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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ZILA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0619668
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
5227 NORTH 7TH STREET
PHOENIX, ARIZONA 85014
(602) 266-6700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
---------------
MR. JOSEPH HINES
ZILA, INC.
5227 NORTH 7TH STREET
PHOENIX, ARIZONA 85014-2800
(602) 266-6700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE OF SERVICE)
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THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
KEVIN J. TOUREK, ESQ.
STREICH LANG, P.A.
2 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004-2391
(602) 229-5200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO PUBLIC:
From time to time after the Registration Statement becomes effective as
determined by market conditions and the needs of the Selling Securityholders.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITY AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 4,184,398 SHARES $ 7.25 (2) $30,336,885.50 $ 9192
Common Stock, $.001 par value,
issuable upon exercise of a 300,000 SHARES $8.6125 (3) $2,583,750 $783
Warrant
Total 4,484,398 $32,920,635.50 $9975
</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving the Company's Common Stock, in order to prevent dilution, the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee based
upon the average of the bid and asked price for the Common Stock on July
17, 1997
(3) The exercise price of the warrants, used for the purpose of calculating the
amount of the registration fee in accordance with Rule 457(g).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION DATED JULY 18, 1997
ZILA, INC.
4,484,398 SHARES
OF
COMMON STOCK
---------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 8 OF THIS PROSPECTUS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The securities offered hereby (the "Offered Securities") are 4,484,398 shares of
common stock, $.001 par value ("Common Stock"), of Zila, Inc., a Delaware
corporation ("Zila" or the "Company"), which may be offered and sold, from time
to time, for the account of certain stockholders of the Company (the "Selling
Securityholders"). Of the 4,484,398 shares of the Common Stock subject to this
Prospectus, (i) 4,200,000 shares (the "LOC Shares") have been or may be issued
pursuant to a Private Equity Line of Credit Agreement dated April 30, 1997 (the
"Equity Line Agreement") between the Company and certain of the Selling
Securityholders, (ii) 300,000 shares (the "Warrant Shares") are issuable upon
the exercise of outstanding warrants to purchase shares of Common Stock (the
"Warrants") acquired by certain of the Selling Securityholders pursuant to the
Equity Line Agreement, and (iii) 284,398 shares were previously issued (the
"Issued Shares") in private placements to certain of the Selling Securityholders
and are currently outstanding. See "RECENT DEVELOPMENTS."
The LOC Shares have been or may be issued by the Company to certain of the
Selling Securityholders pursuant to the terms of the Equity Line Agreement. The
price at which the LOC Shares will be issued by the Company to the Selling
Securityholders shall be 93% of the Market Price (as defined by the Equity Line
Agreement) on the date the Company issues shares available under the Equity Line
Agreement.
The Offered Securities may be sold from time to time by the Selling
Securityholders. See "SELLING SECURITYHOLDERS." The Company will not receive any
of the proceeds from the sale of the Offered Securities (other than the warrant
exercise price which is $8.6125 per share) by the Selling Securityholders. The
Offered Securities may be offered from time to time in one or more
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transactions in the over-the-counter market, pursuant to Rule 144 under the
Securities Act of 1933, or otherwise, at market prices prevailing at the time of
sale, at prices relating to such prevailing market prices, or at negotiated
prices, and without payment of any underwriting discounts or commissions, except
for usual and customary selling commissions paid to brokers or dealers.
The Company has agreed to indemnify certain of the Selling Securityholders
against certain liabilities, including liabilities under the Securities Act of
1933. See "PLAN OF DISTRIBUTION."
The Selling Securityholders and any brokers, dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Common Stock may be deemed to be underwriters within the meaning of the
Securities Act, in which event any commissions received by such brokers,
dealers, agents or underwriters and any profit on the resale of the Common Stock
may be deemed to be underwriting discounts under the Securities Act. See "PLAN
OF DISTRIBUTION."
All expenses in connection with the registration of the Offered Securities will
be borne by the Company. See "RISK FACTORS," "PLAN OF DISTRIBUTION" and "SELLING
SECURITYHOLDERS."
The Common Stock is listed on the Nasdaq National Market under the Symbol
"ZILA." On July 17, 1997, the last reported sales price of the Company's Common
Stock on the Nasdaq National Market was $7.75 per share.
The date of this Prospectus is , 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C., and at the Commission's regional offices at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can also be obtained at
prescribed rates from the Public Reference section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
the Commission maintains a Web site at http://www.sec.com that contains reports,
proxy statements and other information.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement, and reference is made to the
Registration Statement and related exhibits for further information with respect
to the Company and the securities offered hereby. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits thereto may be inspected
and copied at the locations described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission are
incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended July
31, 1996;
(ii) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended October 31, 1996;
(iii) the Company's Current Report on Form 8-K dated (date of earliest
event reported) January 8, 1997;
(iv) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended January 31, 1997;
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(v) the Company's Current Report on Form 8-K dated (date of earliest event
reported) February 11, 1997;
(vi) the Company's Current Report on Form 8-K dated (date of earliest event
reported) March 17, 1997;
(vii) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended April 30, 1997;
(viii) the Company's Current Report on Form 8-K dated July 18, 1997;
(ix) the description of the Common Stock contained in the Company's
Registration of Certain Classes of Securities Pursuant to Section 12(b) or
(g) of the Securities Exchange Act of 1934 on Form 8-A dated March 1, 1989,
as amended from time to time.
All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference herein and to be part hereof from the date of the
filing of such reports and documents.
Any statement contained in a document incorporated or deemed incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document that is also deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including a beneficial owner, to whom a Prospectus is delivered upon written or
oral request of each person, a copy of any document incorporated herein by
reference (not including exhibits to the document that have been incorporated
herein by reference, unless such exhibits are specifically incorporated by
reference in the document which this Prospectus incorporates). Requests should
be directed to President, Zila, Inc., 5227 North 7th Street, Phoenix Arizona
85014-2800; telephone (602) 266-6700.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere, or incorporated by reference, in this Prospectus, including
information under "Risk Factors." The discussion in this Prospectus contains
certain forward-looking statements within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934 and involve risks and
uncertainties. The forward-looking statements are qualified in their entirety by
reference to the risks and risk factors described herein and in such reports.
The Company's actual results could differ materially from those projected in the
forward-looking statements as a result of the factors described under "Risk
Factors" and elsewhere in this Prospectus and in such reports.
THE COMPANY
Zila, Inc., a Delaware corporation, has three operating groups. Zila
Pharmaceuticals, a Nevada corporation ("Zila"), markets a growing line of
non-prescription oral healthcare products, including Zilactin(R), Zilactin-B,
Zilactin-L, Zilactin-Lip, new Zilactin Baby and Quik FlossTM. Cygnus Imaging,
Inc., an Arizona corporation ("Cygnus"), manufactures and markets
internationally CygnaScope(TM) and OralVision(TM) intraoral video camera
systems, and Sens-A-Ray(TM) digital x-ray systems. The third operating group,
Bio-Dental Technologies Corporation, a California corporation ("Bio-Dental"),
consists of Practice Works(TM) dental practice management software and The
Supply House, a nationwide dental products distributor, marketing 15,000 items
to the dental office through extensive direct mail, catalog sales and
telemarketing. Zila was organized on September 12, 1980. On September 1, 1988,
Zila Pharmaceuticals, Inc., a Delaware corporation and a wholly-owned subsidiary
of Zila, Inc., was merged with and into Zila. The surviving corporation was
Zila, which became, by virtue of such merger, a wholly-owned subsidiary of Zila,
Inc. Bio-Dental, Cygnus, Zila Ltd., a corporation incorporated under the laws of
the United Kingdom (the "UK"), and Zila International, an Arizona corporation,
are all wholly-owned subsidiaries of Zila, Inc. Unless the context otherwise
indicates, the term "Company" as used herein refers to Zila, Inc. and each of
its subsidiaries.
The Company is incorporated in the State of Delaware. The Company's principal
executive offices are located at 5227 North Seventh Street, Phoenix, Arizona
85014-2800, and its telephone number is (602) 266-6700.
THE OFFERING
Securities offered 4,488,398 shares of Common Stock
Common Stock Outstanding as of April 30, 32,257,848 shares of Common Stock
1997
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Nasdaq National Market Symbol Zila
7
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RECENT DEVELOPMENTS
Effective April 30, 1997, Zila entered into the Equity Line Agreement with
certain of the Selling Securityholders. Pursuant to the Equity Line Agreement,
the Company may sell up to $25 million of Zila's Common Stock, with the proceeds
to be used to fund OraTest(TM) marketing and for general working capital
purposes. The Company also entered into related Registration Rights Agreements
whereby the Company agreed to file under the Securities Act a registration
statement for the resale by the Selling Shareholders of shares of the Common
Stock obtained pursuant to the Equity Line Agreement. The option to sell stock
to the Investor will remain available for a period of thirteen months following
the effective date of the registration statement discussed below (the
"Commitment Period"). As part of the Equity Line Agreement, Zila sold $3.0
million of stock on April 30, 1997, and has committed to sell an additional $10
million of common stock to the Investor over the Commitment Period. In the event
that the Company does not sell an additional $10 million during the Commitment
Period, the Company shall issue an additional three-year warrant to certain of
the Selling Shareholders to purchase an additional 250,000 shares of the Common
Stock, at the market price, on the last day of the Commitment Period.
