(1) Convert the Redeemed Depositary Shares into Common Stock at the
rate of 1.9455 shares of Common Stock for each Redeemed Depositary
Share. Cash will be paid in lieu of any fractional share. On
February 21, 1996 the last sale price of the Common Stock, as reported
on the Nasdaq National Market, was $19.125. Upon conversion of the
Redeemed Depositary Shares, no payment or adjustment will be made in
respect of accrued and unpaid dividends. THE CONVERSION RIGHT EXPIRES
AT 5:00 P.M. NEW YORK CITY TIME ON THE REDEMPTION DATE; or
(2) Sell the Redeemed Depositary Shares in the open market. Holders
of Depositary Shares who wish to do so should consult with their own
advisers regarding if and when they should sell.
Based on the above-stated last sale price of the Common Stock on
February 21, 1996, the market value of the Common Stock into which each
Depositary Share is convertible (including cash in lieu of any fractional share)
is approximately $37.21, which is considerably higher than the Redemption Price.
Such value is, of course, subject to change depending on the market price of the
Common Stock. SO LONG AS THE MARKET PRICE OF THE COMMON STOCK IS AT LEAST
$13.80 PER SHARE, A HOLDER WHO CONVERTS HIS DEPOSITARY SHARES WILL RECEIVE
COMMON STOCK AND CASH IN LIEU OF ANY FRACTIONAL SHARE WITH A MARKET VALUE
GREATER THAN THE AMOUNT OF CASH RECEIVABLE UPON REDEMPTION OF THE DEPOSITARY
SHARES.
REDEEMED DEPOSITARY SHARES NOT RECEIVED FOR CONVERSION PRIOR TO 5:00 P.M.
NEW YORK CITY TIME ON MARCH 25, 1996 WILL BE REDEEMED AS SET FORTH ABOVE.
STANDBY ARRANGEMENTS
In the event that fewer than all of the outstanding Redeemed Depositary
Shares are surrendered for conversion prior to 5:00 p.m. New York City time on
the Redemption Date, the Company has arranged, subject to certain conditions,
for the Purchasers to purchase directly from the Company up to such whole number
of shares of Common Stock as would have been issuable upon conversion of any
Redeemed Depositary Shares that have not been surrendered for conversion in
accordance with the terms of a Standby Agreement (the "Standby Agreement") as
described below. The Company will use the net proceeds from any such purchase
to pay the Redemption Price of the Redeemed Depositary Shares not surrendered
for conversion.
The Purchasers propose to offer any shares of the Common Stock they acquire
in part directly to retail purchasers as set forth on the cover page of this
prospectus and in part to certain securities dealers at prices that may
represent concessions from the prices at which such shares are then being
offered to the public. The Purchasers may allow, and such dealers may reallow,
a concession to certain brokers and dealers. The amount of such concessions
and reallowances will be determined from time to time by the Purchasers. In
effecting such transactions, the Purchasers may realize profits and losses
independent of the compensation referred to below. The Purchasers will remit to
the Company an amount equal to 70% of the excess of (i) the aggregate net
proceeds realized by the Purchasers in respect of sales of Common Stock
purchased by the Purchasers pursuant to the Standby Agreement over (ii) the
purchase price of such shares (such 70% excess being referred to as the "Trigger
Amount"), until the Trigger Amount shall equal the Standby Commitment Fee (as
defined below), and thereafter the Purchasers shall remit to the Company an
amount equal to 50% of the excess of clause (i) over clause (ii) (determined in
accordance with the terms of the Standby Agreement) made by the Purchasers from
the sale of shares of Common Stock purchased by the Purchasers directly from the
Company.
Pursuant to the terms of the Standby Agreement and in consideration of the
Purchasers' obligations thereunder, the Company has agreed to pay the Purchasers
the sum of (i) $270,616.50 (the "Standby Commitment Fee"), 50% of which shall be
allocated to each Purchaser and (ii) a further sum (the "Take-Up Fee") 50% of
which shall also be allocated to each Purchaser, as follows: (a) if the
Purchasers purchase up to 132,950 shares of Common Stock, no Take-Up Fee shall
be payable; (b) if the Purchasers purchase in excess of 132,950 shares of Common
Stock to a maximum of 398,852 shares, a Take-Up Fee of $0.27 per share shall be
payable for each share of Common Stock (including the 132,950 shares referred to
in clause (a) above) purchased; and (c) if the Purchasers purchase in excess of
398,852 shares of Common Stock, a Take-Up Fee of $0.54 per share shall be
payable for each share of Common Stock (including the 398,852 shares referred to
in subsection (b) above) purchased.
The Company has agreed that, without the prior written consent of the
Purchasers, the Company will not, directly or indirectly, offer, sell, contract
to sell or otherwise dispose of any additional shares of its Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, for
a period commencing on the date of this Prospectus and ending 90 days
thereafter, other than (a) the issuance of Common Stock pursuant to the Standby
Agreement, (b) to consultants and grantors of licensing rights, and (c) to
directors, officers and employees in accordance with the Company's customary
practices. If the Purchasers purchase fewer than 132,950 shares of Common Stock
directly from the Company pursuant to the Standby Agreement, such restrictions
with respect to the Company shall terminate on the Redemption Date. The
obligations of the Purchasers under the Standby Agreement are subject to the
condition that certain officers of the Company shall have agreed not to sell any
equity securities of the Company for a period of 90 days following the date of
this Prospectus. If the Purchasers purchase fewer than 132,950 shares of Common
Stock directly from the Company pursuant to the Standby Agreement, such
restrictions with respect to such officers shall terminate on the Redemption
Date.
In the Standby Agreement, the Company and the Purchasers have agreed to
indemnify each other against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Dewey Ballantine, 1301 Avenue of the Americas, New York,
New York 10019 and for the Purchasers by Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022.
EXPERTS
The consolidated balance sheets as of December 31, 1995, 1994 and 1993 and
the consolidated statements of operations, stockholders' equity, and cash flows
for each of the four years in the period ended December 31, 1995, incorporated
by reference in this registration statement, have been incorporated herein in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR 2,659,012 Shares TO MAKE ANY REPRESENTATIONS 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 THE PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR
A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY THE LIPOSOME
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY, INC.
COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO
THE DATE HEREOF.
COMMON STOCK
_________________
______________
PROSPECTUS
TABLE OF CONTENTS
PAGE ______________
Available Information 2
Incorporation of Certain Documents by
Reference 2
The Company 3
Risk Factors 4
Use of Proceeds 8
Price Range of Common Stock and
Dividend Policy 8
Redemption of Preferred Stock 9 HAMBRECHT & QUIST
Standby Arrangements 9
Legal Matters 10 UBS SECURITIES INC.
Experts 10
February 23, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be born by the
Company in connection with the issuance and distribution of the securities being
registered hereby other than underwriting discounts and commissions.
SEC registration fee $
18,223.40
Accountants' fees and expenses* 20,000.00
Legal fees and expenses* 200,000.00
Blue Sky qualification legal fees and 5,000.00
expenses*
Cost of printing and engraving* 10,000.00
Miscellaneous* 21,776.60
Total $275,000.00
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, among other things,
and subject to certain conditions, authorizes the Company to indemnify its
officers and directors against certain liabilities and expenses incurred by such
persons in connection with claims made by reason of their being such an officer
or director. The By-laws of the Company provide for indemnification of its
officers and directors to the full extent authorized by law.
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty or loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
Director derived any improper personal benefit. Any repeal or modification of
the foregoing amendment after its adoption by the stockholders of the Company
will not adversely affect any right or protection of a director of the Company
existing at the time of such repeal or modification.
The Board of Directors and the Company's stockholders have approved the use
of an indemnification agreement (the "Indemnification Agreement"). The
Indemnification Agreement requires that the Company indemnify directors and
executive officers who are parties thereto in all cases to the fullest extent
permitted by applicable Delaware law. This contract right to indemnification
gives all directors and executive officers protection against a subsequent
adverse change in the Company's indemnification provisions in its By-laws or a
change of control of the Company.
The Company has obtained an insurance policy insuring its officers and
directors for certain acts in connection with their services as such.
Reference is made to the Standby Agreement, the proposed form of which is
filed as Exhibit 1, in which each Purchaser agrees to indemnify the directors
and certain officers of the Registrant and certain other persons against certain
civil liabilities.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description of Document
1 Form of Standby Agreement.
4.1 Provisions of the Articles of Incorporation of the
Registrant defining rights of holders of Common Stock of the
Registrant (Exhibit 3(i)-01 to the Company's annual report on
Form 10-K for the year ended December 31, 1994, incorporated
herein by reference thereto).
4.2 Provisions of the By-Laws of the Registrant defining
rights of holders of the Common Stock of the Registrant (Exhibit
4.5 to Registration Statement No. 33-23292, incorporated herein
by reference thereto).
4.3 Certificate of Designation of the Series A Cumulative
Convertible Exchangeable Preferred Stock of the Company
(Exhibit 3(c) to Registration Statement No. 33-55376,
incorporated herein by reference thereto).
4.4 Form of stock certificate for the Series A Cumulative
Convertible Exchangeable Preferred Stock of the Company (Exhibit
3(d) to Registration Statement No. 33-55376, incorporated herein
by reference thereto).
4.5 Form of Deposit Agreement among the Registrant,
Midlantic National Bank, as depositary, and the holders, from
time to time, of the Depositary Shares (Exhibit 4(c) to
Registration Statement No. 33-55376, incorporated herein by
reference thereto).
4.6 Form of Depositary Receipt for the Series A Cumulative
Convertible Exchangeable Preferred Stock of the Company (Exhibit
4(d) to Registration Statement No. 33-55376, incorporated herein
by reference thereto).
5 Opinion of Dewey Ballantine re legality of securities.
23.1 Consent of Dewey Ballantine (included in Exhibit 5).
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included in the Registration
Statement, page II-3).
99.1 Letter of Transmittal.
99.2 Notice of Redemption.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant described in Item 15 or otherwise, the Registrant has been advised
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 the 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.
The undersigned Registrant hereby undertakes:
(1) 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.
(2) 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
Section 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 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Township of Plainsboro, State of New Jersey on the 23rd day
of February, 1996.
THE LIPOSOME COMPANY, INC.
By: /s/ Charles A. Baker
Charles A. Baker
Chairman of the Board of Directors,
President, Chief Executive
Officer and Director
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Charles A. Baker and Carol J. Gillespie, and each
or either of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities to sign any and all amendments or post-effective amendments to
this Registration Statement and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on the 23rd
day of February, 1996 in the capacities indicated.
/s/ Charles A. Baker Chairman of the Board of
Directors,
Charles A. Baker
President, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Edward G. Silverman Executive Vice President and
Chief
Edward G. Silverman Operating Officer
/s/ Brooks Boveroux Vice President, Finance,
Chief Financial Brooks Boveroux Officer and
Treasurer (Principal Financial Officer)
/s/ Dennis Rodrigues Controller (Principal Accounting
Officer)
Dennis Rodrigues
/s/ James G. Andress Director
James G. Andress
/s/ Morton Collins, Ph.D. Director
Morton Collins, Ph.D.
/s/ Stuart F. Feiner Director
Stuart F. Feiner
/s/ Robert F. Hendrickson Director
Robert F. Hendrickson
/s/ Bengt Samuelsson, M.D. Director
Bengt Samuelsson, M.D.
/s/ Joseph T. Stewart, Jr. Director
Joseph T. Stewart, Jr.
/s/ Gerald Weissmann, M.D. Director
Gerald Weissmann, M.D.
/s/ Horst Witzel, Dr. - Ing. Director
Horst Witzel, Dr. - Ing.
EXHIBIT INDEX
Exhibit No. Description of Document Sequential
Page Number
1 ---- Form of Standby Agreement.
4.1 ---- Provisions of the Articles of Incorporation of the
Registrant defining rights of holders of Common Stock of the
Registrant (Exhibit 3(i)-01 to the Company's annual report on
Form 10-K for the year ended December 31, 1994, incorporated
herein by reference thereto).
4.2 ---- Provisions of the By-Laws of the Registrant defining
rights of holders of the Common Stock of the Registrant (Exhibit
4.5 to Registration Statement No. 33-23292, incorporated herein
by reference thereto).
4.3 ---- Certificate of Designation of the Series A Cumulative
Convertible Exchangeable Preferred Stock of the Company
(Exhibit 3(c) to Registration Statement No. 33-55376,
incorporated herein by reference thereto).
