SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
Under the Securities Exchange Act of 1934
ImmunoTherapeutics, Inc.
(Name of Issuer)
Common Stock, par value $.001 per share
(Title of Class of Securities)
452916 40 6
(CUSIP Number)
Aries Financial Services, Inc.
c/o Lindsay A. Rosenwald, M.D.
375 Park Avenue
New York, NY 10152
(212) 832-4379
with a copy to:
David R. Walner, Esq.
Aries Financial Services, Inc.
375 Park Avenue
New York, NY 10152
(212) 832-4340
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 26, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the
subject of this Statement because of Rule 13d-1(b)(3) or
(4), check the following:
Check the following box if a fee is being paid with this
Statement:
SCHEDULE 13D
CUSIP NO. 452916 40 6
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Aries Financial Services, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) _
(b) _
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3 below)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) _
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
None
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 9,000,000
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING None
PERSON
WITH
10 SHARED DISPOSITIVE POWER
9,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,000,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* _
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.7%
14 TYPE OF REPORTING PERSON*
CO
SCHEDULE 13D
CUSIP NO. 452916 40 6
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Aries Domestic Fund, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) _
(b) _
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) _
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
None
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 2,250,000
OWNED BY
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON None
WITH
10 SHARED DISPOSITIVE POWER
2,250,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,250,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* _
13 15.9%
14 TYPE OF REPORTING PERSON*
PN
SCHEDULE 13D
CUSIP NO. 452916 40 6
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Aries Trust
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) _
(b) _
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) _
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
7 SOLE VOTING POWER
None
NUMBER OF
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 6,750,000
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON None
WITH
10 SHARED DISPOSITIVE POWER
6,750,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,750,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* _
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.8%
14 TYPE OF REPORTING PERSON*
OO (see Item 2)
SCHEDULE 13D
CUSIP NO. 452916 40 6
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Dr. Lindsay A. Rosenwald
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) _
(b) _
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) _
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
None
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 9,000,000
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING None
PERSON
WITH
10 SHARED DISPOSITIVE POWER
9,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,000,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* _
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
63.8
14 TYPE OF REPORTING PERSON*
IN
Item 1. Security and Issuer.
(a) Common Stock, $.001 par value ("Shares")
ImmunoTherapeutics, Inc. (the "Issuer")
3233 15th Street South
Fargo, ND 58104
(701) 232-9575
Item 2. Identity and Background.
Names of Persons Filing:
(a) This statement is filed on behalf of Aries Financial Services, Inc.
("Aries Financial"), Aries Domestic Fund, L.P. ("Aries Domestic"),
The Aries Trust ("Aries Trust") and Dr. Lindsay A. Rosenwald
(collectively, "Reporting Parties"). See attached Exhibit A which
is a copy of their agreement in writing to file this statement on
behalf of each of them.
(b) Aries Financial's, Aries Domestic's and Dr. Rosenwald's business
address is 375 Park Avenue, Suite 1501, New York, New York, 10152.
The business address for Aries Trust is c/o MeesPierson (Cayman)
Limited, P.O. Box 2003, British American Centre, Phase 3, Dr. Roy's
Drive, George Town, Grand Cayman.
(c) Dr. Rosenwald is an investment banker, venture capitalist and fund
manager and sole shareholder of Aries Financial,(1) a Subchapter S
corporation incorporated in Delaware. Aries Financial is the
General Partner of Aries Domestic,(2) a limited partnership
incorporated in Delaware. Aries Financial is the Investment
Manager to Aries Trust,(3) a Cayman Islands Trust.
(d) Dr. Rosenwald, Aries Financial, Aries Domestic and Aries Trust and
their respective officers, directors, general partners, investment
managers, or trustees have not, during the five years prior to the
date hereof, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) Dr. Rosenwald, Aries Financial, Aries Domestic and Aries Trust and
their respective officers, directors, general partners, investment
managers, or trustees have not been, during the five years prior to
the date hereof, parties to a civil proceeding of a judicial or
administrative body of competent jurisdiction, as a result of which
such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
(f) Dr. Rosenwald is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
As previously reported in the original statement on Schedule 13-D
(the "Original Statement") filed by the Reporting Parties in
connection with their initial acquisition of shares of the Issuer
on June 13, 1996, Aries Domestic used its general funds to effect
its initial purchase of 1,000,000 shares of the Issuer for an
approximate purchase price of $100,000 from Dominion Resources,
Inc., a Delaware corporation ("Dominion") and Aries Trust used its
___________________
1 Please see attached Exhibit B indicating the executive
officers and directors of Aries Financial and providing
information called for by Items 2-6 of this statement
as to said officers and directors. Exhibit B is herein
incorporated by reference.
2 Please see attached Exhibit C indicating the general
partner of Aries Domestic and the general partner's
executive officers and directors and providing
information called for by Items 2-6 of this statement
as to said general partners, officers and directors.
Exhibit C is herein incorporated by reference.
3 Please see attached Exhibit D indicating the investment
manager of the Aries Trust and the investment manager's
executive officers and directors and providing
information called for by Items 2-6 of this statement
as to said investment manager and officers and
directors. Exhibit D is herein incorporated by
reference.
general funds to effect it initial purchase of 3,000,000 shares of
the Issuer for an approximate purchase price of $300,000 from
Dominion. On June 26, 1996, Aries Domestic used its general funds
to effect an additional purchase of 1,250,000 newly issued shares
of the Issuer directly from the Issuer for an approximate purchase
price of $250,000 and Aries Trust used its general funds to effect
an additional purchase of 3,750,000 newly issued shares of the
Issuer directly from the Issuer for an approximate purchase price
of $750,000 from Dominion.
Item 4. Purpose of Transaction.
The Reporting Parties first acquired shares of Common Stock of the
Issuer from Dominion Resources, Inc., a Delaware corporation and a
stockholder of the Issuer, pursuant to a Stock Purchase Agreement
(the "Stock Purchase Agreement") dated June 13, 1996, a copy of
which is attached as Exhibit E and the terms of which are
incorporated herein by reference, as an investment in the Issuer.
Amongst other things, the Stock Purchase Agreement entitles the
Aries Trust and Aries Domestic to designate a representative to sit
on the Issuer's Board of Directors and requires the consent of the
Aries Trust and Aries Domestic for certain extraordinary corporate
transactions. Mr. Steve Kanzer was appointed to the Issuer's Board
of Directors as the Aries Trust and Aries Domestic Board designee.
Mr. Kanzer is an employee of certain affiliates of the Reporting
Persons.
In addition, in connection with the purchase of such shares, Aries
Domestic and the Aries Trust entered into a letter agreement with
the Issuer to purchase from the Issuer an additional 5,000,000
shares of Common Stock of the Issuer (the "Additional Shares"). On
June 26, 1996, Aries Domestic and the Aries Trust entered into a
definitive stock purchase agreement (the "June 26 Agreement") with
the Issuer, which such agreement superseded the letter agreement
with the Issuer, pursuant to which the Reporting Parties acquired
ownership of the Additional Shares. Pursuant to the June 26
Agreement, the Additional Shares were purchased in the amount of
3,750,000 shares by the Aries Trust and 1,250,000 shares by Aries
Domestic. A copy of the June 26 Agreement relating to the purchase
of the Additional Shares is attached as Exhibit G hereto and is
incorporated by reference herein.
In connection with the investment by the Aries Trust and Aries
Domestic, the Issuer's Board of Directors redeemed the Shareholder
Rights Plan dated September 23, 1994 by and between the Issuer and
American Stock Transfer & Trust Company, as Rights Agent. In
addition, pursuant to a letter agreement dated June 25, 1996 (the
"Vosika Agreement") the Company and Dr. Gerald Vosika, the Issuer's
Chairman and President, amended Dr. Vosika's prior employment
agreement with the Issuer which such amendment permits the Issuer
to hire a Chief Executive Officer without giving rise to any
termination or severance payment rights under Dr. Vosika's prior
employment or option agreements. The Vosika Agreement contains
additional provisions including, amongst other things, a waiver by
Dr. Vosika of any termination rights or severance payments as a
result of the acquisition of shares of the Issuer by Aries Trust
and Aries Domestic and elimination of certain change of control
provisions from Dr. Vosika's prior employment and option
agreements. A copy of the Vosika Agreement is attached as Exhibit
H hereto and is incorporated by reference herein.
Although the Reporting Parties have not formulated any definitive
plans, they have had preliminary discussions with the Issuer's
management and certain members of the Board concerning various
proposals including the possible addition of certain persons to the
Company's management team and the pursuit of potential strategic
partners and additional technologies. Neither the Reporting
Parties nor, to the Reporting Parties knowledge, the management of
the Issuer, have determined whether such plans are feasible or
whether the Company will in fact pursue such alternatives and it is
not clear that such alternatives will be implemented. In addition
the Reporting Parties, may from time to time acquire, or dispose
of, Common Stock and/or other securities of the Issuer if and when
they deems it appropriate. The Reporting Parties may formulate
other purposes, plans or proposals relating to any of such
securities of the Issuer to the extent deemed advisable in light of
market conditions, investment policies and other factors.