The Equity Line Agreement provides that Zila can obtain up to $2 million at any
one time through the sale of the Company's Common Stock. All shares sold will be
at a 7% discount to the average of the closing bid price of the Company's Common
Stock over a specified period of time, subject to a maximum purchase price
calculation.
The Selling Securityholders' obligation to purchase Common Stock under the
Equity Line Agreement is subject to various conditions, including, without
limitation: (i) effectiveness of the Registration Statement with respect to the
shares that may be purchased pursuant to the Equity Line Agreement, (ii) an
average daily trading volume over the course of the six months prior to a
purchase of greater than 75,000 share per day, (iii) shares issued pursuant to
the Equity Line Agreement may not exceed 20% of the Company's outstanding
shares.
As a commitment fee for keeping the equity line available for the Commitment
Period, the Company has issued warrants dated May 7, 1997 (the "Warrants") to
the Selling Securityholders, exercisable for 300,000 shares of Common Stock at
an exercise price of $8.6125 per share. The Warrants are exercisable for a
three-year period commencing October 31, 1997.
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RISK FACTORS
This offering involves a high degree of risk. Prospective investors should
carefully consider, among other factors, the following risks relating to the
Company, its business and this offering:
No Assurance of Profitable Operations. For the fiscal years ended July 31, 1996,
1995, 1994 and 1993, the Company had net income (loss) of $1,217,298,
($1,282,357), $558,748, and $1,338,826, respectively. For the fiscal quarter
ended April 30, 1997 and the nine months ended April 30, 1997 the Company had a
net loss of $1,447,087 and $5,174,228, respectively. The Company has had
profitable operations in three of its last four fiscal years. There can be no
assurance that the Company will, in the future, return to profitability or that
the Company's plan for expanded operations will be successful.
Introduction of OraTest(TM) In the United State; Uncertainties of Regulatory
Approval. Zila has not yet received Food and Drug Administration ("FDA")
approval for OraTest(TM), a diagnostic for oral cancer and site delineation
device for biopsy and surgical excision. The production and marketing of the
Company's OraTest(TM) and related products are subject to regulation by numerous
governmental authorities in the United States and other countries. Prior to
marketing, any drug developed by the Company must undertake rigorous preclinical
and clinical testing and an extensive regulatory approval process mandated by
the FDA and equivalent foreign authorities. These processes can take a number of
years and require the expenditure of substantial resources. Obtaining such
approvals and completing such testing is a costly and time-consuming process,
and approval may not be ultimately obtained. The length of the FDA review period
varies considerably, as does the amount of preclinical and clinical data
required to demonstrate the safety and efficacy of a specific product. The
Company may also decide to replace the compounds in testing with modified or
optimized compounds, thus extending the testing process. In addition, delays or
rejections may be encountered based upon changes in FDA policy during the period
of product development and FDA regulatory review of each submitted new drug
application or product license application. Similar delays may also be
encountered in other countries. There can be no assurance that even after such
time and expenditures, regulatory approval will be obtained for any products
developed by the Company. Management is unable at this time to determine whether
such FDA approval may be forthcoming or, if so, when OraTest(TM) may begin to be
marketed in the United States. If the FDA does not approve OraTest(TM) for the
United States market, it could have a material adverse effect on the business of
Zila, and the market price for Common Stock would likely be materially adversely
affected as well. As of April 30, 1997, Zila has invested approximately
$3,800,000 in the development of OraTest(TM) and has also made a significant
financial investment to secure FDA approval of OraTest(TM) and to prepare for
the introduction of OraTest(TM) to the United States market. The failure of the
FDA to approve OraTest(TM) would make it impossible for Zila to recoup this
investment through sales of OraTest(TM) in the United States. Management of the
Company believes that the necessary approvals for the sale of OraTest(TM) in the
United States will be received; however, there can be no assurances in this
regard. If regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which the product may be marketed.
Further, even if such regulatory approval is obtained, the FDA will require
post-marketing reporting, and may require surveillance programs to monitor the
usage or side effects of each drug product.
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A marketed product, its manufacturer and its manufacturing facilities are
subject to continual review and periodic inspections, and later discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on such product or manufacturer, potentially including
withdrawal of the product from the market.
Potential Difficulty in Implementing Marketing Strategy. If FDA approval of
OraTest(TM) is received, the Company must establish a marketing and sales force
with technical expertise and distribution capability to market directly to the
dental professional or it must obtain the assistance of a pharmaceutical company
with a large distribution system and sales force. There can be no assurance that
the Company may do this or be successful in gaining market acceptance of
OraTest(TM).
Competition; Research and Development. The pharmaceutical industry is highly
competitive. A number of companies, many of which have greater financial
resources, marketing capabilities and research and development capacities than
the Company, are actively engaged in the development of products similar to
those products produced and marketed by the Company. The Company relies on
outside sources for its ongoing research and development needs in much the same
manner as the Company relies on outside sources for manufacturing. The
pharmaceutical industry is characterized by extensive and ongoing research
efforts. Other companies may succeed in developing products superior to those
marketed by the Company. Such companies may even succeed in developing a cure
for herpes simplex virus, which would substantially reduce the potential market
for symptomatic treatments such as ZILACTIN(R). In addition, Bio-Dental, a
wholly-owned subsidiary of Zila, faces significant competition, primarily from a
various number of dental supply dealers and mail order supply houses in the
United States. Bio-Dental also faces significant competition from providers of
dental practice management software and intra-oral camera systems. Many of the
competing providers of these products have significantly greater market share
and financial resources than Bio-Dental. In addition, new competitors may enter
into Bio-Dental's markets from time to time. It may be difficult for Bio-Dental
to maintain or increase sales volume and market share due to such competition.
Dependence on Proprietary Rights. Zila relies on a combination of patent,
copyright, trademark and trade secret protection, nondisclosure agreements and
licensing arrangements to establish and protect its proprietary rights. Zila
owns and has exclusive licenses to a number of United States and foreign patents
and patent applications, and intends to seek additional patent applications as
it deems appropriate. There can be no assurance that patents will issue from any
of these pending applications or, if patents do issue, that any claims allowed
will be sufficiently broad to cover Zila's products or to effectively limit
competition against Zila. In addition,there can be no assurance that any
patents that may be issued to Zila will not be challenged, invalidated or
circumvented, or that any rights granted thereunder would provide proprietary
protection to, or effectively limit competition against, Zila. Zila also has a
number of trademarks. There can be no assurance that litigation with respect to
trademarks will not result from the use of registered or common law marks, or
that, if litigation against Zila were successful, any resulting loss of the
right to use a trademark would not reduce sales of Zila's products in addition
to the possibility of a significant damages award. Although Zila intends to
defend the proprietary rights, policing unauthorized use of proprietary
technology and products is difficult, and there can be no assurance that Zila's
efforts will be successful. In addition,
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the laws of certain foreign countries may not protect the proprietary rights of
Zila to the same extent as do the laws of the United States.
Government Regulation. The approval and sale of pharmaceutical products is
heavily regulated by the Food and Drug Administration (the "FDA") and other
federal and state regulatory agencies. Such regulation encompasses pricing,
safety and efficacy, testing, advertising and promotion, labeling of
pharmaceutical products and other matters. Compliance with such regulations is
both costly and time consuming. In order to be legally marketed over-the-counter
("OTC"), a product must either be the subject of a New Drug Application ("NDA")
approved by the FDA, be the subject of an applicable FDA monograph designating
the product generally recognized as safe and effective or, if no FDA monograph
exists, the FDA may designate a product as "grandfathered" (i.e., the sale of
such product is permissible because of the safe use of such product or similar
products prior to December 5, 1975). ZILACTIN(R) and its family of products have
been "grandfathered" and a letter has been received by the Company from the FDA
confirming that status. ZILACTIN(R) is currently being marketed for the
symptomatic relief of canker sores (oral mucosal ulcers or lesions), cold sores,
and fever blisters. ZILACTIN(TM)-L (for the treatment of fever blisters and cold
sores before they erupt) is also marketed as a "grandfathered" product. Neither
of these products may be marketed as a treatment for genital herpes or herpes
zoster (commonly known as "shingles") without an effective new drug application.
Depending principally on the time and expense involved, NDAs seeking approval
for marketing ZILACTIN(R) and/or ZILACTIN(R)-L as topical applications for the
treatment of shingles and genital herpes may be filed by the Company. There can
be no assurance that any NDA will be filed with/or approved by the FDA. Any
challenge by the FDA of the Company's sale of or claims for ZILACTIN(R) would
materially adversely affect the business and prospects of the Company. The
Company is also seeking FDA and EU approval of OraTest(TM), an oral cancer
diagnostic. There can be no assurance that FDA or EU approval of OraTest(TM)
will be obtained.
Dependence on Key Personnel. The operations of the Company depend to a great
extent on the technical expertise and management efforts of Mr. Joseph Hines,
President of the Company, Mr. Clarence Baudhuin, Executive Vice President of the
Company, Mr. Edwin Pomerantz, Vice President of Regulatory and Technical
Affairs, Ms. Janice Backus, Vice President and Corporate Secretary, and Curtis
M. Rocca, III, President of Bio-Dental. The loss of Messrs. Hines, Baudhuin,
Rocca or Pomerantz or Ms. Backus could materially adversely affect the Company's
business. The Company maintains key person life insurance coverage on Messrs.
Hines, Baudhuin, [Rocca] and Pomerantz.