4.4 ---- Form of stock certificate for the Series A Cumulative
Convertible Exchangeable Preferred Stock of the Company (Exhibit
3(d) to Registration Statement No. 33-55376, incorporated herein
by reference thereto).
4.5 ---- Form of Deposit Agreement among the Registrant,
Midlantic National Bank, as depositary, and the holders, from
time to time, of the Depositary Shares (Exhibit 4(c) to
Registration Statement No. 33-55376, incorporated herein by
reference thereto).
4.6 ---- Form of Depositary Receipt for the Series A Cumulative
Convertible Exchangeable Preferred Stock of the Company (Exhibit
4(d) to Registration Statement No. 33-55376, incorporated herein
by reference thereto).
5 ---- Opinion of Dewey Ballantine re legality of securities.
23.1 ---- Consent of Dewey Ballantine (included in Exhibit 5).
23.2 ---- Consent of Coopers & Lybrand L.L.P.
24 ---- Power of Attorney (included in the Registration
Statement, page II-3).
99.1 ---- Letter of Transmittal.
99.2 ---- Notice of Redemption.
EXHIBIT 1
THE LIPOSOME COMPANY, INC.
STANDBY PURCHASE AGREEMENT
February 22, 1996
HAMBRECHT & QUIST LLC ("H&Q")
UBS SECURITIES INC. ("UBS")
c/o HAMBRECHT & QUIST LLC
One Bush Street
15th Floor
San Francisco, CA 94104
Ladies and Gentlemen:
The Liposome Company, Inc., a Delaware corporation (the "Company"),
proposes to redeem on March 25, 1996 (the "Redemption Date") 136,675 shares of
its outstanding Series A Cumulative Convertible Exchangeable Preferred Stock,
(the "Preferred Stock") at a redemption price of $26.40, plus accrued and unpaid
dividends thereon through the Redemption Date in the amount of $0.4519 per
Depositary Share for a total of $26.8519 per Depositary Share (the "Redemption
Price") (each Depositary Share representing 1/10 of a share of Preferred Stock,
collectively the "Depositary Shares"), and will cause requisite notice of such
redemption to be duly given. The shares of Preferred Stock are convertible into
shares of the Company's common stock, $.01 par value (the "Common Stock"), at a
conversion price of $12.85 per share of Common Stock (equivalent to a conversion
rate of 1.9455 shares of Common Stock for each Depositary Share). The right to
convert the shares of Preferred Stock into shares of Common Stock will terminate
on the Conversion Expiration Date (as defined below).
To assure the availability of funds to effect the contemplated redemption
of the shares of Preferred Stock, the Company desires to make arrangements
pursuant to which you (each, a "Purchaser" and collectively, the "Purchasers")
would purchase from the Company the shares of Common Stock (hereafter, the
"Shares") that would otherwise have been issuable upon conversion of the shares
of Preferred Stock that are not duly surrendered for conversion on or prior to
5:00 p.m. New York City time on March 25, 1996 (the "Conversion Expiration
Date"). The Company hereby confirms its agreement with the Purchasers with
respect to those arrangements.
This Standby Purchase Agreement shall be referred to herein as this "Agreement".
Sale and Purchase of Shares.
On the basis of the representations, warranties and agreements of the
Company contained herein, but subject to the terms and conditions herein set
forth, H&Q agrees to purchase 50% of the Shares and UBS agrees to purchase 50%
of the Shares, and the Company agrees to issue, sell and deliver the Shares to
H&Q and UBS, at and for a price (the "Purchase Price") of $13.57 per Share, the
obligations of H&Q and UBS being several and not joint.
Payment and Delivery.
No later than 6:00 p.m. New York City time, on the Conversion Expiration
Date, the Company shall give to the Purchasers written or telegraphic notice of
the aggregate number of shares of Preferred Stock not theretofore duly
surrendered for conversion as described above. No later than 9:30 a.m., New
York City time, on the Closing Date (as hereafter defined), the Purchasers
shall, to the extent not already provided pursuant to Section 6(s), remit to the
Company or, at the Company's prior written direction, to MidLantic Bank, N.A.,
as depositary (the "Depositary") under the Deposit Agreement, dated as of
January 15, 1993, relating to the shares of Preferred Stock (the "Deposit
Agreement"), for the account of the Company, by wire transfer of immediately
available funds, a sum equal to the aggregate Redemption Price for the shares of
Preferred Stock specified in the Company's notice referred to in the preceding
sentence, which sum shall be the aggregate Purchase Price of the Shares to be
purchased by the Purchasers pursuant to this Agreement. Simultaneously with
such payment, the Company shall deliver to the Purchasers, at the Purchasers'
respective addresses set forth in Section 12 hereof, or at such other location
as shall be mutually acceptable to the Company and the Purchasers, certificates
evidencing the Shares. The date and time of such payment and delivery shall be
March 28, 1996, but such date may be changed by agreement between the Purchasers
and the Company, and such date shall be referred to herein as the "Closing
Date". Certificates representing the shares shall, to the extent practicable,
be registered in such name or names and shall be in such denominations as the
Purchasers may request in a written notice to the Company prior to the Closing
Date.
Resale of Shares; Open Market Transactions; Solicitations.
(a) The Company understands that the Purchasers intend to resell the Shares
from time to time at prices prevailing in the open market, as set forth in
the Prospectus (as defined below), and confirms that the Purchasers and
dealers selected by the Purchasers have been authorized by the Company to
distribute the Prospectus in connection with such resales. The Purchasers
agree to remit to the Company an amount equal to 70% of the excess of (i)
the aggregate net proceeds realized by the Purchasers in respect of sales
of Shares purchased by the Purchasers from the Company pursuant to this
Agreement over (ii) the Purchase Price of such Shares (such 70% excess
being referred to as the "Trigger Amount"), until the Trigger Amount shall
equal the Standby Commitment Fee (as defined below), and thereafter the
Purchasers shall remit to the Company an amount equal to 50% of the excess
of clause (i) over clause (ii). Settlement of the profit sharing
arrangement, together with a calculation of the amount thereof, set forth
in this Section 3(a) shall occur as soon as reasonably practicable after
the final disposition by the Purchasers of all Shares purchased by the
Purchasers pursuant to this Agreement and no less than every thirty (30)
day period commencing with the Redemption Date.
(b) The Company acknowledges that it is aware that, until the close of business
on the Conversion Expiration Date, the Purchasers may (but shall have no
obligation to) purchase Depositary Shares, in the open market or otherwise,
in such amounts and at such prices as the Purchasers may deem advisable.
The Purchasers agree to convert on or prior to the close of business on the
Conversion Expiration Date any shares of Preferred Stock beneficially owned
by the Purchasers. Shares of Common Stock issued to the Purchasers, if
permitted by law, on conversion of shares of Preferred Stock may be sold by
the Purchasers at any time or from time to time. The Company further
acknowledges that it is aware that the Purchasers may purchase or sell
shares of Common Stock for long or short account on the Nasdaq National
Market or otherwise, at such times and prices and on such terms as the
Purchasers deem advisable, and that such purchases or sales, if commenced,
may be discontinued at any time.
(c) The Purchasers agree that the Purchasers will not solicit conversions of
shares of Preferred Stock by the holders of Depositary Shares. The Company
has not paid or given, and will not pay or give, directly or indirectly,
any commission or other remuneration in connection with soliciting
conversions of shares of Preferred Stock into Common Stock except Corporate
Investor Communications, acting as information agent, and MidLantic Bank,
N.A., acting as Depositary.
Compensation.
As full compensation to the Purchasers for the Purchasers' commitments
hereunder, the Company shall pay to the Purchasers by wire transfer of next day
funds (i) on the date hereof, the aggregate sum of $270,616.50 (the "Standby
Commitment Fee"), $135,308.25 of which shall be paid to H&Q and $135,308.25 of
which shall be paid to UBS, and (ii) on the Closing Date, a further sum (the
"Take-up Fee"), 50% of which shall be allocated to H&Q and 50% of which shall be
allocated to UBS, as follows:
(a) If the Purchasers purchase up to 132,950 Shares, no Take-up Fee shall be
payable.
(b) If the Purchasers purchase in excess of 132,950 Shares to a maximum of
398,852 Shares, a Take-up Fee of $.27 per Share shall be payable for each
Share (including the 132,950 Shares referred to in subsection (a) above)
purchased.
(c) If the Purchasers purchase in excess of 398,852 Shares, a Take-up Fee of
$.54 per Share shall be payable for each Share (including the 398,852
Shares referred to in subsection (b) above) purchased.
All such fees shall be payable by wire transfer of next day funds. The
Purchasers shall have the right, in lieu of receiving payment of the Take-up Fee
from the Company, to deduct an amount equal to the aggregate Take-up Fee from
the aggregate purchase price of the Shares purchased by the Purchasers on the
Closing Date.
5. Representations and Warranties of the Company.
The Company hereby represents and warrants as follows:
(a) The Company meets the requirements for use of Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act").
(b) The Company has prepared and promptly following the execution of this
Agreement will file with the Securities and Exchange Commission (the
"Commission"), pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated by the
Commission thereunder (the "Regulations"), a registration statement on Form
S-3, including a prospectus, covering the maximum number of shares of
Common Stock that could constitute the Shares. The term "Registration
Statement" as used in this Agreement shall mean such registration
statement, including all exhibits, financial statements and documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Securities Act, in the form in which it becomes effective and, in the event
of any amendment thereto after the effective date of such registration
statement (herein called the "Effective Date"), shall also mean (from and
after the effectiveness of such amendment) such registration statement as
so amended. The term "Prospectus" as used in this Agreement shall mean the
prospectus, including the documents incorporated by reference therein,
relating to the Shares first filed with the Commission pursuant to Rule
424(b) or (if no such filing is required) as included in the Registration
Statement and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the
filing with the Commission of such supplement or of the effectiveness of
such amendment) such prospectus as so supplemented or amended.
(c) When the Registration Statement shall become effective, when the Prospectus
is first filed with the Commission pursuant to Rule 424(b) of the
Regulations, when any supplement to or amendment of the Prospectus is filed
with the Commission, and at the Closing Date, the Registration Statement
and the Prospectus and any amendments thereof and supplements thereto will
comply in all material respects with the applicable provisions of the
Securities Act and the Regulations, and will not contain an untrue
statement of a material fact and will not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. No representation and warranty is made in this
subsection (c), however, with respect to any information contained in or
omitted from the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by the Purchasers expressly
for use therein with reference to the Purchasers.
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is duly qualified
as a foreign corporation and in good standing in all jurisdictions in which
the character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary (except where the failure to
be so qualified would not have a material adverse effect on the business,
properties, financial condition or earnings of the Company and its
subsidiaries, taken as a whole).
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
adverse change in the business affairs or business prospects, properties,
financial condition or earnings of the Company and its subsidiaries as a
whole, whether or not arising from transactions in the ordinary course of
business, other than as set forth in the Registration Statement and the
Prospectus, and since such dates, except in the ordinary course of
business, neither the Company nor its subsidiaries have entered into any
material transaction not referred to in the Registration Statement and the
Prospectus. Since such dates, no dividend or distribution of any kind has
been declared or has been paid or made by the Company on its capital stock.
(f) There are no outstanding options, warrants or other rights granted by the
Company to purchase shares of its Common Stock or other securities, other
than the Shares to be sold pursuant to this Agreement and as otherwise
described in the Prospectus and, to the best of the knowledge of the
Company, no such option, warrant or other right has been granted to any
person, the exercise of which would cause such person to own more than 5
percent of its Common Stock outstanding immediately after the offering of
the Shares, other than as might result from the sale of the Shares pursuant
to this Agreement and as otherwise described in the Prospectus.
(g) No further approval or authority of the stockholders or shareholders or the
Board of Directors of the Company will be required for the issuance and
sale of the Shares as contemplated herein.