Except as indicated in this Schedule 13D, the Reporting Parties
currently have no plans or proposals that relate to or would result
in any of the matters described in subparagraphs (a) through (j) of
Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) As of June 26, 1996, Dr. Rosenwald and Aries Financial,
through acquisition of the shares by the Aries Trust and Aries
Domestic, beneficially owned 9,000,000 shares or 63.7% of the
Issuer's securities and Aries Domestic and the Aries Trust
beneficially owned as follows:
Amount Owned
Aries Domestic 2,250,000 Shares
Aries Trust 6,750,000 Shares
(b) Dr. Rosenwald and Aries Financial share the power to vote or
to direct the vote, to dispose or to direct the disposition of
those shares owned by each of Aries Domestic and Aries Trust.
(c) As set forth in Item 4, and as previously reported in the
Original Statement, the Aries Trust and Aries Domestic
purchased 4,000,000 shares of the Issuer from Dominion on June
13, 1996 pursuant to the Stock Purchase Agreement. Other than
as set forth herein the Reporting Parties have not engaged in
any transactions in the Common Stock of the Issuer.
(d) & (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with respect to Securities of the Issuer
Aries Financial is the investment manager of the Aries Trust and
the General Partner of Aries Domestic and in such capacities has
the authority to make certain investment decisions on behalf of
such entities, including decisions relating to the securities of
the Issuer. In connection with its investment management duties,
Aries Financial receives certain management fees and performance
allocations from the Aries Trust and Aries Domestic. Dr. Rosenwald
is the sole shareholder of Aries Financial. Pursuant to its rights
under the Stock Purchase Agreement, the Aries Trust and Aries
Domestic appointed Mr. Steve Kanzer to the Issuer's Board of
Director as their designated Board representative. In
consideration for his services as a Director, Mr. Kanzer was
granted options to purchase 200,000 shares of the Issuer's Common
Stock at a purchase price of $.20 per share. See also Item 4 and
Exhibits E, F, G and H to this Schedule 13-D, all of which are
hereby incorporated by reference.
Except as indicated in this 13D and exhibits, there is no contract,
arrangement, understanding or relationship between the Reporting
Parties and any other person, with respect to any securities of the
Issuer.
Item 7. Material to be Filed as Exhibits:
Exhibit A - Copy of an Agreement between Dr. Rosenwald, Aries Financial,
Aries Domestic and Aries Trust to file this Statement on
Schedule 13D on behalf of each of them.
Exhibit B - List of executive officers and directors of Aries Financial
and information called for by Items 2-6 of this statement
relating to said officers and directors.
Exhibit C - List of executive officers and directors of Aries Domestic and
information called for by Items 2-6 of this statement relating
to said officers and directors.
Exhibit D - List of executive officers and directors of Aries Trust and
information called for by Items 2-6 of this statement relating
to said officers and directors.
Exhibit E - Stock Purchase Agreement dated as of June 13, 1996 by and
among ImmunoTherapeutics, Inc., Dominion Resources Inc., the
Aries Fund, a Series of the Aries Trust and The Aries Domestic
Fund, L.P. (Incorporated by reference to Exhibit E of the
Original Statement on Schedule 13D filed by the Reporting
Parties)
Exhibit F - Letter Agreement dated June 12, 1996 by and between
ImmunoTherapeutics Inc., the Aries Fund, a Series of the Aries
Trust and The Aries Domestic Fund, L.P. (Incorporated by
reference to Exhibit F of the Original Statement on Schedule
13D filed by the Reporting Parties)
Exhibit G - Stock Purchase Agreement dated as of June 26, 1996 by and
among ImmunoTherapeutics, Inc., the Aries Fund, a Series of
the Aries Trust and The Aries Domestic Fund, L.P.
Exhibit H - Letter Agreement dated June 25, 1996 by and between
ImmunoTherapeutics Inc. and Dr. Gerald Vosika
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
ARIES FINANCIAL SERVICES, INC.
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
President
ARIES DOMESTIC FUND, L.P.
By Aries Financial Services, Inc.
General Partner
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
President
THE ARIES TRUST
By Aries Financial Services, Inc.
Investment Manager
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
President
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
EXHIBIT A
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agrees to jointly prepare and file with
regulatory authorities a Schedule 13D and any future amendments thereto
reporting each of the undersigned's ownership of securities of
ImmunoTherapeutics, Inc. and hereby affirm that such Schedule 13D is being
filed on behalf of each of the undersigned.
ARIES FINANCIAL SERVICES, INC.
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
President
ARIES DOMESTIC FUND, L.P.
By Aries Financial Services, Inc.
General Partner
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
President
THE ARIES TRUST
By Aries Financial Services, Inc.
Investment Manager
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
President
Dated: July 7, 1996
New York, NY By /s/ Dr. Lindsay Rosenwald
Dr. Lindsay Rosenwald
EXHIBIT B
The name and principal occupation or employment, which in each instance
is with Aries Financial Services, Inc. ("Aries Financial") located at 375
Park Avenue, Suite 1501, New York, New York, 10152, of each executive officer
and director of Aries Financial is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
Dr. Lindsay Rosenwald Chairman of the Board, President of Aries
Financial Services, Inc., Paramount
Capital LLC and Paramount Capital, Inc.
Peter Morgan Kash Director of Aries Financial Services, Inc.
Senior Managing Director, Paramount
Capital, Inc.
Dr. Yuichi Iwaki Director of Aries Financial Services, Inc.
Professor, University of Southern
California School of Medicine
Item 2.
During the five years prior to the date hereof, none of the above
persons (to the best of Aries Financial's knowledge) was convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, as a result of which such person was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities
laws or finding any violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
EXHIBIT C
The name and principal occupation or employment, which is located at 375
Park Avenue, Suite 1501, New York, New York, 10152, of the General Partner of
Aries Domestic is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
Aries Financial Services, Inc. General Partner; Investment Manager
Exhibit B is hereby incorporated by reference.
Item 2.
During the five years prior to the date hereof, the above person (to the
best of Aries Domestic's knowledge) has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities
laws or finding any violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
EXHIBIT D
The name and principal occupation or employment, which in each instance
is with The Aries Trust ("Aries Trust") located at 375 Park Avenue, Suite
1501, New York, New York, 10152, of each executive officer and director of
Aries Trust is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
Aries Financial Services, Inc. Investment Manager
MeesPierson (Cayman) Limited Trustee
Exhibit B is hereby incorporated by reference.
Item 2.
During the five years prior to the date hereof, neither of the above
persons (to the best of Aries Trust's knowledge) have been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, as a result of which such person was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities
laws or finding any violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
PURCHASE AGREEMENT
AGREEMENT dated as of June 26, 1996 by and among
ImmunoTherapeutics, Inc., a Delaware corporation (the "Company"),
the Aries Fund, a Series of the Aries Trust, a Cayman Island
Trust (the "Trust") and the Aries Domestic Fund, L.P., a Delaware
limited partnership (the "Partnership, and collectively with the
Trust, the "Purchasers").
WITNESSETH:
WHEREAS, the Company desires to issue and sell to
Purchasers, at a price of $.20 per share, 5,000,000 shares of the
Company's Common Stock (the "Shares"); and
WHEREAS, Purchasers desire to purchase the Shares upon and
subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto hereby
agree as follows:
1. Purchase and Sale of the Shares. Subject to the terms
and conditions set forth herein, the Company hereby agrees to
issue and sell to Purchasers, and Purchasers hereby agree to
purchase from the Company, the Shares at the Closing (as such
term is defined in Section 2.1 hereof). The purchase price for
the Shares sold pursuant to this Agreement shall be $.20 per
Share.
2. Closing; Termination.
2.1. Closing. The closing of the purchase and sale of
the Shares will take place at the offices of Purchasers at 375
Park Avenue, Suite 1501, New York, New York. Such closing (the
"Closing") will take place at 10:00 A.M., local time, on June 17,
1996. Such Closing may take place at such other time and place
or on such later date as may be mutually agreeable to the parties
hereto. At such Closing, the Company will deliver to Purchasers
certificates for the Shares purchased as set forth in Section 1
hereof, against payment of the purchase price therefor by
Purchasers, by wire transfer or check payable to the Company.
The Shares shall be registered in Purchasers' name or the name of
the nominee of Purchasers in such denominations as Purchasers
shall request according to their instructions delivered to the
Company not less than two (2) days prior to the Closing.
2.2. Termination. In the event that the transactions
contemplated by this Agreement to take place at or prior to the
Closing have not been consummated by June 29, 1996, this
Agreement shall, at the option of Purchasers, terminate and be of
no further force and effect, any amounts paid by Purchasers to
the Company will be immediately refunded to Purchasers, and there
shall be no further liability on the part of any party hereto
except for breaches of this Agreement prior to the time of such
termination.
3. Conditions to the Obligations of Purchasers at the
Closing. The obligation of Purchasers to purchase and pay for the
Shares to be purchased by Purchasers at the Closing is subject to
the satisfaction on or prior to the date of the Closing of the
following conditions, which may only be waived by written consent
of Purchasers:
3.1. Opinion of Counsel to the Company. Purchasers
shall have received from William S. Clarke, P.A., counsel for the
Company, its opinion dated the date of the Closing substantially
in the form of Exhibit A hereto.
3.2. Representations and Warranties. All of the
representations and warranties of the Company contained in this
Agreement shall be true and correct at and as of the date of the
Closing with the same effect as if made on the date of the
Closing, except to the extent of changes caused by the
transactions contemplated hereby.
3.3. Performance of Covenants. All of the covenants
and agreements of the Company contained in this Agreement and
required to be performed on or prior to the date of the Closing
shall have been performed in a manner reasonably satisfactory in
all respects to Purchasers.