Litigation. In July 1995, one of Zila's subsidiaries, Bio-Dental Technologies
Corporation, was named as a defendant, along with Bio-Dental's transfer agent
and a shareholder of Bio-Dental ("Shareholder"), in a lawsuit. The lawsuit
alleges that Bio-Dental wrongfully failed to register 200,000 Bio-Dental shares
in the name of the plaintiffs which were pledged as security by the Shareholder
for a debt owed by the Shareholder to the plaintiffs. Bio-Dental denied all of
the material allegations of the lawsuit against it and has asserted various
affirmative defenses. In November 1996, Bio-Dental was granted a summary
judgment in which the court ruled in favor of Bio-Dental. The plaintiffs filed a
motion to reconsider the summary judgment ruling, which was
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denied by the court in January 1997. Having lost the summary judgment ruling and
later having this ruling upheld, the plaintiffs are in the process of filing an
appeal. Bio-Dental will continue to vigorously defend against the claims set
forth in the lawsuit. Bio-Dental accrued a contingent liability of $450,000 in
September 1996 because it believed a loss was probable at that time. This amount
was Bio-Dental's best estimate of the loss in the event the outcome of the
litigation was unfavorable to Bio-Dental. If the appeal is successful, it could
have an adverse impact on the Company.
Upon consummation of the Company's merger with Bio-Dental, each of the
outstanding shares of Bio-Dental common stock was converted into .825 shares of
the Company's Common Stock. Subsequent to the merger with Bio-Dental, the
Company's stock transfer agent was presented with a certificate purporting to
represent 220,000 shares of Bio-Dental common stock which did not appear on the
records of Bio-Dental's stock transfer agent as of the closing date. The Company
is currently investigating this matter and has not determined whether any shares
of the Company's common stock are required to be issued in exchange for the
shares purportedly represented by this certificate.
Possible Claims Relating to Products. The Company could be exposed to possible
claims for personal injury resulting from allegedly defective products
manufactured by third parties with which it has entered into manufacturing
agreements. The Company maintains product liability insurance coverage for
claims arising from the use of all its products. However, there can be no
assurance that the Company will not be subject to product liability claims in
excess of its insurance coverage. Any significant product liability claims not
within the scope of the Company's insurance coverage could have a material
adverse effect on the Company.
No Cash Dividends. Although the Company is not restricted in its ability to pay
cash dividends, the Company has never paid cash dividends on its Common Stock
and does not contemplate paying cash dividends in the foreseeable future.
Charter and Bylaw Provisions. The Company's Certificate of Incorporation, as
amended, and Bylaws contain provisions that limit or eliminate director
liability for certain actions. These provisions could, in some instances,
prevent redress by stockholders for certain actions taken by the Company's
directors.
Warrants and Options. As of April 30, 1997, 3,244,012 shares of Common Stock are
issuable upon the exercise of outstanding options and warrants to purchase
shares of Common Stock, including warrants to purchase 300,000 shares covered by
this Prospectus. For the life of such options and warrants, the option and
warrant holders will have the opportunity to profit from a rise in the price of
the Common Stock, with a resulting dilution in the interest of other holders of
the Common Stock. The existence of such options and warrants may adversely
affect the terms on which the Company can obtain additional financing. Further,
the warrant and option holders can be expected to exercise their warrants and
options at a time when the Company would, in all likelihood, be able to obtain
additional capital by an offering of its unissued Common Stock on terms more
favorable to the Company than those provided by such options and warrants.
12
<PAGE> 14
Shares Eligible for Future Sale. As of April 30, 1997, the Company had
32,257,648 shares of Common Stock outstanding. An additional 3,244,012 shares of
Common Stock are issuable upon exercise of outstanding options and warrants to
purchase Common Stock, including warrants to purchase 300,000 shares of the
Common Stock covered by this Prospectus. Such shares, subject to certain
limitations, may be available in the future for resale in the open market
pursuant to Rule 144 promulgated under the Securities Act, as amended or
pursuant to registration of such shares under the Securities Act. The foregoing
resales, if any, may have an adverse effect on the market price of the Common
Stock.
Possible Volatility of Common Stock Price. The market price for Common Stock has
fluctuated significantly in the past. Management of Zila believes that such
fluctuations may have been caused by announcements of new products, quarterly
fluctuations in the results of operations and other factors, including changes
in conditions of the pharmaceutical industry in general. Stock markets have
experienced extreme price volatility in recent years. This volatility has had a
substantial effect on the market prices of securities issued by Zila and other
pharmaceutical and health care companies, often for reasons unrelated to the
operating performance of the specific companies. Zila anticipates that the
market price for Common Stock may continue to be volatile.
Future Capital Requirements and Uncertainty of Future Funding; Dilutive and
Other Effects of Equity Line Agreement. The Company expects that its current
cash and cash equivalents and short-term investments will be sufficient to fund
the Company's operations through fiscal year 1998. In addition, the development
of the Company's products will require the commitment of substantial resources
to conduct the time-consuming research and development, clinical studies and
regulatory activities necessary to bring any potential product to market and to
establish production, marketing and sales capabilities. The Company may need to
raise substantial additional funds for these purposes. The Company may seek such
additional funding through collaborative arrangements and through public or
private financings, including equity financings. The issuance of the Common
Stock covered by this Registration Statement, as well as any additional equity
financing, if available, will be dilutive to stockholders, and any debt
financing, if available, may restrict the Company's ability to pay dividends on
its capital stock or the manner in which the Company conducts its business.
Under the terms of the Equity Line Agreement, the Company has secured an equity
line that allows the Company to raise up to $22 million from investors over a
13-month period beginning August 20, 1997. Other than this equity line, however,
the Company currently has no commitments for any additional financings, and
there can be no assurance that any such financings will be available to the
Company or that adequate funds for the Company's operations, whether from
financial markets, collaborative or other arrangements with corporate partners
or from other sources, will be available when needed or on terms attractive to
the Company. The inability to obtain sufficient funds may require the Company to
delay, scale back or eliminate some or all of its research and product
development programs, to limit the marketing of its products or to license third
parties the rights to commercialize products or technologies that the Company
would otherwise seek to develop and market itself.
While the equity line arrangement discussed above will help provide the Company
with additional future financing, the sale of Common Stock thereunder will have
a dilutive impact on other
13
<PAGE> 15
stockholders of the Company. As a result, the Company net income (loss) per
share could be materially decreased (increased) in future periods, and the
market price of the Common Stock could be materially and adversely affected. In
addition, the Common Stock to be issued under the Equity Line Agreement will be
issued at a discount to the then-prevailing market price of the Common Stock.
These discounted sales could have an immediate adverse effect on the market
price of the Common Stock. The Company also has an obligation to register the
Common Stock to be issued under the Equity Line Agreement on or before August
30, 1997; therefore, the Common Stock sold under the Equity Line Agreement will
generally be eligible for immediate resale, which could further adversely affect
the Company's stock price.
As a commitment fee to the equity line investors, the Company has issued the
Warrants exercisable over a three-year period for 300,000 shares of Common Stock
at an exercise price of $8.6125 per share. In the event the Company does not
sell $13 million of Common Stock pursuant to the Equity Line Agreement in a
specified period, the Company is obligated to issue additional Warrants
exercisable over a three year period for 250,000 shares of Common Stock. The
issuance and exercise of any such additional warrants would have a dilutive
effect on the Company's stockholders and could have an adverse effect on the
Company's stock price, as could the resale of the shares acquired thereunder.
The Equity Line will not be available under certain conditions which could
require the Company to seek funds from other sources (with the attendant risk
factors set forth in the preceding paragraph).
Potential Issuance of Preferred Stock. The Company's Board of Directors has the
authority, without any further vote by the Company's stockholders, to issue up
to 2,500,000 shares of Preferred Stock in one or more series and to determine
the designations, powers, preferences and relative, participating, optional or
other rights thereof, including without limitation, the dividend rate (and
whether dividends are cumulative), conversion rights, voting rights, rights and
terms of redemption redemption price and liquidation preference. Although the
Company has no current plans to issue any shares of Preferred Stock, the rights
of the holders of Common Stock would be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. Issuance of Preferred Stock could have the effect of delaying,
deterring or preventing a change in control of the Company, including the
imposition of various procedural and other requirements that could make it more
difficult for holders of Common Stock to effect certain corporate actions,
including the ability to replace incumbent directors and to accomplish
transactions opposed by the incumbent Board of Directors.
Environment and Controlled Use of Hazardous Materials. The Company is subject to
federal, state and local laws and regulations governing the use, generation,
manufacture, storage, discharge, handling and disposal of certain materials and
wastes used in its operations, some of which are classified as "hazardous."
There can be no assurance that the Company will not be required to incur
significant costs to comply with environmental laws and regulations as its
research activities are increased or that the operations, business and future
profitability of the Company will not be adversely affected by current or future
environmental laws and regulations. Although the company believes that its
safety procedures for handling and disposing materials comply with such laws and
regulations, the risk of accidental contamination or injury from these materials
cannot be eliminated.
14
<PAGE> 16
In the event of such an accident, the Company could be held liable for any
damages that result and any such liability could exceed the resources of the
Company.
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds of the offering of the Offered Securities will be received
directly by each Selling Securityholder. No proceeds will be received by the
Company from the sale of the Common Stock offered hereby. The exercise price of
the Warrant Shares to be received by the Company is $8.6125 per share. The
Company intends to use the proceeds from the exercise of the Warrants for
general working capital purposes.
Zila has not paid dividends on the Zila Common Stock. It is the present policy
of Zila's Board of Directors to retain future earnings to finance the growth and
development of Zila's business. Any future dividends will be at the discretion
of Zila's Board of Directors and will depend upon the financial condition,
capital requirements, earnings and liquidity of Zila as well as other factors
Zila's Board of Directors may deem relevant. Bio-Dental is a wholly-owned
subsidiary of Zila, Inc. and may from time to time declare and pay dividends to
Zila, Inc.