(h) The documents incorporated by reference in the Prospectus pursuant to Item
12 of Form S-3 under the Securities Act, at the time they were filed with
the Commission, complied in all material respects with the requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations of the Commission thereunder and, when read
together and with the other information in the Prospectus, at the time the
Registration Statement became effective and at all times subsequent thereto
up to the Closing Date, will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(i) The execution and delivery of this Agreement, the issuance, sale and
delivery of the Shares, the consummation by the Company of the transactions
contemplated in this Agreement and in the Registration Statement and
compliance by the Company with the terms of this Agreement have been duly
authorized by all necessary corporate action on the part of the Company and
do not and will not conflict with, or result in a breach of, the respective
Articles or Certificate of Incorporation or bylaws (or corporate documents
of similar effect) of the Company or any of its subsidiaries, nor will the
performance of this Agreement and the consummation of the transactions
herein contemplated result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (a) the certificate of
designation relating to the shares of Preferred Stock (the "Certificate of
Designation"), any indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the property of any of them is
bound or (b) any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or over the properties of any of them; and no consent,
approval, authorization or order of any court or governmental agency or
body is required for the consummation by the Company of the transactions
herein and therein contemplated, except such as may be required under the
Securities Act or under the securities or Blue Sky laws of the various
states, or by the National Association of Securities Dealers, Inc. (herein
called the "NASD").
(j) All of the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
no holder thereof is or will be subject to personal liability solely by
reason of being such a holder; and none of the outstanding shares of Common
Stock was issued in violation of the preemptive rights of any stockholder
of the Company.
(k) The Shares have been duly authorized and, when issued upon conversion of
the shares of Preferred Stock, as provided in the Certificate of
Designation or sold and delivered against payment therefor as provided
herein, such Shares will be validly issued, fully paid and non-assessable;
no holder thereof will be subject to personal liability solely by reason of
being such a holder; such Shares will not be subject to the preemptive
rights of any stockholder of the Company; and all corporate action required
to be taken for the authorization, issuance and sale of the Shares has been
validly and sufficiently taken.
(l) The Company owns, or possesses adequate rights to use, all material
patents, patent rights, inventions, trade secrets, licenses, know-how,
proprietary techniques, including processes and substances, trademarks,
service marks, trade names and copyrights described or referred to in the
Prospectus, or owned or used by it or which are necessary for the conduct
of its business as described in the Prospectus (herein collectively called
the "Information Property"). Except as disclosed in the Prospectus, the
Company has not received any notice of infringement of, or notice from the
holder of any Information Property or from any person having a proprietary
interest in any Information Property of a conflict with asserted rights of
others with respect to, any Information Property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially adversely affect the business operations, financial
condition, income or business prospects of the Company and its
subsidiaries, taken as a whole.
(m) The Company holds all material licenses, certificates and permits from
state, federal and other regulatory authorities which are necessary for the
conduct of its business; the Company is not in violation of its Articles or
Certificate of Incorporation or bylaws (or corporate documents of similar
effect). Neither the Company nor its subsidiaries are in default in the
performance or observance of any provision of any obligation, agreement,
covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which any of them or
any of their respective properties may be bound, or are in violation of any
law, order, rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign, the violation
of which, or default in the performance or observance of which, would have
a material effect on the business affairs or business prospects,
properties, financial condition or earnings of the Company and its
subsidiaries, taken as a whole.
(n) Except as set forth in the Prospectus, there is no action, suit or
proceeding, at law or in equity, pending or, to the best of the Company's
knowledge, threatened against the Company or any of its subsidiaries by a
private litigant, by any federal, state or other commission, board or
agency or in any proceeding before any administrative agency, wherein any
unfavorable result or decision could materially adversely affect the
business affairs or business prospects, properties, financial condition or
income or earnings of the Company or its subsidiaries, taken as a whole, or
prevent consummation of the transactions contemplated hereby; and there are
no contracts or documents of the Company which would be required to be
filed as exhibits to the Registration Statement by the Securities Act and
which have not been filed as exhibits to the Registration Statement.
(o) The consolidated financial statements of the Company and its subsidiaries,
together with related notes and schedules as set forth in the Registration
Statement or incorporated by reference therein, present fairly the
financial position and the results of operations of the Company and its
subsidiaries on a consolidated basis, at the indicated dates and for the
indicated periods, in accordance with generally accepted accounting
principles. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of results for such periods have been made.
(p) The Company and each of its subsidiaries have fulfilled their obligations,
if any, under the minimum funding standards of Section 302 of the United
States Employee Retirement Income Security Act of 1974 (herein called
"ERISA") and the regulations and published interpretations thereunder with
respect to each "plan" (as defined in ERISA and such regulations and
published interpretations) in which employees of the Company or any of its
subsidiaries are eligible to participate, and each such plan is in
compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations, and
have not incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the ordinary course)
or to any such plan under Title IV of ERISA.
(q) No authorization, approval, consent or license of any government,
governmental instrumentality or court, domestic or foreign (other than
under the Securities Act, the securities or Blue Sky laws of the various
states and the NASD), is required for the valid authorization, issuance and
delivery of the Shares or the execution, delivery or performance of this
Agreement by the Company.
(r) Coopers & Lybrand L.L.P., who have certified certain of the financial
statements filed with the Commission as part of or incorporated by
reference in the Registration Statement, are independent public accountants
with respect to the Company as required by the Securities Act.
(s) Except as set forth in the Registration Statement and the Prospectus, each
of the Company and its subsidiaries has filed all necessary United States
income tax returns and all necessary state income, franchise, sales and use
tax returns as required by law or regulation, domestic or foreign, and has
paid all taxes shown thereon as due, and each of the Company and its
subsidiaries has no knowledge of any tax deficiency which has been or might
be asserted against any of them which would materially and adversely affect
any of the businesses or properties of the Company and its subsidiaries
taken as a whole; to the knowledge of the Company all tax liabilities are
adequately provided for on the books of the Company and its subsidiaries.
(t) The Company has not taken and will not take, directly or indirectly, any
action designed to cause or result in, or which constitutes or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of
the Shares.
(u) Except as described in the Prospectus, no holder of securities of the
Company has any rights to the registration of securities of the Company
because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby.
(v) Neither the Company nor any subsidiary is involved in any labor dispute
which, either individually or in the aggregate, could have a material
adverse effect on the business or operations of the Company and its
subsidiaries taken as a whole, nor, to the knowledge of the Company, is any
such dispute threatened.
(w) All material contracts, leases and agreements referred to in or filed as
exhibits to the Registration Statement to which the Company or any
subsidiary is a party, or by which the Company or any subsidiary is bound,
are in full force and effect.
(x) Except for Corporate Investor Communications, acting as information agent,
and MidLantic Bank, N.A., acting as Depositary, the Company has neither
paid nor given, nor will pay or give, directly or indirectly, any
commission or other remuneration in connection with soliciting the
conversion of shares of Preferred Stock into Common Stock.
6. Further Agreements of the Company. The Company covenants and agrees as
follows:
(a) The Company will (i) use its best efforts to cause the Registration
Statement to become effective as promptly after filing thereof with the
Commission and (ii) not file any amendment to the Registration Statement or
supplement to the Prospectus (including documents incorporated by reference
in such Prospectus) of which you shall not have previously been advised and
furnished with a copy or to which you shall have reasonably objected in
writing or which is not in compliance with the Securities Act or the rules
and regulations of the Commission.
(b) The Company will promptly notify you in the event of (i) the request by the
Commission for amendment of the Registration Statement or for supplement to
the Prospectus or for any additional information, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended
institution of any action or proceeding for that purpose, (iv) the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or (v) the receipt
by it of notice of the initiation or threatening of any proceeding for such
purpose. The Company will make every reasonable effort to prevent the
issuance of such a stop order and, if such an order shall at any time be
issued, to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you one
signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement became
effective and, promptly upon the filing thereof, one signed copy of each
post-effective amendment, if any, to the Registration Statement (together
with, in each case, all exhibits thereto and documents filed therewith,
including documents incorporated by reference into the Prospectus, unless
previously furnished to you), and will also deliver to you a sufficient
number of additional conformed copies of each of the foregoing (but without
exhibits) as you may reasonably request, (ii) as promptly as possible
deliver to you, at such office or offices as you may designate, as many
copies of the Prospectus as you may reasonably request, and (iii)
thereafter from time to time during the period in which a prospectus is
required by law to be delivered by a Purchaser, likewise deliver to you as
many additional copies of the Prospectus and as many copies of any
supplement to the Prospectus and of any amended prospectus, filed by the
Company with the Commission, as you may reasonably request for the purposes
contemplated by the Securities Act.
(d) If at any time during the period in which the Prospectus is required by law
to be delivered by a Purchaser any event relating to or affecting the
Company or any of its subsidiaries, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is
necessary, in the opinion of counsel for the Company or your counsel, to
supplement or amend the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser of the Shares, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
Prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time such Prospectus is
delivered to such purchaser, not misleading. If, after the initial public
offering of the Shares by you and during such period in which the
Prospectus is required by law to be delivered by a Purchaser, you shall
propose to vary the terms of the offering thereof by reason of changes in
general market conditions or otherwise, you will advise the Company in
writing of the proposed variation, and, if in the opinion of either counsel
for the Company or your counsel such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
Prospectus setting forth such variation. The Company authorizes the
Purchasers to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Shares in accordance with
the applicable provisions of the Securities Act and the applicable rules
and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will submit to
you, for your information, a copy of any post-effective amendment to the
Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions in the United States as you may reasonably
request and, during the period in which the Prospectus is required by law
to be delivered by a Purchaser, in keeping such qualifications in good
standing under said securities or Blue Sky laws; provided, however, that
the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified. The Company will, from time to time, prepare
and file such statements, reports, and other documents as are or may be
required to continue such qualifications in effect for so long a period as
you may reasonably request for distribution of the Shares.
(g) The Company will use its best efforts to effect the "listing" of the Shares
on the National Association of Securities Dealers Automated Quotation
National Market System (herein called "NASDAQ NMS"). The Company will file
with NASDAQ NMS all documents and notices required by NASDAQ NMS of
companies that have issued securities that are traded in the over-the-
counter market and quotations for which are reported by NASDAQ NMS.
(h) During a period of five years commencing with the date hereof, the Company
will furnish to you copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports
filed with the Commission.
(i) Not later than the 45th day following the end of the fiscal quarter first
commencing after the first anniversary of the effective date of the
Registration Statement, the Company will make generally available to its
security holders an earnings statement of the Company in accordance with
Section 11(a) of the Securities Act or shall otherwise comply in full with
the provisions of Rule 158 of the Commission.
(j) The Company will apply the proceeds from the sale of the Shares as set
forth under "Use of Proceeds" in the Prospectus.
(k) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all
reasonable costs and expenses incident to (i) the preparation, printing and
filing with the Commission and the NASD of the Registration Statement and
the Prospectus, and any amendments or supplements thereto, (ii) the
furnishing to you of copies of the several documents required by paragraph
(c) of this Section 6 to be so furnished, (iii) the reproduction of this
Agreement and related documents delivered to you, (iv) the preparation,
printing and filing of all supplements and amendments to the Prospectus
referred to in paragraph (d) of this Section 6, (v) the furnishing to you
of the reports and information referred to in paragraph (h) of this Section
6, and (vi) the printing and issuance of stock certificates, including the
transfer agent's fees.
(l) The Company agrees to reimburse you for Blue Sky fees and related
disbursements (including counsel fees and disbursements and the cost of
reproducing memoranda for you) paid by or for your account or your counsel
in qualifying the Shares under state securities or Blue Sky laws and in the
review of the offering by the NASD.
(m) The Company agrees that except in connection with the conversion of the
Shares, it will not without the prior written consent of H&Q, directly or
indirectly, sell, offer, contract to sell, make any short sale of, pledge,
grant any option to purchase or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
or any rights to purchase or acquire Common Stock for a period of 90 days
from the date of the Prospectus, other than (i) the Shares to be sold to
you pursuant to this Agreement, (ii) to consultants and grantors of
licensing rights and (iii) to directors, officers and employees in
accordance with the Company's customary practices. If the Purchasers
purchase fewer than 132,950 Shares directly from the Company pursuant to
this Agreement, such restrictions with respect to the Company shall
terminate on the Redemption Date.
(n) The Company shall mail or cause to be mailed on the Effective Date the
required notice of the redemption of 136,675 shares of Preferred Stock on
the Redemption Date in the form heretofore submitted to the Purchasers and
shall furnish to the Purchasers such number of copies thereof as the
Purchasers reasonably may request.
(o) The Company will direct MidLantic Bank, N.A., as Depositary for the shares
of Preferred Stock, to advise the Purchasers daily of the aggregate number
of shares of Preferred Stock (x) surrendered for conversion into Common
Stock and (y) surrendered for redemption, in each case through the close of
business on the immediately preceding business day.