3.4. Legal Action. No action or proceeding before any
court or governmental body shall be pending or threatened wherein
an unfavorable judgment, decree or order would prevent the
carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be
rescinded.
3.5. Consents. The Company shall have obtained in
writing all consents required to enable it to observe and comply
with all of its obligations under this Agreement and to
consummate the transactions contemplated hereby.
3.6. Closing Documents. The Company shall have
delivered to Purchasers (a) a certificate executed by the
President of the Company dated the date of the Closing stating
that the conditions set forth in Sections 3.2 through 3.5 hereof
have been satisfied and (b) such certificates, other documents
and instruments as Purchasers may reasonably request in
connection with, and to effect, the transactions contemplated by
this Agreement.
3.7. Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions
contemplated hereby to be consummated at the Closing and all
documents incident thereto shall be reasonably satisfactory in
form and substance to Purchasers.
4. Conditions to the Obligations of the Company at the
Closing. The obligation of the Company to issue and sell the
Shares to Purchasers as set forth herein at the Closing is
subject to the satisfaction on or prior to the date of the
Closing of the following conditions, any of which may be waived
by the Company:
4.1. Representations and Warranties. The
representations and warranties of Purchasers contained in this
Agreement shall be true and correct at and as of the date of the
Closing with the same effect as if made on the date of the
Closing, except to the extent of changes caused by the
transactions contemplated hereby.
4.2. Legal Action. No action or proceeding before any
court or governmental body shall be pending or threatened wherein
an unfavorable judgment, decree or order would prevent the
carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be
rescinded.
4.3. Proceedings. All proceedings taken or to be taken
by Purchasers in connection with the transactions contemplated
hereby to be consummated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and
substance to the Company.
4.4. Redemption of Poison Pill. The Company's
Shareholder Rights Plan dated as of September 23, 1994 between
the Company and American Stock Transfer and Trust Company shall
have been redeemed by the Board of Directors and satisfactory
evidence of such redemption shall have been provided to counsel
for Purchasers.
5. Representations and Warranties of the Company. The
Company hereby represents and warrants to Purchasers as follows:
5.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite
corporate power and authority, and holds all licenses, permits
and other required authorizations from governmental authorities,
necessary to conduct its business as it is now being conducted or
proposed to be conducted and to own or lease the properties and
assets it now owns or holds under lease. The Company is duly
qualified or licensed and in good standing as a foreign
corporation in each jurisdiction wherein the character of its
properties or the nature of the activities conducted by it makes
such qualification or licensing necessary.
5.2. Charter Documents. The Company has heretofore
delivered to Purchasers true, correct and complete copies of the
Company's Certificate of Incorporation and By-Laws as in full
force and effect on the date hereof. Except as expressly
contemplated by this Agreement, there will be no changes or
amendments to such Certificate of Incorporation or By-laws
between the date hereof and the date of the Closing.
5.3. Capitalization. As of the date hereof and the
Closing, the Company's authorized capitalization consists of
50,000,000 shares of Common Stock, of which 9,122,047 shares are
presently issued and outstanding and 2,089,140 shares are
reserved for issuance upon the conversion or exercise of
presently outstanding convertible securities, options, warrants
or other rights to purchase Common Stock. All outstanding shares
of the Company are validly issued, fully paid and nonassessable.
No stockholder of the Company is, or as of the Closing will be,
entitled to any preemptive rights with respect to the purchase or
sale of any securities by the Company. Except as has been set
forth in Schedule 5.3 hereto, there are no outstanding options,
warrants or other rights, commitments or arrangements, written or
oral, to purchase or otherwise acquire any authorized but
unissued shares of capital stock of the Company or any security
directly or indirectly convertible into or exchangeable for any
capital stock of the Company or under which any such option,
warrant or convertible security may be issued in the future. None
of the shares of Common Stock is reserved for any purpose, and
the Company is neither subject to any obligation (contingent or
otherwise), nor has any option to repurchase or otherwise acquire
or retire any shares of its capital stock.
5.4. Subsidiaries. The Company has no wholly or
partially owned subsidiaries and does not control, directly or
indirectly, any other corporation, business trust, firm,
partnership, association, joint venture, entity or organization.
The Company does not own any shares of stock, partnership
interest, joint venture interest or any other security or
interest in any other corporation or other organization or entity.
5.5. Authorization; No Breach. The Company has the
full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder, and the execution,
delivery and performance of this Agreement and all other
transactions contemplated hereby have been duly authorized by the
Company, and this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with
its terms, except as the enforceability hereof may be limited by
(a) bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and (b) the availability of remedies
under general equitable principles. The execution and delivery
by the Company of this Agreement, the offering, sale and issuance
of the Shares pursuant to this Agreement, and the performance and
fulfillment of the Company, do not and will not (i) conflict with
or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, or event which, with notice or
lapse of time or both, would constitute a breach of or default
under, (iii) result in the creation of any lien, security
interest, charge or encumbrance upon the capital stock or assets
of the Company pursuant to, (iv) give any third party the right
to accelerate any obligation under or terminate, (v) result in a
violation of, (vi) result in the loss of any license,
certificate, legal privilege or legal right enjoyed or possessed
by the Company under, or (vii) require any authorization,
consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to or
require the consent of any other person under, the Certificate of
Incorporation or By-Laws of the Company or any law, statute, rule
or regulation to which the Company is subject or by which any of
its properties are bound, or any agreement, instrument, order,
judgment or decree to which the Company is subject or by which
its properties are bound.
5.6. Financial Statements. Annexed hereto as
Schedule 5.6 are (a) the audited financial statements of the
Company for the fiscal year ended January 31, 1996, including
balance sheet as at the end of such fiscal year and the related
statements of income and cash flow statements for such fiscal
year, reported on by Mortenson & Associates, and (b) the
unaudited financial statements of the Company for the three (3)
month period ended April 30, 1996, including a balance sheet as
at the end of such period (together with any related notes, the
"Company Balance Sheet") and the related statements of income and
retained earnings and cash flow statements for such three (3)
month period (the financial statements referred to in Clauses (a)
and (b) collectively, the "Financial Statements"). For purposes
of this Agreement, April 30, 1996, shall be hereinafter referred
to as the "Balance Sheet Date." The Financial Statements have
been prepared in accordance with generally accepted accounting
principles, applied consistently with the past practices of the
Company (except as otherwise noted in such Financial Statements),
reflect all known liabilities of the Company, including all known
contingent liabilities, as of their respective dates, and present
fairly the financial position of the Company and the results of
its operations as of the time and for the period indicated
therein.
5.7. No Material Adverse Changes. Except as set forth
on Schedule 5.7 hereto, since the Balance Sheet Date there has
not at any time been (a) any material adverse change in the
financial condition, operating results, business prospects,
employee relations or customer relations of the Company, or (b)
other adverse changes, which in the aggregate have been
materially adverse to the Company.
5.8. Absence of Certain Developments. Except as
contemplated by this Agreement, and except as set forth in
Schedule 5.8 hereto, since the Balance Sheet Date, the Company
has not, nor will have prior to the Closing; (a) issued any
corporate securities; (b) borrowed any amount or incurred or
became subject to any liabilities (absolute or contingent), other
than liabilities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary course
of business, none of which are or shall be material; (c)
discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business; (d)
declared or made any payment or distribution of cash or other
property to the stockholders of the Company with respect to the
Common Stock or purchased or redeemed any shares of Common Stock;
(e) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any of its properties or assets, except for
liens for taxes not yet due and payable; (f) sold, assigned or
transferred any of its assets, tangible or intangible, except in
the ordinary course of business, or disclosed any proprietary
confidential information to any person, firm or entity; (g)
suffered any extraordinary losses or waived any rights of
material value; (h) made any capital expenditures or commitments
therefor; (i) entered into any other transaction other than in
the ordinary course of business or entered into any material
transaction, whether or not in the ordinary course of business;
(j) made any charitable contributions or pledges; (k) suffered
damages, destruction or casualty loss, whether or not covered by
insurance, affecting any of the properties or assets of the
Company or any other properties or assets of the Company which
could have a material adverse effect on the business or
operations of the Company; or (l) made any change in the nature
or operations of the business of the Company.
5.9. Properties. The Company has good and marketable
title to all of the real property and good title to all of the
personal property and assets it purports to own, including those
reflected as owned on the Company Balance Sheet or acquired
thereafter, and a good and valid leasehold interest in all
property indicated as leased on the Company Balance Sheet,
whether such property is real or personal, free and clear of all
liens, charges, encumbrances or restrictions of any nature
whatsoever, except (a) such as are reflected on the Company
Balance Sheet or described in Schedule 5.9 hereto and (b) for
receivables and charges collected in the ordinary course of
business. Except as disclosed in Schedule 5.9 hereto, the Company
owns or leases all such properties as are necessary to its
operations as now conducted and as presently proposed to be
conducted and all such properties are, in all material respects,
in good operating condition and repair.
5.10. Taxes. Except as referred to in Schedule 5.10
hereto, the Company has filed all federal, state, local and
foreign tax returns and reports required to be filed, and all
taxes, fees, assessments and governmental charges of any nature
shown by such returns and reports to be due and payable have been
paid except for those amounts being contested in good faith and
for which appropriate amounts have been reserved in accordance
with generally accepted accounting principles and are reflected
on the Company Balance Sheet. There is no tax deficiency which
has been, or, to the knowledge of the Company might be, asserted
against the Company which would adversely affect the business or
operations, or proposed business or operations, of the Company.