DETERMINATION OF OFFERING PRICE
This Prospectus may be used from time to time by the Selling Securityholders who
offer the Offered Securities registered hereby for sale. The offering price of
such shares of Common Stock will be determined by the Selling Securityholders
and may be based on market prices prevailing at the time of sale, at prices
relating to such prevailing market prices, or at negotiated prices.
SELLING SECURITYHOLDERS
The following table provides certain information with respect to the Common
Stock beneficially owned by the Selling Securityholders who are entitled to use
this Prospectus. The information in the table is as of the date of this
Prospectus. Other than as set forth below, no Selling Securityholder has had a
material relationship with the Company within the past three years other than as
a result of the ownership of Common Stock or as a result of entering into the
Equity Line Agreement.
Upon the completion of the offering and assuming the sale by the Selling
Securityholders of all the shares of Common Stock available for sale under this
Prospectus, none of the Selling Securityholders shall own more than 1% of the
outstanding Common Stock of the Company.
The Common Stock offered by this Prospectus may be offered from time to time by
the Selling Securityholders named below or their nominees:
16
<PAGE> 18
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
SHARES OWNED AFTER
SHARES AVAILABLE COMPLETION
NAME AND ADDRESS OF SELLING BENEFICIALLY WARRANTS FOR SALE UNDER OF THE
SECURITYHOLDER OWNED (1) THIS PROSPECTUS OFFERING
<S> <C> <C> <C> <C>
1 Deere Park Capital Management(1) 488,851 285,000 3,990,000 (2) 0
650 Dundee Road
Suite 460
Northbrook, Illinois 60062
2 Bartholomew Investment, L.P.(1) 25,729 15,000 210,000 (2) 0
1 Sioux Court
Justice, Illinois 60458
3 H.J. Meyers & Co., Inc. 12,500 0 12,500 0
180 Maiden Lane, 19th Floor
New York, New York 10038-4925
4 Taurus Financial Group, Ltd. 12,500 0 12,500 0
67 Wall Street, Ste 2411
New York, New York 10005
5 Egidio Cianciosi (3) (5) 313,479 (4) 0 238,479 75,000
c/o Cygnus Imaging
8240 E. Gelding
Suite 101
Scottsdale, Arizona 85260
6 James T. Jensen (3)(5) 7,949 0 7,949 0
c/o Cygnus Imaging
8240 Gelding
Suite 101
Scottsdale, Arizona 8520
7 Kenneth D. Kirk (5) 12,970 0 12,970 0
5107 E. Kings Ave.
Scottsdale, Arizona 85254
TOTAL 873,978 300,000 4,484,398 75,000
</TABLE>
(1) The Warrants were acquired by the Selling Securityholders pursuant to the
Private Equity Line of Credit Agreement as a commitment fee.
(2) Represents shares issued or to be issued pursuant to the terms of the Equity
Line Agreement. Deere Park and Bartholomew may reallocate the number of shares
between them.
(3) Egidio Cianciosi is President of Cygnus Imaging, a wholly-owned subsidiary
of Zila, Inc. James T. Jenson is an employee of Cygnus Imaging.
(4) Includes 75,000 shares issuable upon the exercise of options; 25,000 shares
vest on each of April 4, 1998,
17
<PAGE> 19
1999 and 2000.
(5) The shares set forth in the "Shares Available for Sale Under this
Prospectus" column were acquired by the Selling Securityholders in connection
with the acquisition of Cygnus Imaging by Zila, Inc. on April 4, 1997.
18
<PAGE> 20
PLAN OF DISTRIBUTION
The Selling Securityholders have advised the Company that during such time as
the Selling Securityholders may be engaged in the attempt to sell Common Stock
registered hereunder, it will cause to be furnished to each person to whom
Common Stock included herein may be offered, and to each broker-dealer, if any,
through whom Common Stock is offered, such copies of this Prospectus, as
supplemented or amended, as may be required by such person.
To the extent required pursuant to Rule 424 under the Securities Act, a
Prospectus Supplement will be filed with the Securities and Exchange Commission
with respect to a particular offering setting forth the terms of any offering,
including the name or names of any underwriters or agents, if any, any
underwriting discounts and other items constituting underwriters' compensation,
the offering price and any discounts or concessions allowed or reallowed or paid
to dealers. Any offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in a sale, shares of Common Stock will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Common
Stock may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Common Stock to be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters, will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Common
Stock will be subject to conditions precedent, and the underwriters will be
obligated to purchase all of the Common Stock if any is purchased.
If dealers are utilized in the sale of Common Stock in respect of which this
Prospectus is delivered, the Selling Securityholders will sell such Common Stock
to the dealers as principals. The dealers may then resell such Common Stock to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in a Prospectus Supplement relating thereto.
If an agent is used, the agent will be named, and the terms of the agency and
any commissions will be set forth in a Prospectus Supplement relating thereto.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best-efforts basis for the period of its appointment.
Common Stock may be sold directly by the Selling Securityholders to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales, including the terms of any bidding or auction process, will
be described in the Prospectus Supplement relating thereto.
19
<PAGE> 21
Agents, dealers and underwriters may be entitled under agreements entered into
with the Selling Securityholders to indemnification against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
or the Selling Securityholder in the ordinary course of business.
The Company will bear all costs and expenses of the registration of the Offered
Securities under the Securities Act and certain state securities laws. The
Selling Securityholders will pay any transaction costs associated with effecting
any sales that occur.
The Selling Securityholders are not restricted as to the price or prices at
which it may resell Warrant Shares acquired upon the exercise of the Warrants.
Such resales may have an adverse effect on the market price of the Common Stock.
Moreover, the Selling Securityholders are not restricted as to the Common Stock
which could be sold at the same time, which also may have an adverse effect on
the market price of the Common Stock.
The Company has agreed to indemnify the Selling Securityholders against certain
civil liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for the
Company by Streich Lang, P.A., Phoenix, Arizona.
EXPERTS
The financial statements of the Company and its consolidated subsidiaries,
except Bio-Dental, as of July 31, 1996 and 1995, and for each of the three years
in the period ended July 31, 1996, incorporated in this prospectus by reference
from Zila Inc.'s Current Report on Form 8-K dated July 18, 1997, have been
audited by Deloitte & Touche LLP, as stated in their report, which is
incorporated herein by reference. The financial statements of Bio-Dental
(consolidated with those of the Company and not presented separately) as of
March 31, 1995, and for the eight months ended March 31, 1996 and for each of
the three years in the period ended March 31, 1996, have been audited by Grant
Thornton LLP, as stated in their report incorporated herein by reference. Such
financial statements of the Company and its consolidated subsidiaries are
incorporated herein in reliance upon the respective reports of such firms given
upon their authority as experts in accounting and auditing. All of the foregoing
firms are independent auditors.
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from Zila Inc.'s Annual
Report on Form 10-K for the year ended July 31, 1996, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
20
<PAGE> 22
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
-------------
TABLE OF CONTENTS
Page
Available Information..........................
Incorporation of Certain
Documents by Reference.......................
Prospectus Summary.............................
Recent Developments..............................
Risk Factors...................................
Use of Proceeds................................
Determination of Offering Price................
Selling Securityholders........................
Plan of Distribution...........................
Legal Matters..................................
Experts........................................
Material Changes...............................
ZILA, INC.
4,484,398 SHARES
$0.001 PAR VALUE
PROSPECTUS
____________, 1997
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses of the
Company in connection with the offering described in the Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $9,975
Legal Fees and Expenses.......................................... 12,000*
Accounting Fees and Expenses..................................... 5,000*
Other Expenses................................................... 2,500*
------
Total Expenses......................................... $29,475
=======
</TABLE>
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 11 of the Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), limits, to the full extent permitted by
Delaware law, directors' personal liability to the Company or its stockholders
for monetary damages for breach of fiduciary duty. Section 102 of the Delaware
General Corporation Law, as amended, enables a corporation to eliminate or limit
personal liability of members of its board of directors for violations of their
fiduciary duty of care. However, Delaware law does not permit the elimination of
a director's liability for breaching his duty of loyalty, failing to act in good
faith, engaging in intentional misconduct, knowingly violating a law, unlawfully
paying a dividend or approving a stock repurchase or obtaining an improper
personal benefit. The limitation of liability provided by the statute continues
after a director has ceased to occupy such position. The statute has no effect
on the availability of equitable remedies, such as an injunction or rescission,
for breach of fiduciary duty.
Article X of the Company's Bylaws requires indemnification of directors and
officers of the Company to the full extent permitted by Delaware law for claims
against them in their official capacities, including stockholders' derivative
actions. Article X requires that the Company advance expenses incurred in the
defense of such claims and continue the right of indemnification for persons who
have ceased to be directors or officers, and permits the Company to enter into
indemnification agreements with its directors and officers.
Section 145 of the Delaware General Corporation Law, as amended, applies to
the Company and provides for the indemnification of officers and directors in
specified instances. It permits a corporation, pursuant to a bylaw provision in
an indemnity contract, to pay an officer's or director's litigation expenses in
advance of a proceeding's final disposition, and provides that rights arising
II-1
<PAGE> 24
under an indemnity agreement or bylaw provision may continue as to a person who
has ceased to be a director or officer.