(p) The Company will (i) give the Purchasers at least one business day prior
written notice, or such shorter period as is practicable, of the contents
of any press release or other public announcement it intends to issue on or
prior to the Conversion Expiration Date and (ii) consider in good faith any
comments the Purchasers may have concerning the timing and content of such
press release or other public announcement.
(q) The Company is familiar with the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder (the "Investment Company
Act"), and has in the past conducted its affairs, and will invest the
proceeds of the transaction contemplated by this Agreement (the
"Proceeds"), in such a manner as to ensure that the Company was not, and
will not as a result of investment of the Proceeds be, an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act.
(r) The Company will not take any action the effect of which would be to
require an adjustment to the conversion price or the conversion rate of the
Shares.
(s) The Purchasers jointly and severally agree that in the event that MidLantic
Bank, N.A. should require from the Company any deposit of funds pursuant to
Section 7 of the Certificate of Designation, the Purchasers shall advance
such funds to the Company and deposit such funds by wire transfer, in
immediately available funds, with MidLantic Bank, N.A. on behalf of the
Company (such advance and deposit being referred to as the "MidLantic
Deposit"); provided that, prior to the Purchasers advancing the MidLantic
Deposit, the Company shall have delivered to the Purchasers by 2:00 p.m. on
the date requested for the MidLantic Deposit, a certificate signed by the
Chairman of the Board-Chief Executive Officer and the Vice President-Chief
Financial Officer and Treasurer of the Company stating (i) the amount of
the MidLantic Deposit and (ii) that they are not aware of any information
or any current or potential event that would make it impossible or
impracticable for the closing conditions set forth in Section 9 to be
satisfied, either as of the date of such certificate or as of the Closing
Date. The Company agrees to repay or to cause MidLantic Bank, N.A. to
repay to the Purchasers on the Closing Date the sum of any such MidLantic
Deposit plus Purchasers' cost of funds on any such MidLantic Deposit from
the date of such deposit through the Closing Date.
7. Indemnification and Contribution.
(a) Subject to the provisions of paragraph (d) of this Section 7, the Company
agrees to indemnify and hold harmless each Purchaser and each person
(including each partner and officer thereof) who controls such Purchaser
within the meaning of Section 15 of the Securities Act from and against any
and all losses, claims, damages or liabilities, joint or several, to which
such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, the common law or otherwise, and the
Company agrees to reimburse each Purchaser and each such controlling person
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any
such losses, claims, damages or liabilities or in connection with any
investigation of or inquiry into, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the
Prospectus as part thereof and documents incorporated by reference therein)
or any post-effective amendment thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus (as
amended or as supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto, including documents
incorporated by reference therein), or the omission or alleged omission to
state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the indemnity agreements of the Company
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of the Purchasers expressly for use in the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto. The indemnity agreements of the Company contained in
this paragraph (a) and the representations and warranties of the Company
contained in Section 5 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the
Shares.
(b) Subject to the provisions of paragraph (d) of this Section 7, you agree to
indemnify and hold harmless the Company, each of its officers who signs the
Registration Statement on his own behalf or pursuant to a power of
attorney, each of its directors and each person (including each partner or
officer thereof), if any, who controls the Company or the Purchasers within
the meaning of Section 15 of the Securities Act from and against any and
all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities
Act, the Exchange Act or the common law or otherwise and to reimburse each
of them for any legal or other expenses (including, except as otherwise
hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection
with any investigation of or inquiry into, or other proceeding which may be
brought against, the respective indemnified parties, in each case arising
out of or based upon (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (including the
Prospectus as part thereof) or any post-effective amendment thereto, 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 (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, if
such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of you
expressly for use in the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto. The indemnity agreements of
the Purchasers contained in this paragraph (b) shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of any indemnified party and shall survive the delivery of and
payment for the Shares.
(c) Each party indemnified under the provisions of paragraph (a) or (b) of this
Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its
receipt of written notification of the commencement of any investigation of
or inquiry into or proceeding against it, in respect of which indemnity may
be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the
"Notice") of such service or notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for
in such paragraph shall be available to any party who shall fail so to give
the Notice if the party to whom such Notice was not given was unaware of
the action, suit, investigation, inquiry or proceeding to which the Notice
would have related and was prejudiced by the failure to give the Notice,
but the omission so to notify such indemnifying party or parties of any
such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified
party for contribution or other than on account of such indemnity
agreement. Any indemnifying party shall be entitled at its own expense to
participate in the defense of any action, suit or proceeding against, or
investigation of or inquiry into, an indemnified party. Any indemnifying
party shall be entitled, if it so elects within a reasonable time after
receipt of the Notice, by giving written notice (herein called the "Notice
of Defense") to the indemnified party to assume (alone or in conjunction
with any other indemnifying party or parties) the entire defense of such
action, suit, investigation, inquiry or proceeding in which event such
defense shall be conducted, at the expense of the indemnifying party or
parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided,
however, that (i) if the indemnified party or parties reasonably determine
that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that
there may be legal defenses available to such indemnified party or parties
different from or in addition to those available to the indemnifying party
or parties, then one counsel for the indemnified party or parties chosen by
the indemnified party or parties with the consent of the indemnifying
party, whose consent shall not be unreasonably withheld shall be entitled
to conduct the defense to the extent reasonably determined by such counsel
to be necessary to protect the interests of the indemnified party or
parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties
participate in, but not conduct, the defense. If, within a reasonable time
after receipt of the Notice, an indemnifying party gives a Notice of
Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a)
through (c) of this Section 7 for any legal or other expenses subsequently
incurred by the indemnified party or parties in connection with the defense
of the action, suit, investigation, inquiry or proceeding except that (A)
the indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in
clause (i) of the proviso to the preceding sentence and (B) the
indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified party or parties. If,
within a reasonable time after receipt of the Notice, no Notice of Defense
has been given, the indemnifying party or parties shall be responsible for
any legal or other expenses incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a) or
(b) of this Section 7, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a) or (b) of this
Section 7 (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of each indemnifying party in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the Purchasers shall be deemed to be in the same respective proportions
as the aggregate Redemption Price bears to the compensation received by the
Purchaser pursuant to Section 4. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by each indemnifying party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the first sentence of this Section
7(d). The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
Section 7(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending against any action or claim
which is the subject of this Section 7(d). Notwithstanding the provisions
of this Section 7(d), neither Purchaser shall be required to contribute any
amount in excess of the aggregate of the Standby Commitment Fee and the
Take-up Fees applicable to the Shares purchased by such Purchaser pursuant
to this Agreement. 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.
Each party entitled to contribution agrees that, upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall
promptly give written notice of such service to the party or parties from
whom contribution may be sought, but the omission so to notify such party
or parties of any such service shall not relieve the party from whom
contribution may be sought of any obligation it may have hereunder or
otherwise (except as specifically provided in Section 7(c) hereof). No
party will be liable for contribution with respect to any action or claim
settled without its written consent.
(e) No party will, without the prior written consent of the other party to this
Agreement (herein called the other party), settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or any joinder may
be sought hereunder (whether or not such other party or any person who
controls such other party within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such other party and each such
controlling person from all liability arising out of such claim, action,
suit or proceeding.
8. Effective Date of the Agreement; Termination.
(a) This Agreement shall become effective when the Purchasers and the Company
shall have received notification of the effectiveness of the Registration
Statement. Until this Agreement becomes effective as aforesaid, it may be
terminated by the Company by notifying the Purchasers.
(b) The Purchasers shall have the right to terminate this Agreement at any time
prior to the Closing Date by notice to the Company from the Purchasers,
without liability (other than with respect to Section 7) on the Purchasers'
part to the Company if, on or prior to such date, (i) the Company shall
have failed, refused or been unable to perform in any material respect any
agreement on its part to be performed hereunder, (ii) any other condition
to the Purchasers' obligations hereunder as provided in Section 9 is not
fulfilled when and as required in any material respects, (iii) trading in
securities generally on the Nasdaq Stock Market shall have been suspended
or materially limited, or minimum prices shall have been established on
such exchange by the Commission, or by such exchange or other regulatory
body or governmental authority having jurisdiction, (iv) trading in the
Company's Common Stock shall have been suspended by the Commission or the
Nasdaq Stock Market for more than a single four trading hour-period during
the five business days prior to the Redemption Date, (v) a general banking
moratorium shall have been declared by Federal or New York State
authorities or (vi) there is an outbreak or escalation of armed hostilities
significantly involving the United States on or after the date hereof, or
if there has been a declaration by the United States of a national
emergency or war, or if there shall have occurred a calamity or crisis, the
effect of which shall be, in the Purchasers' good faith judgment, to make
it impracticable to proceed with the public offering or delivery of the
Shares on the terms and in the manner contemplated in the Prospectus.
(c) Any notice of termination pursuant to this Section 8 shall be by telephone,
telex, telecopy, or telegraph, confirmed in writing by letter.
9. Conditions of Purchasers' Obligations.
The obligations of the Purchasers to purchase and pay for the Shares shall be
subject to the performance by the Company of all of its respective obligations
to be performed hereunder at or prior to the Closing Date and to the following
further conditions:
(a) The Registration Statement shall have become effective not later than the
first full business day next following the date of this Agreement or at
such later time and date as shall have been consented to in writing by the
Purchasers, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued
and no proceedings therefor shall have been initiated or threatened by the
Commission.
(b) The legality and sufficiency of the call for redemption and the redemption
of the shares of Preferred Stock, the issue and sale of the Shares to the
Purchasers hereunder, and the validity and form of the certificates
representing the Shares, all corporate proceedings and other legal matters
incident to the foregoing, and the form of the Registration Statement and
of the Prospectus (except as to the financial statements contained therein)
shall have been approved at or prior to the Closing Date by Shearman &
Sterling, counsel for the Purchasers, and such counsel shall have been
furnished with such papers and information as they may reasonably have
requested to enable them to pass upon the matters referred to in this
subsection.
(c) You shall have received from Dewey Ballantine, counsel to the Company, an
opinion, addressed to the Purchasers and dated the Closing Date, in the
form attached hereto as Annex A.
(d) You shall have received from Dechert Price & Rhoads, patent counsel to the
Company, an opinion, addressed to the Purchasers and dated the Closing
Date, in the form attached hereto as Annex B.
(e) You shall have received from Carol J. Gillespie, Esq., Vice President,
General Counsel and Secretary of the Company, an opinion, addressed to the
Purchasers and dated the Closing Date, in the form attached hereto as Annex
C.
(f) You shall be satisfied that (i) as of the Effective Date, the statements
made in the Registration Statement and the Prospectus (including the
documents incorporated by reference) were true and correct and neither the
Registration Statement nor the Prospectus omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, (ii) since the Effective Date, no event
has occurred which should have been set forth in a supplement or amendment
to the Prospectus which has not been set forth in such a supplement or
amendment, (iii) since February 22, 1996, there has not been any material
adverse change in the business affairs or business prospects, properties,
financial condition or earnings of the Company and its subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course
of business, and since such date, except in the ordinary course of
business, neither the Company nor any of its subsidiaries has entered into
any transaction material to the Company and its subsidiaries, taken as a
whole, and not referred to in the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein,
(iv) neither the Company nor any of its subsidiaries has any contingent
obligations material to the Company and its subsidiaries, taken as a whole,
which are not disclosed in the Registration Statement and the Prospectus,
(v) there are no pending or known threatened legal proceedings to which the
Company or any of its subsidiaries is a party or of which property of the
Company or its subsidiaries is the subject and which are material to the
business of the Company or any of its subsidiaries, and which are not
disclosed in the Registration Statement and the Prospectus, (vi) there are
no franchises, contracts, leases or other documents which are required to
be filed as exhibits to the Registration Statement which have not been
filed as required, (vii) the representations and warranties of the Company
herein are true and correct in all material respects as of the Closing Date
and (viii) there has not been any material change in the market for
securities in general or in political, financial or economic conditions
from those reasonably foreseeable as to render it impractical in your sole
judgment to make a public offering of the Shares or a material adverse
change in market levels for securities in general (or those of companies in
particular) or financial or economic conditions which render it inadvisable
to proceed.