All such tax returns and reports were prepared in accordance with
the relevant rules and regulations of each taxing authority
having jurisdiction over the Company and are true and correct.
The Company has neither given nor been requested to give any
waiver of any statute of limitations relating to the payment of
federal, state, local or foreign taxes. The Company has not
been, nor is it now being, audited by any federal, state, local
or foreign tax authorities. The Company has made all required
deposits for taxes applicable to the current tax year.
5.11. Litigation. Except as set forth on Schedule 5.11
hereto, there are no actions, suits, proceedings, orders,
investigations or claims pending or threatened against or
affecting the Company, at law or in equity or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality; there are
no arbitration proceedings pending under collective bargaining
agreements or otherwise; and, to the knowledge of the Company,
there is no basis for any of the foregoing.
5.12. Compliance with Law. The Company has complied
in all respects with all applicable statutes and regulations of
the United States and of all states, municipalities and agencies
in respect of the conduct of its business and operations, and the
failure, if any, by the Company to have fully complied with any
such statute or regulation does not and will not materially
adversely affect the business or operations of the Company.
5.13. Trademarks and Patents. Schedule 5.13 annexed
hereto contains a true and correct list of all trademarks, trade
names, patents and copyrights (and applications therefor) if any,
heretofore or presently used or required to be used by the
Company in connection with its business; and each such trademark,
trade name, patent and copyright (and application therefor)
listed in Schedule 5.13 as being owned by the Company is not
subject to any license, royalty arrangement or dispute. To the
knowledge of the Company, none of the trademarks, trade names,
patents or copyrights used by the Company in connection with its
business infringe any trademark, trade name, patent or copyright
of others in the United States or in any other country, in any
way which materially adversely affects or which in the future may
materially adversely affect the business or operations of the
Company. Except as set forth in Schedule 5.13, no stockholder,
officer or director of the Company or any other person owns or
has any interest in any trademark, trade name, patent, copyright
or application therefor, or trade secret, invention or process,
if any, used by the Company in connection with its business. To
the knowledge of the Company, the business of the Company does
not and will not cause the Company to violate any trademark,
trade name, patent, copyright, trade secret, license or
proprietary interest of any other person, in any way which
materially adversely affects or which in the future may
materially adversely affect the business or operations of the
Company. Except as disclosed in Schedule 5.13 hereto, the
Company possesses all proprietary technology necessary for the
conduct of business by the Company, both as presently conducted
and as presently proposed to be conducted.
5.14. Insurance. Schedule 5.14 annexed hereto
contains a brief description of each insurance policy maintained
by the Company with respect to its properties, assets and
business; each such policy is in full force and effect; and the
Company is not in default with respect to its obligations under
any of such insurance policies. The insurance coverage of the
Company is in amounts not less than is customarily maintained by
corporations engaged in the same or similar business and
similarly situated, including, without limitation, insurance
against loss, damage, fire, theft, public liability and other
risks. The activities and operations of the Company have been
conducted in a manner so as to conform to all applicable
provisions of these insurance policies and the Company has not
taken or failed to take any action which would cause any such
insurance policy to lapse.
5.15. Agreements. Except as set forth in Schedule
5.15 hereto, the Company is neither a party to nor bound by any
agreement or commitment, written or oral, which obligates the
Company to make payments to any person, or which obligates any
person to make payments to the Company, in the case of each such
agreement in an amount exceeding $5,000, or in the aggregate in
an amount exceeding $10,000, or which is otherwise material to
the conduct and operation of the Company's business or proposed
business or any of its properties or assets, including, without
limitation, all shareholder, employment, non-competition and
consulting agreements and employee benefit plans and arrangements
and collective bargaining agreements to which the Company is a
party or by which it is bound. All such agreements are legal,
valid and binding obligations of the Company, in full force and
effect, and enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by (a)
bankruptcy, insolvency, moratorium, and similar laws affecting
creditors' rights generally and (b) the availability of remedies
under general equitable principles. The Company has performed
all obligations required to be performed by it, and is not in
default, or in receipt of any claim, under any such agreement or
commitment, and the Company has no present expectation or
intention of not fully performing all of such obligations, nor
does the Company have any knowledge of any breach or anticipated
breach by the other parties to any such agreement or commitment.
The Company is not a party to any contract, agreement, instrument
or understanding which materially adversely affects the business,
properties, operations, assets or condition (financial or
otherwise) of the Company. Purchasers has been furnished with a
true and correct copy of each written agreement referred to in
Schedule 5.15, together with all amendments, waivers or other
changes thereto.
5.16. Undisclosed Liabilities. Except as set forth on
Schedule 5.16 hereto, the Company has no obligation or liability
(whether accrued, absolute, contingent, unliquidated, or
otherwise, whether or not known to the Company, whether due or to
become due) arising out of transactions entered into at or prior
to the Closing of this Agreement, or any action or inaction at or
prior to the Closing of this Agreement, or any state of facts
existing at or prior to the Closing of this Agreement, except (a)
liabilities reflected on the Company Balance Sheet; (b)
liabilities incurred in the ordinary course of business since the
Balance Sheet Date (none of which is a liability for breach of
contract, breach of warranty, torts, infringements, claims or
lawsuits); and (c) liabilities or obligations disclosed in the
schedules hereto.
5.17. Conflicting Agreements. Except as set forth on
Schedule 5.17, no stockholder, director, officer or key employee
of the Company is a party to or bound by any agreement, contract
or commitment, or subject to any restrictions in connection with
any previous or current employment of any such person, which
adversely affects, or which in the future may adversely affect,
the business or the proposed business of the Company.
5.18. Disclosure. Neither this Agreement nor any of
the schedules, exhibits, written statements, documents or
certificates prepared or supplied by the Company with respect to
the transactions contemplated hereby contain any untrue statement
of a material fact or omit a material fact necessary to make the
statements contained herein or therein not misleading. Except as
disclosed in Schedule 5.18 hereto, there exists no fact or
circumstance which, to the knowledge of the Company, materially
adversely affects, or which could reasonably be anticipated to
have a material adverse effect on, the existing or expected
financial condition, operating results, assets, customer
relations, employee relations or business prospects of the
Company.
5.19. Closing Date. The representations and
warranties of the Company contained in this Agreement, and all
information contained in any exhibit, schedule or attachment
hereto or in any writing delivered by the Company to Purchasers,
will be true and correct in all material respects on the date of
the Closing as though then made and as though the date of the
Closing were substituted for the date of this Agreement
throughout this Agreement, except as affected by the transactions
expressly contemplated by this Agreement.
5.20. Compliance with the Securities Laws. Except as
set forth on Schedule 5.20 hereto, neither the Company nor anyone
acting on its behalf has directly or indirectly offered the
Shares or any part thereof or any similar security of the Company
(or any other securities convertible or exchangeable for the
Shares or any similar security), for sale to, or solicited any
offer to buy the same from, anyone other than Purchasers. All
securities of the Company heretofore sold and issued by it were
sold and issued, and the Shares were offered and will be sold and
issued, in compliance with all applicable federal and state
securities laws.
5.21. Brokers. No finder, broker, agent, financial
person or other intermediary has acted on behalf of the Company
in connection with the offering of the Shares or the consummation
of this Agreement or any of the transactions contemplated hereby.
6. Representations and Warranties of Purchasers.
Purchasers hereby severally represent and warrant to the Company
as follows:
6.1. Investment Intent. Purchasers are acquiring the
Shares for their own account and not with a present view to, or
for sale in connection with, any distribution thereof in
violation of the registration requirements of the Securities Act.
Purchasers consent to the placing of a legend on the certificates
representing the Shares to the effect that such shares of Common
Stock have not been registered under the Securities Act and may
not be transferred unless (a) a registration statement under such
Act shall have become effective with respect thereto, (b) a
written opinion of William S. Clarke, P.A., or counsel for the
holder reasonably acceptable to the Company, has been obtained to
the effect that no such registration is required or (c) a
no-action letter or its equivalent has been issued by the staff
of the Securities and Exchange Commission to the effect that
registration under such Act is not required in connection with
such proposed transfer.
6.2. Authorization. Each of Purchasers has the power
and authority to execute and deliver this Agreement and to
perform all of its obligations hereunder, having obtained all
required consents, if any.
6.3. Brokers. No finder, broker, agent, financial
person or other intermediary has acted on behalf of Purchasers in
connection with the offering of the Shares or the consummation of
this Agreement or any of the transactions contemplated hereby.
6.4. Closing Date. The representations and warranties
of Purchasers contained in this Agreement or in any writing
delivered by Purchasers to the Company will be true and correct
on the date of the Closing as though then made and as though the
date of the Closing were substituted for the date of this
Agreement throughout this Agreement, except as affected by the
transactions expressly contemplated by this Agreement.