The Company currently maintains directors' and officers' liability
insurance to supplement the protection provided in the Company's Certificate of
Incorporation and Bylaws and to fund any indemnification payments that the
Company may be required to make. Such insurance is renewable annually and is
subject to standard terms and conditions, including exclusions from coverage.
The above discussion is qualified in its entirety by reference to the
Company's Certificate of Incorporation and Bylaws. See Exhibits 3-A and 3-B to
this Registration Statement.
II-2
<PAGE> 25
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT Page Number
NUMBER Description Method of Filing
<S> <C> <C>
3-A Certificate of Incorporation, as amended Incorporated by reference to Exhibit 3-A of the
Company's Annual Report on Form 10-K for
the fiscal Year ended July 31, 1988. (the "1988
10-K")
3-B Bylaws Incorporated by reference to Exhibit 3-B
of the 1988 10-K.
4-C Specimen Common Stock Certificate Incorporated by reference to Exhibit 4-A
of the 1988 10-K.
4-D Specimen Warrant Certificate Incorporated by reference to Exhibit 4-C filed
with Amendment No. 2 to the Company's
Registration Statement on Form S-4, Registration
No. 33-19647.
10-A Private Equity Line of Credit Agreement *
between Deere Park Capital Management and
Zila, Inc., dated as of April 30, 1997
10-B Amendment to Private Equity Line of Credit
Agreement, dated as of _____________
10-C Registration Rights Agreement dated as of *
May 9, 1997 between Zila, Inc. and Deere
Park Capital Management
10-D Registration Rights Agreement dated as of *
May 9, 1997 between Zila, Inc. and
Bartholomew Investment, L.P.
10-E Deere Park Capital Management Warrant *
10-F Bartholomew Investment, L.P. Warrant
10-G Merger Agreement dated as of April 3, 1997 *
among Zila, Inc., Cygnus Imaging, Inc.,
Cygnus Merger Corporation, and Egidio
Cianciosi, James Jenson and Kenneth Kirk
5-A Opinion of Streich Lang, P.A. as to the *
legality of securities being registered
23-A Consent of Deloitte & Touche LLP *
23-B Consent of Deloitte & Touche LLP *
23-C Consent of Grant Thornton LLP *
23-D Consent of Streich Lang, P.A. See Exhibit 5-A
24-A Power of Attorney of Joseph Hines
24-B Power of Attorney of Clarence J. Baudhuin *
24-C Power of Attorney of Patrick M. Lonergan *
24-D Power of Attorney of Michael S. Lesser *
24-E Power of Attorney of Carl A. Schroeder *
</TABLE>
II-3
<PAGE> 26
24-F Power of Attorney of Curtis M. Rocca III *
24-G Power of Attorney of Douglas L. Ayer *
* Filed herewith.
II-4
<PAGE> 27
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii)To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (1)(I) and (1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be
II-5
<PAGE> 28
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Zila, Inc.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix and State of Arizona on July 18, 1997.
ZILA, INC., a Delaware corporation
By /s/ Clarence J. Baudhuin
--------------------------------------
Clarence J. Baudhuin
Executive Vice President of Finance
and Administration, Treasurer and
Director (Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Joseph Hines Chairman of the Board, President, July 18, 1997
- ------------------------------------------- Chief Executive Officer
Joseph Hines
/s/ Clarence J. Baudhuin Executive Vice President of Finance July 18, 1997
- ------------------------------------------- and Administration,
Clarence J. Baudhuin Treasurer and Director
* Director July 18, 1997
- -------------------------------------------
Curtis M. Rocca III
* Director July 18, 1997
- -------------------------------------------
Patrick M. Lonergan
* Director July 18, 1997
- -------------------------------------------
Carl A. Schroeder
* Director July 18, 1997
- -------------------------------------------
Douglas L. Ayer
</TABLE>
S-1
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
* Director July 18, 1997
- -------------------------------------------
Michael S. Lesser
</TABLE>
*By /s/ Clarence J. Baudhuin
- --------------------------------------------------
Clarence J. Baudhuin
Attorney-in-Fact
<PAGE> 1
STREICH
LANG
Phoenix Office a Professional Association
Renaissance One Attorneys
Two North Central
Phoenix, Arizona 85004-2391
602 229-5200
Fax: 602 229-5690
July 18, 1997 Writer's Direct Line:
(602) 229-5509
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Zila, Inc.
Ladies and Gentlemen:
This firm is counsel for Zila, Inc., a Delaware corporation (the
"Company"). As such, we are familiar with the Certificate of Incorporation and
Bylaws of the Company. We have also acted as counsel for the Company with
respect to certain matters in connection with the preparation of a Registration
Statement on Form S-3 registering 4,484,398 shares of Common Stock, $.001 par
value (the "Shares") under the Securities Act of 1933. In addition, we have
examined such documents and undertaken such further inquiry as we consider
necessary for rendering the opinion hereinafter set forth below.
Based upon the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware.
2. The Shares, when issued, will be duly and validly issued, fully-paid and
nonassessable.
We acknowledge that we are referred to under the heading "Legal Matters" of
the Prospectus which is part of the Registration Statement, and we hereby
consent to the use of our name in such Registration Statement. We further
consent to the filing of this opinion as Exhibit 5-A to the Registration
Statement and with the state regulatory agencies in such states as may require
such filing in connection with the registration of the Shares for offer and sale
in such states.
Very truly yours,
/s/ Kevin J. Tourek
Kevin J. Tourek
FOR THE FIRM
EXHIBIT 5-A
<PAGE> 1
EXHIBIT 10-A
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
DEERE PARK CAPITAL MANAGEMENT
And
ZILA, INC.
Dated as of April 30, 1997
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of April 30, 1997 (the
"Agreement"), among DEERE PARK CAPITAL MANAGEMENT, a limited liability company
organized and existing under the laws of the State of Illinois (the "Investor
Agent"), BARTHOLOMEW INVESTMENT, L.P., an Illinois limited partnership (together
with the Investor Agent, the "Investors"), and ZILA, INC., a corporation
organized and existing under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investors, and the
Investors shall purchase from the Company, from time to time as provided herein,
the Company's Common Stock, par value $.001 per share (the "Common Stock"), for
an aggregate purchase price of up to $25,000,000; and
WHEREAS, except as otherwise provided in this Agreement, such investments
will be made in reliance upon the provisions of Section 4(2) promulgated by the
Securities and Exchange Commission ("SEC") under the United States Securities
Act of 1933, as amended (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in Common Stock to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Call." See Section 2.3.
Section 1.2 "Call Date" or "Optional Purchase Date" shall mean the date the
Company draws down a portion of the subscription amount pursuant to Section 2.3.
Section 1.3 "Closing" shall mean the consummation of each purchase and sale
of Common Stock pursuant to Section 2.1.
<PAGE> 2
Section 1.4 "Closing Date" shall mean, with respect to each purchase and
sale of Common Stock pursuant to this Agreement, (i) with respect to the Initial
Shares, the fifth Trading Day following the Subscription Date and the third
Trading Day following the First Effective Date and the Second Effective Date,
respectively, and (ii) with respect to Optional Shares, an Optional Purchase
Date, provided in each case that all conditions to the applicable Closing have
been satisfied.
Section 1.5 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) August 30, 1997 or (ii) such earlier date as the Company
and the Investors may mutually agree, and expiring on the earlier to occur of
(x) the date on which the Investors shall have purchased Common Stock pursuant
to this Agreement for an aggregate Purchase Price of $25,000,000, (y) the date
this Agreement is terminated pursuant to Section 2.7, or (z) September 30, 1998.
Section 1.6 [intentionally left blank]
Section 1.7 "Equity Credit" shall mean the equity credit incurred by the
Company from the Investors as a result of the Repricing Events. See Section
2.1(b) and (c).
Section 1.8 "Equity Offerings" shall mean the issuance or sale by the
Company in a transaction exempt from or not subject to the registration
requirements of the Securities Act of any shares of Common Stock or securities
which are convertible into or exchangeable for its Common Stock or any warrants,
options or other rights to subscribe for or purchase its Common Stock or any
such convertible or exchangeable securities (other than shares of Common Stock
which may be issued upon exercise of options under the Company's employee or
director stock option plans, upon the conversion or exchange of convertible or
exchangeable securities or upon the exercise of warrants, or other rights, which
options, convertible or exchangeable securities, warrants or other rights are
outstanding on the date of execution and delivery of the Agreement and are
listed in the SEC Documents on file with the Commission as of the date of this
Agreement (other than the Warrants and the Additional Warrants) and other than
(x) shares of Common Stock which may be issued upon exercise of options granted
under such plans, (y) shares of Common Stock which may be issued upon exercise
of the Warrants, and (z) shares of Common Stock or securities which are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities issued in business combinations or strategic
corporate partnering transactions.)
Section 1.9 "Escrow Agent" shall mean, initially, the law firm of Morse,
Zelnick, Rose & Lander, 450 Park Avenue, New York, New York 10022-2605,
Attention: Kenneth Rose, or such other entity or individual mutually agreed to
by the Company and the Investor Agent.
Section 1.10 "Escrow Agreement" shall mean that certain Escrow Agreement of
even date herewith entered into among the Company, the Escrow Agent, the
Investor Agent and H.J. Meyers & Co., Inc., as the same may be amended from time
to time.
Section 1.11 The "Exchange Act". See Section 4.7.
<PAGE> 3
Section 1.12 "First Effective Date" shall mean the date on which the
Securities Exchange Commission declares effective the Registration Statement
pursuant to Section 3.2(a).