(g) You shall have received on the Closing Date a certificate, dated the
Closing Date and signed by the Chairman of the Board-Chief Executive
Officer and by the Vice President-Chief Financial Officer and Treasurer of
the Company stating that the respective signers of said certificates have
carefully examined the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein and any
supplements or amendments thereto, and that the statements included in
clauses (i) through (viii) of paragraph (f) of this Section 9 are true and
correct.
(h) You shall have received from Coopers & Lybrand L.L.P., a letter or letters,
addressed to you and dated the Effective Date and the Closing Date
confirming that they are independent public accountants with respect to the
Company within the meaning of the Securities Act and based upon the
procedures described in their letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than five business days prior to the
Effective Date and the Closing Date (i) confirming, to the extent true,
that the statements and conclusions set forth in the Original Letter are
accurate as of the Effective Date, the Closing Date and (ii) setting forth
any revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of the Original Letter or
to reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company or any of its subsidiaries which, in your sole judgment,
makes it impractical or inadvisable to proceed with the public offering of
the Shares as contemplated by the Prospectus.
(i) You shall have been furnished evidence in the usual written or telecopied
form from the appropriate authorities of the several states, or other
evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
(j) The Company shall have furnished to you such further certificates and
documents as you shall reasonably request (including certificates of
officers of the Company) as to the accuracy of the representations and
warranties of the Company, the performance of their respective obligations
hereunder, and as to other conditions concurrent with and precedent to the
obligations of the Purchasers hereunder.
(k) You shall have received from all officers listed on Schedule 1 hereto
stockholders agreements stating that without the prior written consent of
H&Q, each of such holders will not, directly or indirectly, sell, offer,
contract to sell, make any short sale, pledge or otherwise dispose of any
shares of Common Stock or any securities convertible into or exchangeable
or exercisable for or any rights to purchase or acquire Common Stock for a
period of 90 days from the date of the Prospectus. If the Purchasers have
purchased fewer than 132,950 Shares directly from the Company pursuant to
this Agreement, such restrictions with respect to such officers shall
terminate on the Redemption Date.
All of the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Shearman & Sterling, counsel for the Purchasers, shall
be reasonably satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Purchasers and without liability of the Purchasers to the Company; provided,
however, that (i) in the event of any such termination, the Company agrees to
indemnify and hold harmless the Purchasers from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (k) and (l) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein or to comply with any
provision hereof other than by reason of a default by the Purchasers, the
Company will reimburse the Purchasers upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by it in connection with the transactions contemplated hereby.
10. Reimbursement of Certain Expenses. In connection with its obligations
under Section 7 of this Agreement, the Company hereby agrees to reimburse the
Purchasers on a quarterly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 10 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
11. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company and the Purchasers and, with respect to the
provisions of Section 7 hereof, the several parties (in addition to the Company
and the Purchasers) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Shares from any of the Purchasers.
12. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing, mailed or telecopied, and, if to the Purchasers,
shall be mailed, telecopied or delivered to Hambrecht & Quist LLC, One Bush
Street, 15th Floor, San Francisco, California 94104, Attn.: William R. Timken;
if to the Company, shall be mailed, telecopied or delivered to The Liposome
Company, Inc., One Research Way, Princeton Forrestal Center, Princeton, New
Jersey 08540, Attn.: Carol J. Gillespie, Esq. All notices given by telecopy
shall be promptly confirmed by letter.
13. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of the Purchasers or controlling person thereof, or by or on behalf of
the Company or its respective directors or officers and (c) delivery of and
payment for the Shares under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraph
(m) of Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
Please sign and return to the Company the enclosed copies of this letter,
whereupon this letter will become a binding agreement among the Company and the
Purchasers in accordance with its terms.
Very truly yours,
THE LIPOSOME COMPANY, INC.
By: /s/ Charles A. Baker
Name: Charles A. Baker
Title:Chairman and Chief Executive
Officer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
HAMBRECHT & QUIST LLC
UBS SECURITIES INC.
By: HAMBRECHT & QUIST LLC
By: /s/ Dennis Purcell
Name: Dennis Purcell
Title: Managing Director
ANNEX A
______________, 1996
Hambrecht & Quist LLC
UBS Securities Inc.
c/o Hambrecht & Quist LLC
One Bush Street
15th Floor
San Francisco, CA 94104
RE: THE LIPOSOME COMPANY, INC.
Ladies and Gentlemen:
We have acted as counsel to The Liposome Company, Inc. (the "Company") in
connection with the preparation of the Registration Statement on Form S-3 of the
Company, filed with the Securities and Exchange Commission on February 23, 1996
(the "Registration Statement"), relating to the registration under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively the "Securities Act"), of [__________] shares of the
Company's Common Stock, par value $.01 per share (the "Shares"), in connection
with an underwritten call for partial redemption of the Company's Cumulative
Convertible Exchangeable Preferred Stock (the "Preferred Stock"). The Shares
may be either issued upon conversion of the shares of Preferred Stock in
accordance with the terms of the Certificate of Designation governing the shares
of Preferred Stock (the "Certificate of Designation") or purchased by Hambrecht
& Quist LLC and UBS Securities Inc. acting as standby purchasers (the "Standby
Purchasers") pursuant to the Standby Purchase Agreement dated February 22, 1996
between the Standby Purchasers and the Company (the "Standby Purchase
Agreement"), as the case may be. All terms, unless otherwise defined herein,
have the meanings assigned to them in the Standby Purchase Agreement.
In arriving at the opinions expressed below, we have examined and relied
upon, among other things, such certificates of public officials and responsible
officers of the Company and such originals or copies, certified or otherwise
identified to our satisfaction, of corporate documents and records of the
Company and its subsidiaries, as we have deemed necessary or appropriate for the
purposes hereof. In giving this opinion, we assume that the certificates
representing the Common Stock conform to the specimens examined by us, that the
Shares has been completed as to the numbers of shares and names of registered
stockholders pursuant to Section 2 of the Standby Purchase Agreement and have
been countersigned and registered by Midlantic Bank as Registrar. In giving
this opinion, we are also assuming the authenticity of all instruments presented
to us as originals, the conformity to the originals of all instruments presented
to us as copies, the genuineness of all signatures and the competency of all
individuals signing all instruments presented to us.
On the basis of the foregoing, we are of the opinion that:
(i) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with corporate power and
authority under such laws to own its properties and conduct its business as
described in the Prospectus.
(ii) The Company is duly qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and its subsidiaries taken as a whole.
(iii) The Shares have been duly authorized, and, when issued upon conversion
of the shares of Preferred Stock, as provided in the Certificate of
Designation, or sold and delivered against payment therefor in accordance
with the terms of the Standby Purchase Agreement, such Shares will be
validly issued by the Company, fully paid and non-assessable, and no holder
thereof will be subject to personal liability solely by reason of being
such a holder; to the best of our knowledge, such Shares will not be
subject to the preemptive rights of any stockholder of the Company; and all
corporate action required to be taken for the authorization, issuance and
sale of such Shares has been validly and sufficiently taken.
(iv) All of the outstanding shares of capital stock of the Company prior to the
issuance of the Shares have been duly authorized and validly issued and are
fully paid and non-assessable; no holder thereof is or will be subject to
personal liability solely by reason of being such a holder; and, to our
knowledge, none of such outstanding shares of capital stock of the Company
was issued in violation of the preemptive rights of any holder of any
securities of the Company.
(v) The Standby Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(vi) To the best of our knowledge, except as described in the Prospectus, no
holder of the securities of the Company has rights to the registration of
securities of the Company because of the filing of the Registration
Statement or otherwise in connection with the sale of Shares or other
actions contemplated thereby.
(vii) No approval, consent, order, authorization, designation, declaration
of or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery by the Company of the Standby Purchase Agreement and the
consummation of the transactions therein contemplated (except such of the
aforementioned as have been obtained under the Securities Act and such as
may be required by the National Association of Securities Dealers, Inc. or
as may be necessary to qualify the Shares for public offering by the
Purchasers under state securities or Blue Sky laws).
(viii) The execution and delivery by the Company of the Standby Purchase
Agreement, the issuance and delivery of the Shares by the Company, the
consummation by the Company of the transactions contemplated in the Standby
Purchase Agreement and in the Registration Statement and the compliance by
the Company with the terms of the Standby Purchase Agreement do not and
will not conflict with any provision of the charter or bylaws of the
Company or any of its subsidiaries and do not and will not conflict with,
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the properties or assets of the Company or any
of its subsidiaries under, (a) the Certificate of Designation or any
indenture, mortgage, loan agreement, or other agreement or instrument of
which we have knowledge, to which the Company or any of its subsidiaries is
a party or by which any of them may be bound or to which any of the
properties of any of them may be subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have
a material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise), (b) any existing applicable
law, rule or regulation (other than the securities or Blue Sky laws of the
various states, as to which we express no opinion) or (c) any judgment,
order or decree, of which we have knowledge, of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, any of its subsidiaries or any of their
properties.
(ix) The Registration Statement has been declared effective by the Commission
under the Securities Act and we have no knowledge of any stop order or that
the effectiveness of the Registration Statement has been suspended or
withdrawn in any manner; and any required filing of the Prospectus or any
supplement thereto pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b).
(x) The Registration Statement and the Prospectus, and each amendment or
supplement thereto including documents incorporated by reference therein
(except for the financial statements and other financial or statistical
data included therein or omitted therefrom, as to which we express no
opinion), as of their respective effective or issue dates, appear on their
face to have been appropriately responsive in all material respects to the
requirements of the Securities Act.
(xi) The documents incorporated by reference in the Prospectus (except for the
financial statements and other financial or statistical data included
therein or omitted therefrom, as to which we express no opinion), as of the
dates they were filed with the Commission, appear on their face to have
been appropriately responsive in all material respects to the requirements
of the Exchange Act and the rules and regulations thereunder; and such
counsel has no reason to believe that any such documents, when filed,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such documents
were so filed, not misleading.
(xii) Except as set forth in the Prospectus, we do not know of any action,
suit or proceeding, at law or in equity, against the Company or its
subsidiaries pending or threatened by a private litigant, by any federal,
state or other commission, board or agency or any proceeding before any
administrative agency wherein any unfavorable result or decision could
materially adversely affect the business, property, financial condition,
income or earnings of the Company and its subsidiaries, taken as a whole,
or prevent consummation of the transactions contemplated in the Standby
Purchase Agreement; and there are no contracts or documents, of which we
have knowledge, of the Company or of its subsidiaries which would be
required to be filed as exhibits to the Registration Statement by the
Securities Act or by the rules and regulations thereunder which have not
been filed as exhibits to the Registration Statement.
(xiii) To our knowledge, no stop order suspending the effectiveness of such
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or are contemplated under the
Securities Act.
(xiv) The call for redemption by the Company of the 136,675 shares of
Preferred Stock as contemplated in the Standby Purchase Agreement has been
duly and validly authorized by all necessary corporation action on the part
of the Company and complies with all applicable requirements of the
Certificate of Designation.
(xv) Based upon the agreements, representations and warranties of the Purchasers
contained in the Standby Purchase Agreement, conversion of the Preferred
Stock into Common Stock is not subject to the registration requirements of
the Securities Act.
We have acted as counsel to the Company in connection with the preparation of
the Registration Statement and in the course of such representation have
reviewed and discussed the information in the Registration Statement and the
Prospectus with officers and employees of the Company and with the auditors and
you and your counsel. Although we have not independently checked or verified
any statements made in connection with such discussions and review, except as
expressly specified herein, and although we assume no responsibility for the
accuracy, completeness or fairness of the information set forth in the
Registration Statement and Prospectus (except as otherwise stated in this
letter), based upon our participation, we have no reason to believe (a) that the
Registration Statement (except for the financial statements and other financial
or statistical data included therein or omitted therefrom, as to which we
express no opinion), at the time such Registration Statement became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (b) that the Prospectus, including the documents incorporated
by reference therein (except for the financial statements and other financial or
statistical data included therein or omitted therefrom, as to which we express
no opinion), at the time the Prospectus was issued or at the date hereof,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
In rendering the foregoing opinion, we express no opinion as to laws other
than the laws of the state of New York, the general corporate laws of the State
of Delaware and the federal law of the United States of America (exclusive of
patent law).
This letter is furnished solely for the information of the Purchasers in
connection with the offering and sale of the Shares and may not be relied upon
by any other person.