7. Covenants of the Company. The Company covenants and
agrees with Purchasers as follows:
7.1. Books and Accounts. The Company will and will
cause each Subsidiary hereafter formed or acquired to: (a) make
and keep books, records and accounts, which, in reasonable
detail, accurately and fairly reflect its transactions and
dispositions of its assets; and (b) devise and maintain a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and in accordance with the Company's past practices or
any other criteria applicable to such statements, and to maintain
accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
7.2. Periodic Reports.
(a) The Company will furnish to Purchasers as soon
as practicable, and in any event within ninety (90) days after
the end of each fiscal year of the Company (commencing with the
fiscal year ended January 31, 1996), a consolidated and
consolidating annual report of the Company and its Subsidiaries,
including a consolidated and consolidating balance sheet as at
the end of such fiscal year and consolidated and consolidating
statements of income and retained earnings, and changes in
consolidated financial position for such fiscal year, together
with the related notes thereto, setting forth in each case in
comparative form corresponding figures for the preceding fiscal
year, all of which will be correct and complete and will present
fairly the consolidated financial position of the Company and its
Subsidiaries and the consolidated results of their operations and
changes in their financial position as of the time and for the
period then ended. The consolidated portions of such financial
statements shall be accompanied by an unqualified report (other
than qualifications contingent upon the Company's ability to
obtain additional financing), in form and substance reasonably
satisfactory to Purchasers, of independent public accountants
reasonably satisfactory to Purchasers to the effect that such
financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with prior years (except as otherwise specified in
such report), and present fairly the consolidated financial
position of the Company and its Subsidiaries and the consolidated
results of their operations and changes in their consolidated
financial position as of the time and for the period then ended.
The Company will use its best efforts to conduct its business so
that such report of the independent public accountants will not
contain any qualifications as to the scope of the audit, the
continuance of the Company and its Subsidiaries, or with respect
to the Company's compliance with generally accepted accounting
principles consistently applied, except for changes in methods of
accounting in which such accountants concur.
(b) The Company will furnish to Purchasers, as
soon as practicable and in any event within forty-five (45) days
after the end of each of the first three (3) fiscal quarters of
the Company, a quarterly report of the Company and its
Subsidiaries consisting of an unaudited consolidated and
consolidating balance sheet as at the end of such quarter and an
unaudited consolidated and consolidating statement of income and
retained earnings and changes in consolidated financial position
for such quarter and the portion of the fiscal year then ended,
setting forth in each case in comparative form corresponding
figures for the preceding fiscal year. All such reports shall be
certified by the chief financial officer of the Company to be
correct and complete, to present fairly the consolidated
financial position of the Company and its Subsidiaries and the
consolidated results of their operations and changes in their
consolidated financial position as of the time and for the period
then ended and to have been prepared in accordance with generally
accepted accounting principles.
7.3. Certificates of Compliance. Concurrently with
the furnishing of the reports pursuant to Sections 7.2(a) and
7.2(b) hereof, the Company will furnish to Purchasers an
Officer's Certificate stating that neither the Company nor any
Subsidiary is in default under, or has breached, any material
agreement or obligation, including, without limitation, this
Agreement, or if any such default or breach exists, specifying
the nature thereof and what actions the Company has taken and
proposes to take with respect thereto. The Company covenants
that promptly after the occurrence of any default hereunder or
any default under or breach of any material agreement, or any
other material adverse event or circumstance affecting the
Company or any of its Subsidiaries, it will deliver to Purchasers
an Officers' Certificate specifying in reasonable detail the
nature and period of existence thereof, and what actions the
Company has taken and proposes to take with respect thereto.
7.4. Other Reports and Inspection. The Company will
furnish to Purchasers (a) as soon as practicable after issuance,
copies of any financial statements or reports prepared by the
Company or its Subsidiaries for, or otherwise furnished to, its
stockholders or the Securities and Exchange Commission and (b)
promptly, such other documents, reports and financial data as
Purchasers may reasonably request. In addition the Company will,
upon reasonable prior notice, make available during regular
business hours to Purchasers or its representatives or designees
(a) all assets, properties and business records of the Company
and its Subsidiaries for inspection and/or copying and (b) the
directors, officers and employees of the Company and its
Subsidiaries for interviews concerning the business, affairs and
finances of the Company and its Subsidiaries, provided, however,
nothing herein shall require the Company to provide Purchasers
with copies of or access to its scientific data.
7.5. Insurance. The Company will at all times maintain
valid policies of worker's compensation insurance and such
insurance with respect to its properties and business and the
properties and business of its Subsidiaries of the kinds and in
amounts not less than is customarily maintained by corporations
engaged in the same or similar business and similarly situated,
including, without limitation, insurance against fire, loss,
damage, theft, public liability and other risks.
7.6. Use of Proceeds. After the date of each
respective Closing, the Company will use the proceeds from the
sale of the Shares for the general corporate purposes.
7.7. Material Changes. The Company will promptly
notify Purchasers of any material adverse change in the business,
properties, assets or condition, financial or otherwise, of the
Company or any of its Subsidiaries, or any other material adverse
event or circumstance affecting the Company or any of its Subsidiaries,
and of any litigation or governmental proceeding pending or, to the
knowledge of the Company or any Subsidiary, threatened against the
Company or any of its Subsidiaries or against any director or officer
of the Company or any of its Subsidiaries.
7.8. Transactions with Affiliates. Except for the
transactions contemplated by this Agreement, neither the Company
nor any Subsidiary shall (a) engage in any transaction with, (b)
make any loans to, nor (c) enter into any contract, agreement or
other arrangement (i) providing for (x) the employment of, (y)
the furnishing of services by, or (z) the rental of real or
personal property from, or (ii) otherwise requiring payments to,
any officer, director or key employee of the Company or any
Subsidiary or any relative of such persons or any other
"affiliate" or "associate" of such persons (as such terms are
defined in the rules and regulations promulgated under the
Securities Act), without the prior approval of the Company's
Board of Directors.
7.9. Corporate Existence, Licenses and Permits;
Maintenance of Properties; New Businesses. The Company will at
all times conduct its business in the ordinary course and cause
to be done all things necessary to maintain, preserve and renew
its existence and the corporate existence of each of its
Subsidiaries and will preserve and keep in force and effect, and
cause each Subsidiary to preserve and keep in force and effect,
all licenses, permits and authorizations necessary to the conduct
of its and their respective businesses. The Company will also
maintain and keep, and cause each Subsidiary to maintain and
keep, its and their respective properties in good repair, working
order and condition, and from time to time, to make all needful
and proper repairs, renewals and replacements, so that the
business carried on in connection therewith may be properly
conducted at all times.
7.10. Other Material Obligations. The Company will
comply with, and will cause each Subsidiary to comply with, (a)
all material obligations which it or its Subsidiaries are subject
to, or become subject to, pursuant to any contract or agreement,
whether oral or written, as such obligations are required to be
observed or performed, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and
the Company and its Subsidiaries have set aside on their books
adequate reserves with respect thereto, and (b) all applicable
laws, rules, and regulations of all governmental authorities, the
violation of which could have a material adverse effect upon the
business of the Company or any Subsidiary.
7.11. Amendment to the Certificate of Incorporation
and the By-Laws. The Company will perform and be in compliance
with and observe all of the provisions set forth in its
Certificate of Incorporation and By-Laws to the extent that the
performance of such obligations is legally permissible; provided
that the fact that performance is not legally permissible will
not prevent such nonperformance from constituting an event of
default under this Agreement. The Company will not amend its
Certificate of Incorporation or By-Laws so as to adversely affect
the rights of Purchasers under this Agreement, the Certificate of
Incorporation or the By-Laws.
7.12. Merger; Sale of Assets. Neither the Company nor
any Subsidiary will become a party to any merger or
consolidation, or sell, lease or otherwise dispose of any of its
assets, other than sales and leases of assets in the ordinary
course of business, without the prior approval of Purchasers,
except that (a) any Subsidiary may merge or consolidate with any
other Subsidiary or Subsidiaries, (b) any Subsidiary may merge or
consolidate with the Company so long as the Company is the
surviving entity of such merger or consolidation, and (c) any
Subsidiary may lease, sell, transfer or otherwise dispose of all
or any part of its properties and assets to the Company or any
other Subsidiary.
7.13. Acquisition. The Company will not acquire, or
permit any Subsidiary to acquire, any interest in any business
from any person, firm or entity (whether by a purchase of assets,
purchase of stock, merger or otherwise) without the prior
approval of Purchasers, except the acquisition of 1% or less of
any class of outstanding securities of a company whose securities
are listed on a national securities exchange or which has not
fewer than 1,000 stockholders and except as otherwise
specifically permitted pursuant to the provisions of this
Agreement.
7.14. Dividends; Distributions; Repurchases of Common
Stock; Treasury Stock. The Company shall not declare or pay any
dividends on, or make any other distribution with respect to, its
capital stock, whether now or hereafter outstanding, other than
dividends payable in shares of such stock, or purchase, acquire,
redeem or retire any shares of its capital stock, without the
consent of Purchasers, provided, however, the foregoing shall not
prohibit the Company from repurchasing any shares of its Common
Stock from any present or former officer, Director or employee of
the Company.
7.15. Consents. Prior to the Closing the Company
shall obtain all consents needed to enable it to perform all of
its obligations under this Agreement and the transactions
contemplated hereby.
7.16. Taxes and Liens. The Company will duly pay and
discharge, and will cause each of its Subsidiaries to duly pay
and discharge, when payable, all taxes, assessments and
governmental charges imposed upon or against the Company or its
Subsidiaries or their respective properties, or any part thereof
or upon the income or profits therefrom, in each case before the
same become delinquent and before penalties accrue thereon, as
well as all claims for labor, materials or supplies which if
unpaid might by law become a lien upon any of its property or any
property of any Subsidiary, unless and to the extent that the
same are being contested in good faith and by appropriate
proceedings and the Company and its Subsidiaries have set aside
on their books adequate reserves with respect thereto.