Section 1.13 "Initial Closing Date" shall mean the date upon which the
Closing of the purchase and sale of the Initial Shares shall occur.
Section 1.14 "Investment Amount" shall mean the amount required to be
invested by the Investors with respect to any Optional Purchase Date as notified
by the Company to the Investor Agent in accordance with Section 2.6 hereof.
Section 1.15 "Market Price" shall mean (i) with respect to sale of the
Initial Shares, the closing bid price (as reported by Bloomberg L.P.) of the
Company's Common Stock on the Trading Day immediately preceding the Subscription
Date and (ii) with respect to Repricing Events and sale of Optional Shares, the
average of the closing bid price (as reported by Bloomberg L.P.) of the
Company's Common Stock over the 10-Trading Day period following the First
Effective Date, the Second Effective Date, and the applicable Optional Purchase
Date.
Section 1.16 "Material Adverse Effect". See Section 5.5.
Section 1.17 "Optional Purchase Date" shall mean a Trading Day during the
Commitment Period on which the Company elects by delivery of an Optional
Purchase Notice pursuant to Section 2.6 to sell Common Stock to the Investors,
in conformity with the provisions of this Agreement.
Section 1.18 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.19 "Registration Rights Agreement". See Section 2.9.
Section 1.20 "Registration Statement". See Section 3.2(a).
Section 1.21 "Second Effective Date" shall mean the thirtieth (30th) day
(or, if such day is not a Trading Day, the first Trading Day thereafter) after
the First Effective Date.
Section 1.22 "Securities Act". See the introductory paragraphs hereof.
Section 1.23 "SEC Documents". See Section 5.2.
Section 1.24 "Subscription Date" shall mean April 30, 1997.
Section 1.25 "Trading Cushion" shall mean the mandatory 15 Trading Days
between Optional Purchase Dates.
<PAGE> 4
Section 1.26 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.27 "Warrants". See Section 2.9.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article III hereof), during
the Commitment Period the Company shall issue and sell to the Investors, and the
Investors shall purchase from the Company, Common Stock.
Section 2.2 Initial Purchase. (a) The Company agrees to sell and the
Investors agree to purchase that number of shares of Common Stock (the "Initial
Shares") determined by dividing $3,000,000 by 88% of the Market Price on the
Subscription Date. The Initial Shares will be subject to repricing as described
in Section 2.2(b) and (c).
(b) Fifty percent (50%) of the Initial Shares shall be subject to repricing
upon the First Effective Date. In the event the Market Price with respect to the
First Effective Date is lower than the Market Price on the Subscription Date,
the Company will be required with respect to such fifty percent (50%) of the
Initial Shares to issue additional shares of Common Stock to the Investors such
that the Investors shall receive an additional number of shares of Common Stock
equal to (i) the quotient of (x) One Million Five Hundred Thousand Dollars
($1,500,000) divided by (y) the number equal to 88% of the Market Price on the
First Effective Date less (ii) that number of shares of Common Stock equal to
fifty percent (50%) of the Initial Shares. In the event that the Market Price on
the First Effective Date is greater than the Market Price on the Subscription
Date, the Company will incur an Equity Credit with respect to the first fifty
percent (50%) of Initial Shares such that Investor shall be deemed to have
received excess shares (the "Equity Credit") of Common Stock in an amount
determined by subtracting (i) from that number equal to fifty percent (50%) of
the Initial Shares, (ii) the quotient of (x) One Million Five Hundred Thousand
Dollars ($1,500,000) divided by (y) the price equal to 88% of the Market Price
on the First Effective Date. Such credit will be applied first to shares subject
to repricing pursuant to Section 2.2(c) and then to shares purchased on any
Optional Purchase Date under this Agreement.
(c) The remaining fifty percent (50%) of the Initial Shares shall be
subject to repricing on the Second Effective Date. In the event the Market Price
on the Second Effective Date is lower than the Market Price on the Subscription
Date, the Company will be required with respect to such fifty percent (50%) of
the Initial Shares to issue additional shares of Common Stock to the Investors
such that the Investors shall receive an additional number of shares of Common
Stock equal to (i) the quotient of (x) One Million Five Hundred Thousand Dollars
($1,500,000) divided by (y) the number equal to 88% of the Market Price on the
Second Effective Date less (ii) that number of shares of Common Stock equal to
fifty percent (50%) of the Initial Shares. To the extent that there is an Equity
Credit arising from the repricing required pursuant to
<PAGE> 5
Section 2.2(b), such Equity Credit shall reduce the number of additional shares,
on a share for share basis, required to be issued to the Investors pursuant to
this Section 2.2(c).
In the event that the Market Price on the Second Effective Date is greater
than the Market Price on the Subscription Date, the Company will incur an Equity
Credit with respect to the second fifty percent (50%) of the Initial Shares to
be applied to Optional Shares to be issued to the Investors pursuant to this
Agreement. Such Equity Credit shall be in an amount determined by subtracting
(i) from that number equal to fifty percent (50%) of the Initial Shares, (ii)
the quotient of (x) One Million Five Hundred Thousand Dollars ($1,500,000)
divided by (y) the price equal to 88% of the Market Price on the Second
Effective Date.
Section 2.3. Optional Shares. (a) In addition to the purchase of the
Initial Shares pursuant to Section 2.2(a), the Investors agree to make
additional purchases of shares of Common Stock for up to Twenty-Two Million
Dollars ($22,000,000) in the aggregate (the "Optional Shares"). Each purchase of
such shares shall occur on an Optional Purchase Date. During the Commitment
Period, the Company will be obligated to draw down a minimum of Thirteen Million
Dollars ($13,000,000), including the Initial Shares commitment, from the full
subscription commitment of $25,000,000. The Company will have the option to set
the date of each draw down and the Investment Amount relating to such draw down
(each, a "Call"); provided, however, that under no circumstances will shares in
excess of 20% of the Company's currently outstanding shares be issued pursuant
to this Agreement and provided further that the average daily trading volume
over the course of the previous six months preceding each Call must be greater
than 75,000 shares per Trading Day as reported by Bloomberg L.P.
(b) The Company may in its sole discretion on any Optional Purchase Date
sell to the Investors the number of shares of Common Stock determined by
dividing the Investment Amount by the per share purchase price equal to 93% of
the Market Price on the Optional Purchase Date with respect to each Call
(provided, however, that in no event will such purchase price be greater than
150% of the Market Price on the Subscription Date). The Investment Amount
relating to each Call shall be determined by the Company, shall be in the
minimum amount of $200,000 and may be in increments of $10,000 in excess thereof
but shall not exceed $2,000,000. In addition, the Company shall not deliver an
Optional Purchase Notice until the expiration of an applicable Trading Cushion.
Notwithstanding the foregoing, the Company and the Investor Agent may by mutual
agreement from time to time provide for a greater Investment Amount per Call.
Section 2.4 [intentionally left blank]
Section 2.5 Closings.
(a) With respect to the sale of the Initial Shares (i) on or before the
Initial Closing Date, the Company shall deliver to the Escrow Agent for deposit
into escrow two or more certificates aggregating a total of 514,580 of shares of
Common Stock (based on the closing bid price as reported by Bloomberg L.P. of
6 5/8 on April 29, 1997) to be purchased by the Investors pursuant to Sections
2.2, registered in the names of the Investors as designated in writing by the
Investor Agent or, at the Investors' option,
<PAGE> 6
deposit such certificates into such account or accounts previously designated by
the Investor Agent and (ii) on or before the Initial Closing Date the Investor
Agent shall deliver or cause to be delivered to the Escrow Agent for deposit
into escrow the amount of $3,000,000 by wire transfer of immediately available
funds to the account provided for in the Escrow Agreement.
(b) With respect to repricing of the Initial Shares on the First and Second
Effective Dates, immediately following determination of the Market Price on the
First or Second Effective Dates, as applicable, the Company shall send a written
notice to the Investor Agent informing the Investor Agent of the applicable
Market Price, calculating the appropriate price per share in accordance with
Section 2.2(b) or (c) and setting forth the number of additional shares of
Common Stock to be delivered to the Investors or the amount of the Equity
Credit, as applicable in each case. Certificates for additional shares, if any,
shall be delivered to the Investor Agent within three (3) business days after
the notice is sent pursuant to written instructions of the Investor Agent
delivered to the Company.
(c) With respect to each Closing relating to Optional Shares (i)
concurrently with delivery of the Optional Purchase Notice to the Investor
Agent, the Company shall deliver to the Escrow Agent for deposit into escrow two
or more certificates representing the number of shares to be purchased by the
Investors pursuant to Section 2.3, provided, however, the number of shares
delivered pursuant to this clause (i) shall be determined based on the closing
bid price of the Company's Common Stock as reported by Bloomberg L.P. on the
Trading Day immediately preceding the date of the applicable Optional Purchase
Notice, such shares to be registered in the names of the Investors as designated
in writing by the Investor Agent or, at the Investors' option, deposited in such
account or accounts as previously designated by the Investor Agent, (ii) on or
before the Closing Date, the Investor Agent shall deliver to the Escrow Agent
for deposit into escrow the Investment Amount by wire transfer to the account
designated in the Escrow Agreement, (iii) concurrently with the delivery of the
Investment Amount by the Investors, the Escrow Agent shall be directed to
deliver the certificates representing the shares described in clause (i) to the
Investor Agent and release the Investment Amount to the Company, and (iv) upon
determination of the definitive number of shares to be sold to the Investors
with respect to the applicable Call in accordance with Section 2.3(b), if such
determination requires additional shares to be delivered to the Investors, the
Company shall immediately notify the Investor Agent and promptly cause the
issuance and delivery of certificates in the requisite number of shares to be
delivered to the Investor Agent in accordance with the Investor Agent's written
instructions and if such determination results in excessive shares having been
issued, the excess shall be deemed to constitute an Equity Credit to be applied
to subsequent Calls.