Very truly yours,
ANNEX B
__________, 1996
Hambrecht & Quist LLC
UBS Securities Inc.
c/o Hambrecht & Quist LLC
One Bush Street
15th Floor
San Francisco, CA 94104
Ladies and Gentlemen:
We have acted as special patent counsel for The Liposome Company, Inc.,
a Delaware corporation, in connection with the preparation of the Registration
Statement on Form S-3 of the Company, filed with the Securities and Exchange
Commission on February 23, 1996 (the "Registration Statement"), relating to the
registration under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (collectively the "Securities Act"), of
[__________] shares of the Company's Common Stock, par value $.01 per share (the
"Shares"), in connection with an underwritten call for partial redemption of the
Company's Cumulative Convertible Exchangeable Preferred Stock (the "Preferred
Stock"). The Shares may be either issued upon conversion of the shares of
Preferred Stock in accordance with the terms of the certificate of designation
governing the shares of Preferred Stock or purchased by Hambrecht & Quist LLC
and UBS Securities Inc. acting as standby purchasers (the "Standby Purchasers")
pursuant to the Standby Purchase Agreement dated February 22, 1996 between the
Standby Purchasers and the Company (the "Standby Purchase Agreement"), as the
case may be. All terms, unless otherwise defined herein, have the meanings
assigned to them in the Standby Purchase Agreement.
In connection with this opinion, we have reviewed copies of (i) the Standby
Purchase Agreement, (ii) the information set forth under the caption "Risk
Factors - The Company's Dependence on and the Uncertainty of Protection of
Patents and Proprietary Rights" in the Company's Registration Statement on Form
S-3 (Registration No. _______) filed on February 23, 1996 with the Securities
and Exchange Commission (the "Registration Statement") under the Securities Act
of 1933, as amended (the "1933 Act"), including as a part thereof a form of
prospectus (the "Prospectus") dated February 23, 1996, and (iii) such corporate
documents and records, certificates of public officials and officers and such
other documents and matters of law as we have deemed necessary or appropriate
for the purpose of this opinion. Our examination of the Registration Statement
and the Prospectus has been limited solely to the information presented under
the captions specified in the preceding sentence and we have not undertaken any
review or investigation of any other information or matters set forth therein.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all corporate records,
documents, instruments and certificates submitted to us as originals and the
conformity to authentic original corporate records, documents, instruments and
certificates of all corporate records, documents, instruments and certificates
submitted to us as certified, conformed or photostatic copies. As to matters of
fact material to our opinion, we have relied upon representations of the Company
in the Standby Purchase Agreement and the other agreements and documents
referred to in clause (iii) of the previous paragraph, and upon certificates of
the officers of the Company and of public officials.
Based upon the foregoing and subject to the qualifications set forth below,
we are of the opinion that the statements under the caption. Risk Factors - The
Company's Dependence on and the Uncertainty of Protection of Patents and
Proprietary Rights" in the Prospectus insofar as such statements constitute a
summary of the law or documents referred to therein accurately summarize the
matters described therein.
Our opinion is limited solely to the federal laws of the United States of
America and the laws of the State of New Jersey, and we express no opinion
herein concerning the laws of any other jurisdiction.
The opinions expressed herein are solely for the benefit of you and the
Purchasers and without our express prior written consent, neither our opinion
nor this opinion letter may be furnished by you or the Purchasers to or relied
upon by any other person or entity.
Very truly yours,
ANNEX C
__________, 1996
Hambrecht & Quist LLC
UBS Securities Inc.
c/o Hambrecht & Quist LLC
One Bush Street
15th Floor
San Francisco, CA 94104
Ladies and Gentlemen:
I am Vice President, General Counsel and Secretary of The Liposome Company,
Inc. (the "Company"), and am delivering this opinion in connection with the
preparation of the Registration Statement on Form S-3 of the Company, filed with
the Securities and Exchange Commission on February 23, 1996 (the "Registration
Statement"), relating to the registration under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively the
"Securities Act"), of [__________] shares of the Company's Common Stock, par
value $.01 per share (the "Shares"), in connection with an underwritten call for
partial redemption of the Company's Cumulative Convertible Exchangeable
Preferred Stock (the "Preferred Stock"). The Shares may be either issued upon
conversion of the shares of Preferred Stock in accordance with the terms of the
certificate of designation governing the shares of Preferred Stock or purchased
by Hambrecht & Quist LLC and UBS Securities Inc. acting as standby purchasers
(the "Standby Purchasers") pursuant to the Standby Purchase Agreement dated
February 23, 1996 between the Standby Purchasers and the Company (the "Standby
Purchase Agreement"), as the case may be. All terms, unless otherwise defined
herein, have the meanings assigned to them in the Standby Purchase Agreement.
I have examined and am familiar with originals of the Registration Statement
on Form S-3 (Registration No. _________) of the Company, including the documents
incorporated by reference therein, filed with the Commission on February 23,
1996 under the Securities Act and Amendment No. 1 thereto filed with the
Commission on _____, 1996. I have also examined and am familiar with originals
or copies, certified or otherwise verified to my satisfaction, of such records
of the Company and such other documents and other records as I have deemed
necessary or appropriate as a basis for the opinions set forth below.
Except as disclosed in the Prospectus under the caption "Risk Factors - The
Company's Dependence on and the Uncertainty of Protection of Patents and
Proprietary Rights", I do not know of any pending or threatened legal or
governmental proceeding relating to patents or proprietary know-how owned or
used by the Company or others, to which the Company or any of its subsidiaries
is a party or might be a party or to which any of the properties of the Company
or any of its subsidiaries are subject or might be subject which, if adversely
decided, would have a material effect on the business operations, financial
condition, income or business prospects of the Company or any of its
subsidiaries.
Except as disclosed in the sections of the Prospectus mentioned above, I
have no knowledge of any infringement or alleged infringement by the Company or
any of its subsidiaries of patent rights of any holder or of any person having a
proprietary interest in such patent rights, which could have a material adverse
effect on the business affairs or business prospects, properties, financial
condition or earnings of the Company or any of its subsidiaries.
To my knowledge, the Company owns or possesses material licenses or other
rights to use all patents, trade secrets, trademarks, service marks or other
proprietary information or materials necessary to conduct the business now being
or proposed to be conducted by the Company as described in the Prospectus,
including the documents incorporated by reference therein.
To my knowledge, no default exists in the performance or observance of any
material provision of any obligation, agreement, covenant or condition contained
in any bond, debenture, note or other evidence of indebtedness or in any
contract, indenture, mortgage, loan agreement, joint venture or other agreement
or instrument that is described or referred to in the Registration Statement or
the Prospectus including the documents incorporated by reference therein or that
is filed as an exhibit to the Registration Statement.
Very truly yours,
SCHEDULE 1
Officer
Charles A. Baker
Brooks Boveroux
Andrew S. Janoff, Ph.D.
Ralph delCampo
Spiro G. Rombotis
James A. Boyle, M.D., Ph.D.
HAMBRECHT & QUIST LLC
ONE BUSH STREET
SAN FRANCISCO, CA 94104
TEL: (415) 576-3300
FAX: (415) 576-3370
February 23, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
The Liposome Company, Inc.
2,659,012 shares of Common Stock
filed on Form S-3 Registration
Dear Sirs:
We hereby join in the request of the registrant that the effectiveness of the
above-mentioned Registration Statement be accelerated to February 23, 1996 at
9:00 a.m., or as soon thereafter as practicable.
Very truly yours,
HAMBRECHT & QUIST LLC
UBS SECURITIES INC.
By: HAMBRECHT & QUIST LLC
By: William R. Timken
Name: Bill Timken
Title: Managing Director
EXHIBIT 5
February 22, 1996
The Liposome Company, Inc.
One Research Way
Princeton Forrestal Center
Princeton, New Jersey 08450
Ladies and Gentlemen:
We have acted as counsel to The Liposome Company, Inc., a Delaware
corporation (the "Company"), in connection with the filing by the Company of a
Registration Statement on Form S-3 on the date hereof (the "Registration
Statement") relating to the public offering of up to 2,659,012 shares (the
"Stock") of the Company's Common Stock, $.01 par value per share.
Based on the foregoing, it is our opinion that:
1. The issuance of the Stock has been lawfully and duly authorized;
and
2. When the Stock has been issued, delivered and sold upon the terms
stated in the Registration Statement, the Stock will be legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the references to this firm on the cover of the Registration
Statement and under the heading "Legal Matters" in the Prospectus included in
such Registration Statement.
Very truly yours,
/s/ DEWEY BALLANTINE
EXHIBIT 23.2
CONSENT OF THE INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our reports dated February 2, 1996 and February 2, 1995 on our
audits of the financial statements and financial statement schedule of The
Liposome Company, Inc. We also consent to the reference to our firm under the
caption "Experts."
Princeton, New Jersey
February 21, 1996
EXHIBIT 99.1
The conversion right with respect to Redeemed Depositary Shares will expire at
5:00 p.m. NEW YORK CITY time on March 25, 1996, unless Depositary Receipts and a
properly completed Letter of Transmittal are RECEIVED by the Depositary
identified below prior to that time, TIME BEING OF THE ESSENCE. See
instructions below.
THE LIPOSOME COMPANY, INC.
LETTER OF TRANSMITTAL
(TO ACCOMPANY DEPOSITARY RECEIPTS FOR DEPOSITARY SHARES,
EACH REPRESENTING 1/10TH SHARE OF
SERIES A CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK)
The Liposome Company, Inc. (the "Company") has issued a notice of partial
redemption of its Series A Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock"). It will redeem fifty percent (50%), on a pro rata
basis, of the Preferred Stock (the "Redeemed Preferred Shares"), and MidLantic
Bank, N.A. (the "Depositary") will redeem the number of Depositary Shares, each
representing 1/10th of a share of Preferred Stock (the "Depositary Shares"),
representing the Redeemed Preferred Shares (the "Redeemed Depositary Shares").
If you wish to convert your Redeemed Depositary Shares, then the depositary
receipts representing your Redeemed Depositary Shares (the "Depositary
Receipts") and related Letter of Transmittal must be RECEIVED by the Depositary
at one of the addresses set forth below PRIOR TO 5:00 PM NEW YORK CITY TIME, ON
MARCH 25, 1996, TIME BEING OF THE ESSENCE. Alternatively, you may instruct the
Depositary to redeem your Redeemed Depositary Shares and return a new Depositary
Receipt representing the portion of your Depositary Shares that have not been
redeemed and that you do not wish to convert to shares of Common Stock in the
Company (the "Common Stock"). See Instruction 2 below.
TO: MIDLANTIC BANK, N.A.
DEPOSITARY
FOR INFORMATION CALL: 1-800-639-0242
By mail:
MidLantic Bank, N.A.
Corporate Trust Department
PO Box 600
Edison, NJ 08818
Overnight mail or By Hand:
MidLantic Bank, N.A.
Corporate Trust Department
Metro Top Building
111 Wood Avenue South
Iselin, NJ 08830
Ladies and Gentlemen:
Surrendered with this Letter of Transmittal are Depositary Receipts for
Depositary Shares numbered and registered as listed below:
ITEMS A, B AND E OF THIS LETTER OF TRANSMITTAL AND THE SUBSTITUTE FORM W-9 MUST
BE COMPLETED IN ALL CASES.
ITEM A
TO BE COMPLETED BY ALL DEPOSITARY RECEIPT HOLDERS
N
U
M
NAME(S) AND ADDRESS(ES) DEPOSITARY RECEIPT NUMBER(S) B
OF REGISTERED HOLDER(S) E
(PLEASE FILL IN IF BLANK) R
O
F
D
E
P
O
S
I
T
A
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Y
S
H
A
R
E
S
R
E
P
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E
S
E
N
T
E
D
B
Y
D
E
P
O
S
I
T
A
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Y
R
E
C
E
I
P
T
TOTAL NUMBER OF DEPOSITARY SHARES
If the name and address are not shown, or if the address shown is not correct,
please indicate any changes necessary.
Check here if Depositary Shares Are being delivered by book-entry transfer
made to the account maintained by the Depositary with The Depository Trust
Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") and
complete the following (only participants in a book-entry transfer facility
may deliver shares by book-entry transfer):
Name of Tendering Institution:
___________________________________________________
Check Box of Applicable Account: (check one)
DTC PDTC
Account Number: ________________________________________________
Transaction Code Number: _________________________________________
ITEM B.
INDICATE CHOICE BY CHECKING ONE BOX
THE ABOVE DEPOSITARY RECEIPTS ARE SURRENDERED FOR THE ACTION INDICATED BELOW.