7.17. Restrictive Agreement. The Company covenants
and agrees that subsequent to the Closing, neither it nor any of
its Subsidiaries will be a party to any agreement or instrument
which by its terms would restrict the Company's performance of
its obligations pursuant to this Agreement.
8. Registration of Common Stock.
8.1. Demand Registration. Upon the written request
of one or more registered holders of Securities, which request
will state the intended method of disposition by such holders and
will request that the Company effect the registration under the
Securities Act of all or part of the Registrable Common Stock (as
defined in Section 9.5 hereof) of such holders, the Company will,
within ten (10) days after the receipt of such request give
written notice of such requested registration to all registered
holders of Securities and thereupon (except as expressly provided
herein) will use reasonable efforts to effect the registration
("Demand Registration") under the Securities Act of (x) the
shares of Registrable Common Stock included in the initial
request for registration (for disposition in accordance with the
intended method of disposition stated in such request) and (y)
all other shares of Registrable Common Stock the holders of which
have made written request to the Company for registration thereof
within 15 days after the receipt of such written notice from the
Company, provided that:
(a) the Company shall be required to effect only
two Demand Registrations hereunder, each of which shall have been
initially requested by holders of at least 60% of the Securities
outstanding at the time of such request, except that, upon
request of any holder of Securities (regardless of the number of
Securities held by such holder), the Company shall be required to
effect an unlimited number of registrations on Form S-3, or a
similar short form registration statement, which registrations
(hereinafter referred to as "Short Form Registrations") shall not
be included for purposes of this Section 8.1(a) in the total of
two Demand Registrations which the Company is required to effect;
(b) if a Demand Registration is in connection
with an underwritten public offering, the underwriters will be
selected by holders of a majority of Registrable Common Stock
being included in such offering, subject to the approval of the
Company (which approval shall not be unreasonably withheld), and
each holder of Securities agrees by acquisition of such
Securities not to effect any public sale or distribution of such
Securities or Registrable Common Stock (other than as part of
such underwritten public offering) during the period commencing
seven days prior to, and expiring ninety (90) days after, such
underwritten public offering has become effective;
(c) the Company shall not include and shall not
permit third parties to include additional securities in any
Demand Registration without the consent of the holders of a
majority of the shares of Registrable Common Stock sought to be
included in such Demand Registration;
(d) if a Demand Registration is in connection
with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion
the amount of Registrable Common Stock requested to be included
in such registration exceeds the amount of such Registrable
Common Stock which can be sold in such offering, the Company will
nevertheless include such Registrable Common Stock in such
registration prior to the inclusion of any securities which are
not Registrable Common Stock (notwithstanding any consent
obtained in accordance with Section 8.1(c) hereof) pro rata among
the holders of Registrable Common Stock requesting inclusion on
the basis of the number of shares of Registrable Common Stock of
such holders; and
(e) registrations under this Section 8.1 will be
on a form permitted by the rules and regulations of the
Securities and Exchange Commission selected by the underwriters
if the Demand Registration is in connection with an underwritten
public offering or otherwise by the Company.
8.2. Incidental Registrations.
(a) If the Company at any time proposes to
register any of its securities under the Securities Act (other
than pursuant to Section 8.1) whether of its own accord or at the
demand of any holder of such securities pursuant to an agreement
with respect to the registration thereof, and if the form of
registration statement proposed to be used may be used for the
registration of Registrable Common Stock, the Company will give
notice to all holders of Securities not less than fifteen (15)
days prior to the filing of such registration statement of its
intention to proceed with the proposed registration (the
"Incidental Registration"), and, upon the written request of any
such holder made within ten (10) days after the receipt of any
such notice (which request will specify the Registrable Common
Stock intended to be disposed of by such holder and state the
intended method of disposition thereof), the Company will use
reasonable efforts to cause all Registrable Common Stock as to
which registration has been requested to be registered under the
Securities Act, provided that if such registration is in
connection with an underwritten public offering, such holder's
Securities to be included in such registration shall be offered
upon the same terms and conditions as apply to any other
securities included in such registration.
(b) If an Incidental Registration is a primary
registration on behalf of the Company and is in connection with
an underwritten public offering, and if the managing underwriters
advise the Company in writing that in their opinion the amount of
securities requested to be included in such registration (whether
by the Company, the holders of Securities pursuant to
Section 8.2(a) or other holders of its securities pursuant to any
other rights granted by the Company to demand inclusion of any
such securities in such registration) exceeds the amount of such
securities which can be sold in such offering, the Company will
include in such registration the amount of securities requested
to be included which in the opinion of such underwriters can be
sold, in the following order (i) first, all of the securities the
Company proposes to sell, (ii) second, subject to the terms of
any other agreement to which the Company is a party, all of the
Registrable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of
the number of shares of Registrable Common Stock then owned by
such holders, and (iii) third, any other securities requested to
be included in such registration, pro rata among the holders
thereof on the basis of the amount of such securities then owned
by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company
and is in connection with an underwritten public offering, and if
the managing underwriters advise the Company in writing that in
their opinion the amount of securities requested to be included
in such registration (whether by such holders, by holders of
Securities pursuant to Section 8.2(a) or by holders of its
securities pursuant to any other rights granted by the Company to
demand inclusion of securities in such registration) exceeds the
amount of such securities which can be sold in such offering, the
Company will include in such registration, the amount of
securities requested to be included which in the opinion of such
underwriters can be sold, in the following order (i) first, all
of the securities requested to be included by holders demanding
or requesting such registration, (ii) second, subject to the
terms of any other agreement to which the Company is a party, all
of the Registrable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of
the number of shares of Registrable Common Stock then owned by
such holders; and (iii) third, any other securities requested to
be included in such registration, pro rata among the holders
thereof on the basis of the amount of such securities then owned
by such holders.
8.3. Registration Procedures. If and whenever the
Company is required to use reasonable efforts to effect or cause
the registration of any Registrable Common Stock under the
Securities Act as provided in this Section 8, the Company will,
as expeditiously as possible:
(a) prepare and file with the Securities and
Exchange Commission a registration statement with respect to such
Registrable Common Stock and use reasonable efforts to cause such
registration statement to become effective;
(b) prepare and file with the Securities and
Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than nine (9) months or such
shorter period in which the disposition of all securities in
accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement shall
be completed, and to comply with the provisions of the Securities
Act (to the extent applicable to the Company) with respect to
such dispositions;
(c) furnish to each seller of such Registrable
Common Stock such number of copies of such registration statement
and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of
the Securities Act, and such other documents, as such seller may
reasonably request, in order to facilitate the disposition of the
Registrable Common Stock owned by such seller;
(d) use its reasonable efforts to register or
qualify such Registrable Common Stock covered by such
registration statement under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests, and
do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Common Stock
owned by such seller, except that (i) the Company will not be
required to register or qualify such Registrable Common Stock in
any jurisdiction in which the officers or Directors of the
Company would be required by the relevant securities commission
or its equivalent in such jurisdiction to enter into an agreement
restricting their rights to transfer their shares of Common
Stock, and (ii) the Company will not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the
requirements of this Section 8.3(d) be obligated to be qualified,
to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(e) provide a transfer agent and registrar for
all such Registrable Common Stock covered by such registration
statement not later than the effective date of such registration
statement;
(f) notify each seller of such Registrable Common
Stock at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the
Company will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such
Registrable Common Stock, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(g) cause all such Registrable Common Stock to be
listed on each securities exchange or automated over-the-counter
trading system on which similar securities issued by the Company
are then listed;
(h) enter into such customary agreements
(including an underwriting agreement in customary form) and take
all such other actions as reasonably required in order to
expedite or facilitate the disposition of such Registrable Common
Stock; and
(i) make available for inspection by any seller
of Registrable Common Stock, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney, accountant or other agent retained by any such seller
and/or representative of such seller or underwriter, all
financial and other records, pertinent corporation documents and
properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant
or agent in connection with such registration statement,
provided, however, nothing herein shall require the Company to
provide Purchasers with copies of or access to its scientific data.
8.4. Registration and Selling Expenses.
(a) All expenses incurred by the Company in
connection with the Company's performance of or compliance with
this Section 8, including, without limitation (i) all
registration and filing fees (including all expenses incident to
filing with the National Association of Securities Dealers,
Inc.), (ii) blue sky fees and expenses, (iii) all necessary
printing and duplicating expenses and (iv) all fees and
disbursements of counsel and accountants for the Company
(including the expenses of any audit of financial statements),
retained by the Company (all such expenses being herein called
"Registration Expenses"), will be paid by the Company except as
otherwise expressly provided in this Section 8.4.
(b) The Company will, in any event, in connection
with any registration statement, pay its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal, accounting or other
duties in connection therewith and expenses of audits of year-end
financial statements), the expense of liability insurance and the
expenses and fees for listing the securities to be registered on
one or more securities exchanges or automated over-the-counter
trading systems on which similar securities issued by the Company
are then listed.
(c) The Company shall bear the Registration
Expenses of the first Demand Registration (which is not a Short
Form Registration) and of each Short Form Registration hereunder.
Nothing herein shall be construed to prevent any holder or
holders from retaining such counsel as they shall choose, the
expenses of which shall be borne by such holder or holders.