(d) In addition, on or prior to each Closing Date, each of the Company and
the Investor Agent shall deliver all documents, instruments and writings
required to be delivered or reasonably requested by either of them pursuant to
this Agreement in order to implement and effect the transactions contemplated
herein. Delivery of certificates to escrow shall occur three (3) business days
following the Subscription Date, the First or Second Effective Date or Call
Date, as applicable. Payment of funds to the Company shall occur out of escrow
on the business day following receipt of the related stock certificates,
concurrently with delivery of such certificates to the Investors. The 10-Trading
Day period applicable to a determination of Market Price with respect to any
Closing (other than the Initial Closing) shall not
<PAGE> 7
commence until all funds, certificates and other required documents, instruments
and writings have been deposited in escrow with the Escrow Agent or delivered to
the appropriate party, as provided herein.
Section 2.6 Mechanics of Exercise Relating to Optional Shares.
(a) Delivery of Optional Purchase Notice. At any time during the Commitment
Period following the Second Effective Date, the Company may deliver written
notices to the Investor Agent (each such notice hereinafter referred to as an
"Optional Purchase Notice") setting forth the Investment Amount, subject to the
limitations imposed by Sections 2.3 and 3.2 herein, which the Company proposes
to draw down. Any Optional Purchase Notice shall be revocable at the Company's
option. The Company may not deliver an Optional Purchase Notice to the Investor
Agent if the events described in Section 2.7 occur or if the conditions set
forth in Article III are not satisfied. If any of the events described in
Section 2.7 occur on or after the date on which an Optional Purchase Notice is
given, but prior to the closing of the transaction on the Closing Date
associated with such Optional Purchase Notice, or if the conditions set forth in
Article III are not satisfied as of the Closing Date (subject to any extension
as mutually agreed by the Company and the Investor Agent), such Optional
Purchase Notice shall be null, void and of no further force or effect.
(b) Date of Delivery of Optional Purchase Notice. An Optional Purchase
Notice shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor Agent if such notice is received prior to
5:00 P.M. Chicago time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 5:00 P.M. Chicago time. No Optional
Purchase Notice may be delivered or deemed delivered, on a day which is not a
Trading Day.
Section 2.7 Termination or Suspension of Investment Obligation. The
Investors shall not be required to purchase any shares of Common Stock from the
Company on any Closing Date nor may an Optional Purchase Notice be delivered at
any time during the Commitment Period that there shall exist any one or more of
the following: (i) the withdrawal of the effectiveness of the Registration
Statement, (ii) the Company's failure to satisfy in all material respects the
requirements in Section 3.2, or (iii) any failure or interruption in the
compliance in all material respects with the Company's covenants provided in
Article VI; provided, however that the obligation of the Investors to purchase
shares of Common Stock shall be terminated (including with respect to a Closing
Date which has not yet occurred) in the event that (x) there shall occur any
stop order or suspension of the effectiveness of the Registration Statement, for
any reason other than as a result of subsequent corporate developments which
would require such Registration Statement to be amended to reflect such event in
order to maintain its compliance with the disclosure requirements of the
Securities Act, or (y) the Company shall at any time fail to comply with the
requirements of Sections 6.3, 6.4, 6.5 or 6.6.
<PAGE> 8
Section 2.8 Intentionally left blank.
Section 2.9 Commitment Fee. (a) On the Initial Closing Date, the Company
will issue to the Investors two or more warrants, exercisable beginning six
months from the Subscription Date (collectively the "Warrant") and then
exercisable at any time over the following three year period, to purchase an
aggregate of 300,000 shares of Common Stock at a price equal to 130% of the
Market Price on the Subscription Date. The shares of Common Stock to be issued
upon exercise of the Warrant shall be registered for resale on the Registration
Statement referenced in Section 3.2(a) herein. The resale by the Investors of
Common Stock issuable upon exercise of the Warrant shall be subject to a
registration rights agreement (the "Registration Rights Agreement") to be
entered into between the Company and the Investors on the Initial Closing Date.
(b) In the event at least Ten Million Dollars ($10,000,000) is not drawn
down by the Company during the Commitment Period (exclusive of the Initial
Shares) pursuant to this Agreement, the Company shall issue an additional three
(3) year Warrant to the Investors to purchase an additional 250,000 shares in
the aggregate at the Market Price of the Company's Common Stock on the last
Trading Day of the Commitment Period. Such additional warrant shall be subject
to the same terms and conditions as the Warrant. Each of the Warrants shall be
in form and substance reasonably acceptable to the Company and the Investor
Agent. The Company agrees that a breach of its obligations under this Section
2.9(b) could cause the Investors irreparable injury and that monetary damages
may not be an adequate remedy for any such breach.. In the event of a breach or
threatened breach by the Company of this Section 2.9(b), the Company agrees that
the Investors are entitled to equitable relief in any court of competent
jurisdiction, including the remedy of specific performance, in addition to all
other remedies available to the Investor at law or in equity.
ARTICLE III
Conditions to Closing
Section 3.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
Common Stock to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investors' Representations and Warranties. The
representations and warranties of the Investors shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
Closing as though made at each such time.
(b) Performance by the Investors. The Investors shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investors at or prior to such Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent
<PAGE> 9
jurisdiction which, in the reasonable opinion of the Company and its legal
counsel, prohibits or materially adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced
which may have the effect of prohibiting or materially adversely affecting any
of the transactions contemplated by this Agreement.
Section 3.2 Conditions Precedent to the Right of the Company to Deliver an
Optional Purchase Notice and the Obligation of the Investors to Purchase Common
Stock. The right of the Company to deliver an Optional Purchase Notice and the
obligation of the Investors hereunder to acquire and pay for Common Stock
incident to a Closing for the sale and purchase of Optional Shares is subject to
the satisfaction, on the date of delivery of such Optional Purchase Notice and
on the applicable Closing Date (each a "Condition Satisfaction Date") of each of
the following conditions.
(a) Registration of the Common Stock with the SEC. The Company shall have
filed with the SEC a registration statement on Form S-3 (the "Registration
Statement") for the registration of the resale by the Investors of Common Stock
to be acquired pursuant to this Agreement (including Common Stock to be issued
upon exercise of the Warrants) under the Securities Act, which Registration
Statement shall have been declared effective by the SEC on the First Effective
Date, no later than August 30, 1997, and no stop order or suspension or
withdrawal of the effectiveness of or with respect to any such registration
statement or any other suspension of the use of any such registration statement
or related prospectus shall have been issued by the SEC or any state securities
commission during the Commitment Period; and the Company shall be in compliance
in all material respects with the terms of the Registration Rights Agreement.
(b) Effective Registration Statement. The Registration Statement shall have
previously become effective and shall remain effective on each Closing Date and
(i) neither the Company nor the Investors shall have received notice that the
SEC has issued or intends to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently, or intends or
has threatened to do so, and (ii) no other suspension of the use of the
Registration Statement or prospectus shall exist pursuant to the Registration
Rights Agreement.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Closing Date as though made at each such time
(except for representations and warranties specifically made as of a particular
date) with respect to all periods, and as to all events and circumstances
occurring or existing to and including each Closing Date.
(d) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Closing Date.
(e) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
or materially adversely affects any of the transactions contemplated by this
<PAGE> 10
Agreement, and no proceeding shall have been commenced which may have the effect
of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's most recent
SEC Document prior to the Subscription Date, no event which had or is reasonably
likely to have a Material Adverse Effect (as that term is defined in Section 5.5
hereof) has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock. The trading
of the Common Stock shall not have been suspended by the SEC, the Principal
Market or the National Association of Securities Dealers, Inc. (the "NASD") and
the Common Stock shall have been approved for listing or quotation on and shall
not have been delisted from the Principal Market. The issuance of shares of
Common Stock with respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the Principal Market.
(h) Legal Opinions. The Company shall have caused to be delivered to the
Investor Agent, (i) within five (5) Trading Days prior to the effective date of
the Registration Statement and (ii) to the extent provided by Section 3.3, an
opinion of the Company's independent counsel in form and substance reasonably
acceptable to the Investor Agent and its counsel, addressed to the Investors
stating, inter alia, that nothing shall have come to such counsel's attention
that causes such counsel to believe that the Registration Statement (if
applicable, as so amended by such SEC Document) contains an untrue statement of
material fact or omits a material fact required to make the statements contained
therein, not misleading or that the underlying prospectus (if applicable, as so
amended or supplemented) contains an untrue statement of material fact or omits
a material fact required to make the statements contained therein, in light of
the circumstances in which they were made, not misleading, except with respect
to the financial statements and the notes thereto and the schedules and other
financial and statistical data derived therefrom in the Registration Statement
or the Prospectus, as to which such counsel shall express no opinion; provided,
however, that in the event that such an opinion cannot be delivered by the
Company's independent counsel to the Investors, the Company shall promptly
revise the Registration Statement and shall not deliver an Optional Purchase
Notice. If an Optional Purchase Notice shall have been delivered in good faith
without knowledge by the Company that an opinion of independent counsel cannot
be delivered as required, the Company may postpone such Closing Date for a
period of up to five (5) Trading Days until such an opinion is delivered to the
Investors (or such Closing shall otherwise be canceled). In the event of such a
postponement, the Purchase Price of the Common Stock to be issued at such
Closing as determined pursuant of Section 2.2 or Section 2.3 shall be the lower
of such Purchase Price as calculated as of the originally scheduled Closing Date
and as of the actual Closing Date. The Company's independent counsel shall also
deliver to the Investors on the Initial Closing Date an opinion in form and
substance satisfactory to the Investor Agent and its counsel addressing, among
other things, corporate matters and the exemption from registration under the
Securities Act of the issuance of the Initial Shares by the Company to the
Investors under this Agreement.