1. CONVERSION INTO COMMON STOCK
NUMBER OF DEPOSITARY SHARES TO BE CONVERTED: ___________
NOTE: WHILE NO ASSURANCE CAN BE GIVEN AS TO ANY FUTURE PRICES OF THE COMMON
STOCK, AS LONG AS THE PRICE OF THE COMMON STOCK IS EQUAL TO OR EXCEEDS $13.80
PER SHARE, COMMON STOCK (INCLUDING CASH, IF ANY, RECEIVED IN LIEU OF FRACTIONAL
SHARES) RECEIVED UPON CONVERSION WILL HAVE A MARKET VALUE (WITHOUT GIVING EFFECT
TO COMMISSIONS AND OTHER COSTS WHICH WOULD LIKELY BE INCURRED ON SALE) GREATER
THAN THE AMOUNT OF CASH RECEIVABLE UPON REDEMPTION.
2. REDEMPTION
NUMBER OF DEPOSITARY SHARES TO BE REDEEMED: ______________ (CANNOT EXCEED
50% OF TOTAL NUMBER OF DEPOSITARY SHARES STATED IN ITEM A)
NOTE: THE AMOUNT OF CASH RECEIVABLE ON REDEMPTION MAY BE LESS THAN THE MARKET
VALUE OF THE COMMON STOCK (INCLUDING CASH, IF ANY, RECEIVED IN LIEU OF A
FRACTIONAL SHARE)
IF THE NUMBER OF SHARES TO BE CONVERTED OR REDEEMED IS NOT INDICATED, 50% OF THE
TOTAL NUMBER OF DEPOSITARY SHARES STATED IN ITEM A WILL BE ACTED ON PURSUANT TO
THE ALTERNATIVE SELECTED. IF NO CHOICE IS INDICATED, 50% OF THE DEPOSITARY
SHARES STATED IN ITEM A WILL BE REDEEMED. IN EITHER CASE, A DEPOSITARY RECEIPT
FOR THE REMAINING DEPOSITARY SHARES WILL BE RETURNED TO THE HOLDER.
ITEM C
IF COMMON STOCK CERTIFICATE(S) AND/OR CHECK, AND/OR DEPOSITARY RECEIPT FOR
REMAINING ISSUE TO:
DEPOSITARY SHARES, IF ANY, ARE TO BE ISSUED IN A NAME OTHER THAN AS INDICATED IN
ITEM A NAME:______________________________________
ABOVE, FILL IN THIS SPACE.
____________________________
SEE INSTRUCTIONS 4 AND 5 BELOW.
TYPE OR PRINT
ADDRESS:___________________________________
___________________________________________
_____________________________________ ZIP
CODE__________
ITEM D
IF COMMON STOCK CERTIFICATE(S) AND/OR CHECK, AND/OR DEPOSITARY RECEIPT FOR
REMAINING MAIL TO:
DEPOSITARY SHARES, IF ANY, ARE TO BE MAILED TO AN ADDRESS OTHER THAN AS
INDICATED IN NAME:______________________________________
ITEM A ABOVE, FILL IN THIS SPACE. SEE INSTRUCTIONS 4 AND 5 BELOW.
____________________________
TYPE OR PRINT
ADDRESS:___________________________________
___________________________________________
_____________________________________ ZIP
CODE__________
ITEM E
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
THE SIGNATURE(S) ON THIS LETTER OF TRANSMITTAL MUST CORRESPOND EXACTLY WITH THE
NAME(S) DATED: _____________________________
OF THE: (1) REGISTERED OWNER(S) OF THE DEPOSITARY RECEIPT(S) SURRENDERED, OR
(2)
PERSON(S) TO WHOM EACH SUCH DEPOSITARY RECEIPT(S) HAS(HAVE) BEEN PROPERLY
TRANSFERRED. SIGNATURE: ________________________
SEE INSTRUCTIONS 1,4,5, AND 6 BELOW
SIGNATURE: ________________________
**PLEASE SIGN HERE**
TELEPHONE: ( ) ___________________
SOCIAL SECURITY NO:
OR TAXPAYER I.D. NO: _______________
GUARANTEE OF SIGNATURE(S)
AUTHORIZED SIGNATURE:
SEE INSTRUCTIONS 4 AND 5 BELOW.
____________________________________
NAME OF FIRM:______________________
ADDRESS: __________________________
____________________________________
____________________________________
DATED: _____________________________
PLEASE FOLLOW CAREFULLY THE INSTRUCTIONS LISTED ON THE REVERSE SIDE
INSTRUCTIONS
1. GENERAL
Please do not send Depositary Receipts to The Liposome Company, Inc. The
Depositary Receipts, together with the signed and completed Letter of
Transmittal and any required supporting documents (see Instructions 4 and 5
below), should be mailed in the enclosed addressed envelope, or otherwise
delivered to MidLantic Bank, N.A. at PO Box 600, Edison, NJ 08818 (by mail) or
Metro Top Building, 111 Wood Avenue South, Iselin, NJ 08830 (overnight mail or
by hand}. If mail is used, it is recommended that registered mail, properly
insured, be used as a precaution against loss. The method of transmitting the
Depositary Receipts, however, is at the option and sole risk of the holder.
ITEMS A, B AND E OF THIS LETTER OF TRANSMITTAL AND THE SUBSTITUTE FORM W-9 MUST
BE COMPLETED IN ALL CASES.
If you wish a Common Stock certificate, check and/or depositary receipt for
your remaining Depositary Shares to be mailed to an address other than that
shown in Item A above, you MUST complete Item D above.
2. IF YOU WISH TO CONVERT YOUR REDEEMED DEPOSITARY SHARES
If you wish to convert your Redeemed Depositary Shares, your Depositary
Receipts and completed Letter of Transmittal must be received by the Depositary
prior to 5:00 p.m. New York City time on March 25 1996, TIME BEING OF THE
ESSENCE.
You may also convert into Common Stock an additional number of Depositary
Shares, in excess of the number of Redeemed Depositary shares, although your
conversion right with respect to these shares will not expire on March 25, 1996.
To do so, indicate under Alternative 1, "Conversion into Common Stock," the
total number of Depositary Shares that you own (if you wish to convert all your
Depositary Shares) or the number of Depositary Shares that you do wish to
convert into Common Stock (if you wish to convert less than all of your
Depositary Shares). A Depositary Receipt for your remaining Depositary Shares,
if any, will be returned to you. IF YOU CONVERT LESS THAN THE NUMBER OF
DEPOSITARY SHARES PRIOR TO 5:00 P.M. NEW YORK CITY TIME ON MARCH 25, 1996, YOUR
CONVERSION RIGHT WILL EXPIRE ON ANY UNCONVERTED REDEEMED DEPOSITARY SHARES, AND
THOSE SHARES WILL NO LONGER ACCRUE DIVIDENDS OR BE TRANSFERABLE, AND YOU WILL
ONLY BE ABLE TO REDEEM THEM AT THE REDEMPTION PRICE, WITHOUT INTEREST.
If the Common Stock certificates, fractional share interest check, or the
Depositary Receipt for your remaining Depositary Shares, if any, are to be
issued in the same name(s) as that in which the surrendered Depositary Receipts
are registered, complete Items A, B and E above.
If the Common Stock Certificates, fractional share interest check, or the
Depositary Receipt for your remaining Depositary Shares, if any, are to be
issued in a different name, see Instructions 4 and 5 and complete Items A, B, C
and E above and the Substitute Form W-9.
No fractional shares of Common Stock will be issued upon conversion.
Instead, a cash payment for such fractional shares will be made by The Liposome
Company, Inc. on the basis of the average of the reported last sale prices of
the Common Stock, on the Nasdaq National Market, on the thirty consecutive
trading days preceding the date of conversion.
Each Depositary Share represents 1/10th share of Preferred Stock.
Depositary Shares may be converted into Common Stock only to the extent that
they represent whole shares of Preferred Stock. Any Redeemed Depositary Shares
representing less than a whole share of Preferred Stock which are surrendered
for conversion will be redeemed, and a cash payment for such Depositary Shares
will be made based upon the Redemption Price. No dividends will be paid on
Depositary Shares converted into Common Stock.
NOTE: AS LONG AS THE PRICE OF THE COMMON STOCK EXCEEDS $13.80 PER SHARE,
COMMON STOCK (INCLUDING CASH, IF ANY, RECEIVED IN LIEU OF A FRACTIONAL SHARE)
RECEIVED UPON CONVERSION WILL HAVE A MARKET VALUE (BEFORE COMMISSIONS AND OTHER
COSTS USUALLY INCURRED ON SALE) GREATER THAN THE AMOUNT OF CASH RECEIVABLE UPON
REDEMPTION. IT SHOULD BE NOTED, HOWEVER, THAT THE PRICE OF COMMON STOCK
RECEIVED UPON CONVERSION WILL FLUCTUATE IN THE MARKET. NO ASSURANCE IS GIVEN AS
TO THE PRICE OF THE COMMON STOCK AT ANY FUTURE TIME, AND THE HOLDERS SHOULD
EXPECT TO INCUR VARIOUS EXPENSES OF SALE IF SUCH COMMON STOCK IS SOLD.
3. IF YOU WISH YOUR REDEEMED DEPOSITARY SHARES TO BE REDEEMED
If you wish to receive cash in the amount of the current redemption price
($26.40) and accrued dividend ($0.4519 per share) for your Redeemed Depositary
Shares, your Depositary Receipts and completed Letter of Transmittal must be
sent to the Depositary. A check will be sent to you when the Depositary
Receipts and Letter of Transmittal have been received by the Depositary, but in
no event earlier than the redemption date, March 25, 1996. The Depositary will
also send you a Depositary Receipt for your remaining Depositary Shares.
If the check, or the Depositary Receipt for your remaining Depositary
Shares, is to be issued in the same name(s) as that in which the surrendered
Depositary Receipts are registered, complete Items A, B and E above and the
Substitute Form W-9 below.
If the check, or the Depositary Receipt for your remaining Depositary
Shares, is to be issued in a different name, see Instructions 4 and 5 and
complete Items A, B, C and E above and the Substitute Form W-9 below.
NOTE: THE AMOUNT OF CASH RECEIVABLE UPON REDEMPTION MAY BE LESS THAN THE MARKET
VALUE OF THE COMMON STOCK (INCLUDING CASH, IF ANY, RECEIVED IN LIEU OF A
FRACTIONAL SHARE) RECEIVABLE UPON CONVERSION.
4. SIGNATURE GUARANTEE REQUIREMENTS
If a Common Stock certificate, a check, or the Depositary Receipt for the
owner's remaining Depositary Shares, is to be issued in a name other than that
of the registered owner of the Depositary Shares, the Depositary Receipts must
be properly endorsed or be accompanied by appropriate powers, properly executed
by the registered owner(s), so that such endorsement or powers are signed
exactly as the name(s) of the registered owner(s) appear on the certificates,
and the signature(s) must be properly guaranteed by a financial institution
which is a member of a Stock Transfer Association approved medallion program.
Complete Items A, B, C and E above.
5. SIGNATURE BY OTHER THAN REGISTERED HOLDER
If the Letter of Transmittal is signed in Item E by an executor,
administrator, trustee, guardian, attorney or the like, the Letter of
Transmittal and Depositary Receipts must be accompanied by evidence,
satisfactory to the Depositary and The Liposome Company, Inc., of the authority
of such person to sign the Letter of Transmittal.
If the Letter of Transmittal is signed in Item E by a person, other than
the registered holder, who is not a person described in the preceding paragraph,
the Depositary Receipts ,must be properly endorsed or be accompanied by
appropriate powers, properly executed by the registered owner(s), so that such
endorsement or powers are signed exactly as the name(s) of the registered
owner(s) appear on the Depositary Receipts, and the signature(s) must be
properly guaranteed by a financial institution which is a member of a Stock
Transfer Association approved medallion. Complete Items A, B, C and E above.
6. JOINT HOLDERS OF DEPOSITARY RECEIPTS REGISTERED IN DIFFERENT NAMES
If Depositary Receipts are tendered by joint holders or owners, all such
persons must sign the Letter of Transmittal in item E. If Depositary Receipts
are registered in different names or forms of ownership, separate Letters of
Transmittal must be completed, signed and returned for each different
registration.