(d) The holders of Registrable Common Stock
covered by the second Demand Registration (which is not a Short
Form Registration) shall pay or reimburse the Company for the
Registration Expenses in connection therewith, provided that they
shall not be liable for expenses which would otherwise have been
incurred by the Company in the ordinary course of business or in
excess of an aggregate of $60,000; and provided further that to
the extent securities of the Company or third parties are
included in such registration, the Registration Expenses of such
registration shall be borne pro rata by the Company and selling
security holders in proportion to the dollar value of the
securities being sold by each such person.
(e) The holders of Registrable Common Stock
covered by any Incidental Registration shall pay or reimburse the
Company for any incremental Registration Expenses incurred by
reason of the inclusion of such Registrable Common Stock in such
registration.
(f) Notwithstanding any of the foregoing, all
underwriting discounts, selling commissions and stock transfer
taxes applicable to sales of Registrable Common Stock in
connection with any Demand Registration or Incidental
Registration shall be borne by all persons who are selling
Registrable Common Stock pursuant to such Registration Statement
in proportion to the dollar value of the securities being sold by
each such person, or in such other proportion as they may agree.
(g) All fees and expenses required to be paid by
the holders of Registrable Common Stock in connection with any
Demand Registration or Incidental Registration hereunder shall be
borne by said holders in proportion to the dollar value of the
securities of such holder covered by such Demand Registration or
Incidental Registration.
8.5. Other Public Sales and Registrations. The
Company agrees that if it has previously filed a registration
statement with respect to Registrable Common Stock in connection
with a Demand Registration or Incidental Registration hereunder,
and if such previous registration has not been withdrawn or
abandoned, the Company will not file or cause to become effective
any other registration of any of its securities under the
Securities Act or otherwise effect a public sale or distribution
of its securities (except pursuant to registration on Form S-8 or
any successor form relating to a special offering to the
employees or security holders of the Company or any Subsidiary),
whether on its own behalf or at the request of any holder of such
securities, until at least ninety (90) days have elapsed after
the effective date of such previous registration.
8.6. Transferees of Securities. Notwithstanding
anything else set forth in this Section 8, no person to whom
Securities are transferred shall have any rights under this
Section 9 as a holder of such Securities unless such person
agrees to be bound by the terms and conditions of this Agreement.
8.7. Indemnification.
(a) The Company hereby agrees to indemnify, to
the extent permitted by law, each holder of Registrable Common
Stock, its officers and directors, if any, and each person, if
any, who controls such holder within the meaning of the
Securities Act, against all losses, claims, damages, liabilities
and expenses (under the Securities Act or common law or
otherwise) caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration
statement or prospectus (and as amended or supplemented if the
Company has furnished any amendments or supplements thereto) or
any preliminary prospectus, which registration statement,
prospectus or preliminary prospectus shall be prepared in
connection with a Demand Registration or Incidental Registration,
or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by
any untrue statement or alleged untrue statement contained in or
by any omission or alleged omission from information furnished to
the Company by such holder in connection with a Demand
Registration or Incidental Registration, provided the Company
will not be liable pursuant to this Section 8.7 if such losses,
claims, damages, liabilities or expenses have been caused by any
selling security holder's failure to deliver a copy of the
registration statement or prospectus, or any amendments or
supplements thereto, after the Company has furnished such holder
with a sufficient amount of copies of the same.
(b) In connection with any registration statement
in which a holder of Registrable Common Stock is participating,
each such holder shall furnish to the Company in writing such
information as is reasonably requested by the Company for use in
any such registration statement or prospectus and shall
indemnify, to the extent permitted by law, the Company, its
directors and officers and each person, if any, who controls the
Company within the meaning of the Securities Act, against any
losses, claims, damages, liabilities and expenses resulting from
any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact
required to be stated in the registration statement or prospectus
or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, but only to the
extent such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or alleged untrue statement
contained in or by an omission or alleged omission from
information so furnished by such holder in connection with the
Demand Registration or Incidental Registration. If the offering
pursuant to any such registration is made through underwriters,
each such holder agrees to enter into an underwriting agreement
in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each
person who controls such underwriters within the meaning of the
Securities Act to the same extent as hereinabove provided with
respect to indemnification by such holder of the Company.
(c) Promptly after receipt by an indemnified
party under Section 8.7(a) or Section 8.7(b) of notice of the
commencement of any action or proceeding, such indemnified party
will, if a claim in respect thereof is made against the
indemnifying party under such Section, notify the indemnifying
party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise
than under such Section. In case any such action or proceeding is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and, to the extent
that it wishes, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
approved by such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under such Section for any legal
or any other expenses subsequently incurred by such indemnified
party in connection with the defense thereof (other than
reasonable costs of investigation) unless incurred at the written
request of the indemnifying party. Notwithstanding the above, the
indemnified party will have the right to employ counsel of its
own choice in any such action or proceeding if the indemnified
party has reasonably concluded that there may be defenses
available to it which are different from or additional to those
of the indemnifying party, or counsel to the indemnified party is
of the opinion that it would not be desirable for the same
counsel to represent both the indemnifying party and the
indemnified party because such representation might result in a
conflict of interest (in either of which cases the indemnifying
party will not have the right to assume the defense of any such
action or proceeding on behalf of the indemnified party or
parties and such legal and other expenses will be borne by the
indemnifying party). An indemnifying party will not be liable to
any indemnified party for any settlement of any such action or
proceeding effected without the consent of such indemnifying party.
(d) If the indemnification provided for in
Section 8.7(a) or Section 8.7(b) is unavailable under applicable
law to an indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the holders
of Registrable Common Stock on the other in connection with the
statements or omissions which resulted in such losses, claims,
damages, or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand
and of the holders of Registrable Common Stock on the other shall
be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied
by the Company or by the holders of Registrable Common Stock and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages and liabilities referred to above shall be deemed
to include, subject to the limitations set forth in
Section 9.7(c), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or
defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
(e) Promptly after receipt by the Company or any
holder of Securities of notice of the commencement of any action
or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (the
"contributing party"), notify the contributing party of the
commencement thereof; but the omission so to notify the
contributing party will not relieve it from any liability which
it may have to any other party other than for contribution
hereunder. In case any such action, suit, or proceeding is
brought against any party, and such party notifies a contributing
party of the commencement thereof, the contributing party will be
entitled to participate therein with the notifying party and any
other contributing party similarly notified.
9. Certain Definitions. For the purposes of this
Agreement the following terms have the respective meanings set
forth below:
9.1. "Affiliate" means any person, corporation, firm or
entity which directly or indirectly controls, is controlled by,
or is under common control with the indicated person,
corporation, firm or entity.
9.2. "Common Stock" means the Company's Common Stock.
9.3. "Generally Accepted Accounting Principles" means
generally accepted accounting principles consistently applied.
9.4. "Officers' Certificate" means a certificate
executed on behalf of the Company by its President, Chairman of
the Board, Chief Financial Officer, Secretary or one of its Vice-
Presidents.
9.5. "Registrable Common Stock" means any Common Stock
owned by, or any Common Stock issuable upon exercise of any
options, warrants or other rights to purchase Common Stock owned
by, a holder of Securities.
9.6. "Securities" means the Shares, whether issued at
the Closing or thereafter, but shall not include any such Shares
or Common Stock sold or distributed by the Company in any public
offering.
9.7. "Securities Act" means, as of any given time, the
Securities Act of 1933, as amended, or any similar federal law
then in force.
9.8. "Securities Exchange Act" means, as of any given
time, the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.
9.9. "Securities and Exchange Commission" includes any
governmental body or agency succeeding to the functions thereof.
9.10. "Subsidiary" means any person, corporation, firm
or entity at least the majority of the equity securities (or
equivalent interest) of which are, at the time as of which any
determination is being made, owned of record or beneficially by
the Company, directly or indirectly, through any Subsidiary or
otherwise.
10. Miscellaneous.
10.1. Survival of Representations, Warranties and
Covenants. All representations, warranties, covenants and
agreements contained in this Agreement, or in any document,
exhibit, schedule or certificate by any party delivered in
connection herewith shall survive the execution and delivery of
this Agreement and the date of the Closing and the consummation
of the transactions contemplated hereby, regardless of any
investigation made by Purchasers or on their behalf, provided
that, except as otherwise provided herein, the obligations of the
Company to perform the covenants and agreements set forth in
Section 7 hereof will continue only so long as any Purchaser owns
in excess of 10% of the Securities or until the Securities have
been registered under the Securities Act and distributed to the
public, and, further provided that, such representations and
warranties shall survive until December 31, 1996.
10.2. Expenses. The Company agrees to pay, and save
Purchasers harmless against liability for the payment of (a) fees
and expenses (including, without limitation, attorneys' fees)
incurred with respect to any amendments or waivers (whether or
not the same shall become effective) under or with respect to
this Agreement and the transactions contemplated hereby, (b)
stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby including the issuance,
delivery and acquisition of the Shares, and (c) fees and expenses
(including, without limitation, reasonable attorneys' fees)
incurred in respect of the enforcement of the rights granted
under this Agreement and the transactions contemplated hereby.
10.3. Amendments and Waivers. This Agreement and all
exhibits and schedules hereto set forth the entire agreement and
understanding among the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them. This
Agreement may be amended, the Company may take any action herein
prohibited or omit to take any action herein required to be
performed by it, and any breach of any covenant, agreement,
warranty or representation may be waived, only if the Company has
obtained the written consent or waiver of (a) Purchasers, if the
amendment, action, omission or waiver is one which affects its
rights or obligations under this Agreement and (b) the holders of
51% of the Securities then outstanding if the amendment, action,
omission or waiver is one which affects their rights or
obligations under this Agreement. No course of dealing between
or among any persons having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under
or by reason of this Agreement.
10.4. Successors and Assigns. This Agreement may not
be assigned by the Company except with the prior written consent
of the holders of 51% of the Securities then outstanding. This
Agreement shall be binding upon and inure to the benefit of the
Company and its permitted successors and assigns and Purchasers
and their successors and assigns. The provisions hereof which
are for Purchasers' benefit as purchasers or holders of the
Shares, are also for the benefit of, and enforceable by, any
subsequent holder of such Shares.
10.5. Notices. All notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be
deemed to have been given personally or when mailed by certified
or registered mail, return receipt requested and postage prepaid,
and addressed to the addresses of the respective parties set
forth below or to such changed addresses as such parties may have
fixed by notice; provided, however, that any notice of change of
address shall be effective only upon receipt:
To the Company:
Immunotherapeutics, Inc.
3233 Fifteenth Street South
Fargo, North Dakota 58104
Attention: Dr. Gerald Vosika
With a Copy to:
William S. Clarke, P.A.
5 Independence Way
Princeton, New Jersey 08540
To Purchasers:
Aries Financial Services, Inc.
375 Park Avenue, Suite 1501
New York, New York 10152
With a Copy to:
David R. Walner, Esquire
Aries Financial Services, Inc.
375 Park Avenue, Suite 1501
New York, New York 10152
10.6. Governing Law. The validity, performance,
construction and effect of this Agreement shall be governed by
the internal laws of the State of New York without giving effect
to principles of conflicts of law.
10.7 Counterparts. This Agreement may be executed in
any number of counterparts and, notwithstanding that any of the
parties did not execute the same counterpart, each of such
counterparts shall, for all purposes, be deemed an original, and
all such counterparts shall constitute one and the same
instrument binding on all of the parties thereto.
10.8 Headings. The headings of the Sections hereof
are inserted as a matter of convenience and for reference only
and in no way define, limit or describe the scope of this
Agreement or the meaning of any provision hereof.
10.9. Severability. In the event that any provision
of this Agreement or the application of any provision hereof is
declared to be illegal, invalid or otherwise unenforceable by a
court of competent jurisdiction, the remainder of this Agreement
shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless the
provision held invalid shall substantially impair the benefit of
the remaining portion of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Immunotherapeutics, Inc.
By: /s/ Gerald Vosika
___________________________________
Name: Gerald Vosika
Title: Chairman
The Aries Fund, a Series of
the Aries Trust
By its Investment Manager, Aries
Financial Services, Inc.
By: /s/ Lindsay Rosenwald
____________________________________
Name: Lindsay Rosenwald
Title: President
The Aries Domestic Fund, L.P.
By its General Partner, Aries
Financial Services, Inc.
By: /s/ Lindsay Rosenwald
__________________________________
Name: Lindsay Rosenwald
Title: President
IMMUNOTHERAPEUTICS, INC.
June 25, 1996
Gerald Vosika, M.D.
3233 Fifteenth Street South
Fargo, North Dakota 58104
Letter Agreement, Amendment and Waiver
Dear Mr. Vosika:
In connection with the purchase by Aries Domestic Fund,
L.P., a Delaware limited partnership (the "Fund"), and the Aries
Trust, a Cayman Islands Trust (the "Trust", and collectively with
the Fund, the "Purchasers") of 5,000,000 shares of Common Stock
of ImmunoTherapeutics, Inc., a Delaware corporation (the
"Company"), directly from the Company and the purchase by the
Purchasers of 4,000,000 shares of the Company's Common Stock from
Dominion Resources, Inc., a Delaware corporation, the Company and
Mr. Gerald R. Vosika (the "Executive" and the Company,
collectively referred to as the "Parties") wish to enter into an
agreement as follows:
(1) The Parties have agreed that the Company may hire a
Chief Executive Officer who, if hired, will have the
corporate title of President, which such title will be
relinquished by Executive. Executive expressly agrees
to relinquish such title and agrees to the hiring of
such CEO and the conduct by such CEO of the duties
assigned him by the Board of Directors. The Executive
agrees that the hiring of such CEO will not constitute
"Good Reason" as such term is defined in the Employment
Agreement between the Company and Executive dated June
1, 1996 (the "Employment Agreement") and will not be
grounds for the Executive to terminate his employment
for "Good Reason" as provided pursuant to the
Employment Agreement. Executive further agrees that
the Company may take any of the foregoing actions and
such actions will not result in any breach or violation
of any provisions of the Employment Agreement or
entitle the Executive to any payments or severance pay
under the terms of the Employment Agreement. The
Executive hereby waives any claims or causes of action,
whether based on contract or otherwise, in any way
related to or arising out of such actions.
(2) The Executive hereby agrees that the acquisition of the
shares of Common Stock of the Company by the Purchasers
(including any purchases made subsequent to the date
hereof) and the appointment by Purchasers of any
representatives to the Board of Directors or other
change in the configuration of the Board of Directors
by Purchasers did not and will not constitute (x) a
"change in control of the Company" or "Good Reason" as
such terms are defined in the Employment Agreement and
will not be grounds for the Executive to terminate his
employment with the Company or (y) a "change of
control" or other event giving rise to a cancellation
of the Option under Section 5(b), (c) or (d) of the
Stock Option Agreement (the "Option") dated March 21,
1996 or any other option agreement to which the
Executive is a party (collectively with the Option, the
"Options"). Executive further agrees that such
acquisitions of shares or future acquisitions of shares
or changes to the configuration of the Company's Board
of Directors did not and will not result in any breach
or violation, or acceleration of any rights to payment
pursuant to any provisions of the Employment Agreement
or Options or entitle the Executive to any payments,
accelerated rights or severance pay under the terms of
the Employment Agreement or Options. The Executive
hereby waives any claims or causes of action, whether
based on contract or otherwise, in any way related to
or arising out of such actions.
(3) The Executive hereby agrees to amend paragraph 8(d)(ii)
of the Employment Agreement to read as follows:
(ii) in lieu of any further salary payments to the
Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance
pay to the Executive an amount equal to the
product of (A) the Executive's annual salary rate
in effect as of the Date of Termination,
multiplied by (B) the number of years (including
partial years) remaining in the term of employment
hereunder, such payment to be made in
substantially equal monthly installments
commencing with the month in which the Date of
Termination occurs and continuing for the number
of consecutive monthly payment dates (including
the first such date as aforesaid) equal to the
product obtained by multiplying the number of
years (including partial years) applicable under
(ii)(B) above by twelve (12); and
The foregoing language shall be substituted for and
shall replace the language in paragraph 8(d)(ii).
(4) The Executive hereby agrees that the Employment
Agreement shall be amended to delete any reference to
the term "change in control of the Company" and agrees
that he shall not be entitled to terminate his
employment with the Company or to any additional
severance or termination payments as a result of the
occurrence of any events which satisfy the definition
of "change of control of the Company" in Section 7(d)
of the Employment Agreement.
(5) The Executive hereby agrees that the Option shall be
amended to delete Sections 5(b), (c) and (d) and the
Executive hereby waives any rights to any payments
pursuant to those provisions.
(6) The Executive hereby agrees that from the date hereof
and continuing for a period (the "Lock-Up Period") of
twenty four (24) months from the date hereof, he will
not, without the prior written consent of Aries
Financial Services, Inc., offer, pledge, sell, contract
to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any shares of any
equity securities of ImmunoTherapeutics, Inc. (the
"Company") or any options, warrants or other securities
convertible into equity securities of the Company (the
"Shares") provided however that, on the date twelve
months from the date hereof, an amount of Shares equal
to 25% of the number of Shares currently owned by the
Executive (as set forth in the Company's current SEC
filings) shall become exempt from the lock-up
provisions contained in this sentence. In addition,
Executive agrees that while Executive hold any Shares,
Executive will not directly or indirectly, through
related parties, affiliates or otherwise sell "short"
or "short against the box" (as those terms are
generally understood) any equity security of the
Company. Notwithstanding the foregoing, (i) the
Executive will be permitted to transfer his shares in
private sale transactions pursuant to a valid private
placement exemption provided any transferee in
connection with such any such transaction expressly
consents in writing to be subject to the same
restrictions and agreements applicable to such shares
as Executive was hereunder, pursuant to the Employment
Agreement and the Option Agreement.
This letter agreement shall not be amended or modified
without the prior written consent of both Parties and Aries
Financial Services, Inc, a Delaware corporation. Aries Financial
Services, Inc. and the Purchasers shall be third party
beneficiaries of this letter agreement, have relied on the
provisions contained herein and shall be entitled to enforce the
rights of the Company hereunder. This letter agreement shall act
as a complete release of the Company from all claims which the
Executive had with respect to any of the matters with respect to
which the Executive agreed to waive, forego or amend any rights
as provided herein.
If you agree with the foregoing, please execute a copy
of this letter in the space provided below and return the
executed copy to me whereupon this letter will become a binding
agreement among the Parties.
________________________
IMMUNOTHERAPEUTICS, INC.
Name:
Title: Secretary
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
GERALD VOSIKA, M.D.
_____________________________