7. STOCK TRANSFER TAXES
It is not presently anticipated that any stock transfer taxes will be
payable in connection with the issuance of stock certificates on conversion of
Depositary Shares. If, however, it should develop that in certain circumstances
such taxes may be payable, conversion or sale of Depositary Shares will be
effected without charge to the converting or selling holder for any such stock
transfer tax except in the following cases. If Common Stock certificates issued
upon conversion are to be registered in the name of any person other than the
registered holder, or if tendered Depositary Receipts are registered in the name
of any person other than the person(s) signing the Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder or
such person) payable on account of the transfer to such person will be charged
to the person signing the Letter of Transmittal if satisfactory evidence of the
payment of such taxes, or exemption therefrom, is not submitted. The Liposome
Company, Inc. will not be required to issue or deliver Common Stock certificates
in any such case until such evidence has been received by The Liposome Company,
Inc..
8. SUBSTITUTE FORM W-9
You are required to provide the Depositary with a correct Taxpayer
Identification Number ("TIN"), generally your social security or employer
identification number, on Substitute Form W-9 below. Failure to provide the
information on the Form may subject you to 31% federal income tax withholding on
the payment of the Redemption Price. If you have not been issued a TIN and have
applied for a number or intend to apply for a number in the near future, you
should write "Applied For" next to the initials TIN in Part 1. If you do this
and the Depositary is not provided with a TIN within 60 days, thereafter the
Depositary will withhold 31% on subsequent payments, if any, until a TIN is
provided to the Depositary.
9. QUESTIONS REGARDING YOUR DEPOSITARY SHARES
All questions regarding your Depositary Shares should be directed to our
information agent, Corporate Investor Communications, at 1-800-639-0242.
ALL STOCKHOLDERS MUST COMPLETE THIS SUBSTITUTE FORM W-9.
FAILURE TO DO SO MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PROCEEDS PAID TO YOU.
PAYER'S NAME: MIDLANTIC BANK, N.A.
SUBSTITUTE FORM W-9 DEPARTMENT OF THE TREASURY INTERNAL PART 1: Please
provide your TIN in the
REVENUE SERVICE box at right and
certify by signing and TIN _____________________
dating below
Social Security No.,
Employer Identification No.
or write `Applied For"
PART 2
Name (Please
Type or Print) :
Address
City
State Zip
PART 3: CERTIFICATION
-- UNDER PENALTIES
OF PERJURY, I
CERTIFY THAT
(1) The number shown
on this form is my
correct taxpayer
identification number (or
I am waiting for a
number to be issued to
me),
(2) I am not
subject to backup
withholding either
because I have not been
notified by the
Internal Revenue Service
(the "IRS") that
I am subject to backup
withholding as a
result of a failure to
report all
interest or dividends or the
IRS has notified me
that I am no longer
subject to backup
withholding, and
(3) all other
information provided on
this form is true,
correct and complete.
Signature _______________________________
Date _______________
You must cross out Item (2) above if you have been
notified by IRS that you are currently subject to
backup withholding because of underreporting interest
or dividends on your tax return. However, if after
being notified by IRS that you were subject to backup
withholding you received another notification from the
IRS that you were no longer subject to backup
withholding, do not cross out Item 2.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART 1 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer number has not been
issued to me and either (a) I have mailed or delivered an application to receive
a taxpayer identification number to the appropriate Internal Revenue Service
Center or Social Security Administration Office or (b) I intend to mail or
deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
Signature ___________________________________________ Date
_________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PROCEEDS PAID TO YOU. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder whose Depositary Shares are
redeemed for cash, or who receives cash in lieu of fractional shares of Common
Stock upon conversion of Depositary Shares, is required to provide the
Depositary with his or her correct taxpayer identification number on Substitute
Form W-9. If the Depositary is not provided with the correct taxpayer
identification number, the holder may be subject to a 450 penalty imposed by the
Internal Revenue Service (the "IRS"). In addition, payments made to such holder
may be subject to backup withholding. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
Certain holders, including, among others, all corporations and certain
foreign individuals, are not subject to these backup withholding and reporting
requirements. A foreign person may qualify as an exempt recipient by
submitting to the Depositary a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. A Form W-8 can
be obtained from the Depositary upon request.
EXHIBIT 99.2
THE LIPOSOME COMPANY, INC.
NOTICE OF PARTIAL REDEMPTION OF
DEPOSITARY SHARES
EACH REPRESENTING 1/10TH SHARE OF
SERIES A CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
AND
TERMINATION OF CONVERSION RIGHT
February 22, 1996
To: HOLDERS OF DEPOSITARY SHARES EACH REPRESENTING 1/10 OF A SHARE OF
SERIES A CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Redemption Date: March 25, 1996
Conversion Right Expires: 5:00 P.M. New York Time, March 25 1996
PLEASE TAKE NOTICE that The Liposome Company, Inc., a Delaware corporation
(the "Company") has elected to redeem and will redeem on March 25, 1996 (the
"Redemption Date") fifty percent (50%) of its outstanding shares (the "Redeemed
Preferred Stock") of Series A Cumulative Convertible Exchangeable Preferred
Stock (the "Preferred Stock"), on a pro rata basis, pursuant to provisions of
the certificate of designation of the Preferred Stock. The Preferred Stock has
been deposited with MidLantic Bank, N.A. (the "Depositary") under the Deposit
Agreement dated as of January 15, 1993 (the "Deposit Agreement") among the
Company, MidLantic Bank, N.A., and the holders of receipts ("Depositary
Receipts") for the Depositary Shares (the "Depositary Shares"). Each of the
Depositary Shares represents 1/10th of a share of Preferred Stock and entitles
the holder to all proportionate rights and preferences of the underlying
Preferred Stock. The Depositary will redeem fifty percent (50%) of the
Depositary Shares (the "Redeemed Depositary Shares") at a redemption price of
$26.40 per share plus accrued and unpaid dividends thereon, to and including the
Redemption Date in the amount of $0.4519 per share for a total of $26.8519 per
Redeemed Depositary Share (the "Redemption Price") in accordance with the
Deposit Agreement. After the Redemption Date, each holder of Redeemed
Depositary Shares who surrenders a Depositary Receipt evidencing such shares to
the Depositary at the address set forth below will receive payment of the
Redemption Price. If the Depositary Receipt surrendered for redemption
evidences a number of Depositary Shares in excess of the Redeemed Depositary
Shares, the Depositary will issue a new Depositary Receipt evidencing the
Depositary Shares to be retained by the holder.
On or before March 25, 1996, the Company will irrevocably deposit in trust
with the Depositary funds sufficient for the redemption of the outstanding
Redeemed Depositary Shares. Then, from and after the Redemption Date,
notwithstanding that Depositary Receipts evidencing some of the Redeemed
Depositary Shares may not have been surrendered, the dividends on the Redeemed
Depositary Shares will cease to accrue, the Redeemed Depositary Shares will no
longer be deemed outstanding, and all rights whatsoever with respect to the
Redeemed Depositary Shares and the Redeemed Preferred Stock (except the right to
receive the Redemption Price, without interest, upon surrender of Depositary
Receipts) will terminate.
ALTERNATIVES AVAILABLE TO HOLDERS
OF REDEEMED DEPOSITARY SHARES
CONVERSION
At any time prior to the close of business (5:00 p.m. New York time) on
March 25, 1996, when the conversion right expires, the Redeemed Depositary
Shares are convertible into full shares of the Company's Common Stock, $.01 par
value per share (the "Common Stock"), at the rate of 1.9455 shares of Common
Stock for each Depositary Share. No fractional shares of the Company's Common
Stock will be issued upon conversion. Instead, a cash payment for each
fractional share will be made on the basis of the last reported sales price on
the last trading day before the conversion. No payment or adjustment in respect
of accrued and unpaid dividends on the Preferred Stock will be made upon
conversion. Shareholders desiring to convert more than fifty percent of their
Depositary Shares into shares of Common Stock may do so, but the conversion
rights and dividend accrual on Depositary Shares in excess of those to be
redeemed is not affected by the redemption.
REDEMPTION
The Redeemed Depositary Shares represent fifty percent (50%) of the
Depositary Shares held by each shareholder of record as of the Redemption Date.
Redeemed Depositary Shares that are not converted by the Redemption Date will be
redeemed at a Redemption Price of $26.8519 per Redeemed Depositary Share. No
dividends will accrue or be payable with respect to the Redeemed Depositary
Shares after the Redemption Date, regardless of whether the Depositary Receipt
representing these shares has been presented for redemption. Any Redeemed
Depositary Shares that are presented to the Depositary after the Redemption Date
will not be eligible for conversion and will be redeemed at the Redemption
Price, without interest. Depositary Shares that are not converted and have not
been called for redemption will remain outstanding and will continue to accrue
dividends.
FACTORS TO CONSIDER
The last reported sales price of the Common Stock on the Nasdaq National
Market System on February 21, 1996, was $19.125 per share. Based on that sales
price, the market value of Common Stock that holders would obtain by converting
one Depositary Share into 1.9455 shares of Common Stock (including cash received
in lieu of any fractional share) would be $37.21. As long as the price of the
Common Stock is above $13.80, holders of Depositary Shares will, upon
conversion, receive Common Stock (and cash in lieu of any fractional share) with
a market value greater than the amount of cash receivable upon redemption of the
Depositary Shares (without giving effect to commissions and other costs of
sale). Holders of the Depositary Shares should obtain current market quotations
for the Common Stock before making a decision whether to convert. The symbol
for the Common Stock on the Nasdaq National Market System is "LIPO". The symbol
for the Depositary Shares is "LIPOZ".
TAX CONSEQUENCES
The Company is advised that, under present United States Federal income tax
laws, no taxable gain or loss will be recognized by holders of Depositary Shares
upon the conversion thereof into shares of Common Stock, except with respect to
cash received in lieu of fractional shares. A redemption of Redeemed Depositary
Shares, however, will be a taxable transaction, and the sale or other
disposition of the Depositary Shares or the Common Stock received upon
conversion of Depositary Shares will generally be taxable events. Since all
dividends that have been paid to holders of Depositary Shares have been eligible
for treatment as a return of capital, the tax basis of these shares will in most
cases be less than their original issue price, thereby increasing the amount of
taxable gain, or reducing the amount of loss, that will be recognized on
redemption or sale. THE AMOUNT OF INCOME, GAIN OR LOSS RECOGNIZED BY A HOLDER
ON REDEMPTION OF THE REDEEMED DEPOSITARY SHARES WILL VARY DEPENDING ON SUCH
HOLDER'S INDIVIDUAL CIRCUMSTANCES. HOLDERS OF DEPOSITARY SHARES SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
APPLICABLE TO THEM.
IMPORTANT FINANCIAL FACTS ABOUT THE ALTERNATIVES
CONVERSION OF DEPOSITARY SHARES
Market value of Common Stock (including fractional shares)
into which each Depositary Share is convertible (based on
the reported last sale price of the Common Stock on the
Nasdaq National
Market on February 21, 1996 of $19.125 per share) $37.2100
REDEMPTION OF DEPOSITARY SHARES
Redemption Price (including accrued dividends) for each
Redeemed
Depositary Share $26.8519
PROCEDURES
Only those Depositary Receipts received by the Depositary prior to 5:00
p.m. New York time on March 25, 1996, with a notice of conversion properly
completed and executed, will be converted into Common Stock, except that the
conversion right with respect to the Depositary Shares that are not called for
redemption shall remain in effect. A holder of Depositary Shares whose
Depositary Receipt includes shares that are not to be either converted or
redeemed will receive a new Depositary Receipt representing his or her remaining
Depositary Shares. A Letter of Transmittal in the form enclosed herewith,
should be used in connection with the surrender of Depositary Receipts for
redemption or conversion. In each case, Depositary Receipts should be sent to
the Depositary as follows:
By mail:
MidLantic Bank N.A.
Corporate Trust Department
PO Box 600
Edison, NJ 08818
Overnight mail or By Hand:
MidLantic Bank N.A.
Corporate Trust Department
Metro Top Building
111 Wood Avenue South
Iselin, NJ 08830
The method of delivery of Depositary Receipts is at the risk and option of
the holder, but if mail is used, registered mail, with return receipt
requested, properly insured, is recommended, and sufficient time to ensure
timely receipt should be allowed.
Questions concerning the procedures for converting or redeeming Depositary
Shares should be addressed to the Information Agent, Corporate Investor
Communications, at 1-800-639-0242.
The Liposome Company, Inc.