(i) Officer's Certificate. The Company shall have delivered to the Investor
Agent, on each Closing Date, a certificate dated as of such Closing Date ,
executed by an executive officer of the Company and to the effect that all the
conditions to such Closing have been satisfied as at the date of each such
certificate.
<PAGE> 11
(j) Due Diligence. No dispute between the Company and the Investor Agent
shall exist pursuant to Section 3.3 as to the adequacy of the disclosures
contained in the Registration Statement.
(k) Other. On each Closing Date, the Investor Agent shall have received and
been reasonably satisfied with such other certificates and documents as shall
have been reasonably requested by the Investor Agent in order for the Investor
Agent to confirm the Company's satisfaction of the conditions set forth in
Section 3.2.
Section 3.3 Due Diligence Review. The Company shall make available for
inspection and review by the Investor Agent, advisors to and representatives of
the Investor Agent (who may or may not be affiliated with the Investor Agent),
any underwriter participating in any disposition of Common Stock on behalf of
the Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, NASD or other
filing, all financial and other records, all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by the Investor Agent or any such representative, advisor
or underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investor Agent and such representatives, advisors and underwriters
and their respective accountants and attorneys to conduct initial and ongoing
due diligence with respect to the Company and the accuracy of the Registration
Statement.
The Company shall not disclose non-public information to the Investors,
advisors to or representatives of the Investors unless prior to disclosure of
such information the Company identifies such information as being non-public
information and provides the Investors, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require the Investors' advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investors.
Nothing herein shall require the Company to disclose non-public information
to the Investors, their respective advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investors and underwriters, if any, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 3.3 shall be construed to mean that such
persons or entities other than the
<PAGE> 12
Investors (without the written consent of the Investors prior to disclosure of
such information) may not obtain non-public information in the course of
conducting due diligence in accordance with the terms of this Agreement and
nothing herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such persons or
entities, that the Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
in no event shall the Investors' advisors or representatives disclose to the
Investors the nature of the specific event or circumstances constituting any
non-public information discovered by such advisors or representatives in the
course of their due diligence (without the written consent of the Investors
prior to disclosure of such information).
The Investors' advisers or representatives shall make complete disclosure
to the Investors' independent counsel of all events or circumstances
constituting non-public information discovered by such advisors or
representatives in the course of their due diligence upon which such advisors or
representatives form the opinion that the Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in the light of the circumstances in which they were made,
not misleading. Upon receipt of such disclosure, the Investors' independent
counsel shall consult with the Company's independent counsel in order to address
the concern raised as to the existence of a material misstatement or omission
and to discuss appropriate disclosure with respect thereto. In the event after
such consultation the Investors' independent counsel believes that the
Registration Statement contains an untrue statement or a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, (x) the Company shall file with the SEC an
amendment to the Registration Statement responsive to such alleged untrue
statement or omission and provide the Investor, as promptly as practicable with
copies of the Registration Statement and related prospectus, as so amended, (y)
if the Company disputes the existence of any such material misstatement or
omission, (i) the Company's independent counsel shall provide the Investors'
independent counsel with an opinion stating that nothing has come to their
attention that would lead them to believe that the Registration Statement or the
related prospectus, as of the date of such opinion contains an untrue statement
of a material fact or omits a material fact required to be stated in the
Registration Statement or the related prospectus or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading and (ii) in the event the dispute relates to the adequacy
of financial disclosure and the Investors shall reasonably request, the
Company's independent auditors shall provide to the Company a letter outlining
the performance of such "agreed upon procedures" as shall be reasonably
requested by the Investors and the Company shall provide the Investors with a
copy of such letter, or (z) if the Company disputes the existence of any such
material misstatement or omission, and the dispute relates to the timing of
disclosure of a material event and the Company's independent counsel is unable
to provide the opinion referenced in clause (y) above to the Investors, then
this Agreement shall be suspended for a period of up to thirty (30) days, at the
end of which, if the dispute still exists between the Company's independent
counsel and the Investors' independent counsel, the Company shall either (i)
amend the Registration Statement as provided above, (ii) provide to the
Investors the Company's independent counsel opinion and a copy of the letter of
the Company's independent auditors referenced above, or (iii) this Agreement
shall be suspended for an additional period of up to thirty (30) days; provided,
however, that at
<PAGE> 13
the end of such sixty (60) day period, if the dispute still exists between the
Company's independent counsel and the Investor's independent counsel, the
Company shall either (i) amend the Registration Statement as provided above,
(ii) provide the Company's independent counsel opinion referenced above, or
(iii) the obligation of the Investors to purchase shares of Common Stock
pursuant to this Agreement shall terminate.
ARTICLE IV
Representations and Warranties of Investors
Each of the Investors represent and warrant to the Company that:
Section 4.1 Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 4.2 Sophisticated and Accredited Investor. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk. The Investor acknowledges that the Initial Shares to be
issued pursuant to this Agreement are "restricted securities" within the meaning
of the Securities Act and the rules and regulations promulgated thereunder and
may not be resold in the absence of an effective registration statement under
the Securities Act or an available exemption from the Securities Act
registration requirements.
Section 4.3 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.4 Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 4.5 Organization and Standing. The Investor Agent is a limited
liability company duly organized, validly existing, and in good standing under
the laws of Illinois. Bartholomew Investment, L.P. is a limited partnership duly
organized, validly existing and in good standing under the laws of Illinois.
Section 4.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions
<PAGE> 14
contemplated thereby, and compliance with the requirements thereof, will not
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on Investor, or the provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, or conflict with or constitute a material default
thereunder, or result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or require the approval
of any third-party (which has not been obtained) pursuant to any material
contract, agreement, instrument, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.
Section 4.7 Disclosure; Access to Information. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. Investor further
acknowledges that it understands that the Company is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Investor has reviewed or received copies of any such
reports that have been requested by it.
Section 4.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE V
Representations and Warranties of the Company
The Company represents and warrants to the Investors that:
Section 5.1 Company Status. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq National
Market.
Section 5.2 Current Public Information. The Company has furnished the
Investor Agent with true and correct copies of all registration statements,
reports and documents, including proxy statements (other than preliminary proxy
statements), filed with the SEC by or with respect to the Company since February
1, 1996, pursuant to the Securities Act or Exchange Act. All such registration
statements, reports and documents, together with those registration statements,
reports and documents filed pursuant to the Securities Act or Exchange Act
subsequent to the date of this Agreement are collectively referred to herein as
the "SEC Documents").
Section 5.3 No General Solicitation in Regard to this Transaction. Neither
the Company nor any of its affiliates nor any distributor or any person acting
on its or their behalf has conducted any general solicitation (as that term is
used in Rule 502(c) of Regulation D) with respect to any of the Common Stock,
<PAGE> 15
nor have they made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Common Stock under the Securities Act.
Section 5.4 Valid Issuance of Common Stock. As of the date of this
Agreement, the Company has authorized capitalization consisting of 50,000,000
shares of Common Stock, par value $.001 and 2,500,000 shares of Preferred Stock,
par value $.001. Stock options granted or reserved for issuance to employees and
directors of the Company are as described in the SEC Documents on file with the
Commission as of the date of this Agreement. As of April 29, 1997, there were
issued and outstanding 31,384,610 shares of Common Stock and no shares of
Preferred Stock were issued or outstanding as of such date. As of the date of
this Agreement, the Company has no other outstanding securities convertible into
Common Stock other than as described in the SEC Documents on file with the
Commission as of the date of this Agreement. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable. Upon issuance of the Common Stock to the
Investors pursuant to the terms of this Agreement, the Common Stock will be duly
and validly issued, fully paid and nonassessable, and the holders of outstanding
Common Stock of the Company are not and shall not be entitled to preemptive or
other rights afforded by the Company or other rights afforded by the Company to
subscribe for the capital stock or other securities of the Company as a result
of the sale of the Common Stock to the Investors hereunder.
Section 5.5 Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. Except as disclosed in the SEC
Documents and except for Cygnus Imaging, Inc., the Company does not have any
subsidiaries. The Company and each subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect. "Material Adverse Effect" means any
effect on the business, operations, properties, prospects, or financial
condition of the Company and which is material and adverse to the Company or to
the Company and such other entities controlling or controlled by the Company,
taken as a whole and/or any condition or situation which would prohibit or
otherwise interfere in any material respect with the ability of the Company to
enter into and perform its obligations under this Agreement.
Section 5.6 Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Common Stock and the Warrants, (ii) the execution, issuance and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required (other than such stockholder
approval as may be required by the standards imposed on companies listed on the
Nasdaq Stock Market with respect to issuances by such companies of greater than
20% of such companies' outstanding voting stock), (iii) this Agreement has been
duly executed and delivered by the Company and constitutes valid and binding
obligations of the Company enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other
<PAGE> 16
equitable principles of general application and (iv) the Common Stock issuable
in accordance with the terms of this Agreement or upon exercise of the Warrants
will be validly issued, fully paid and nonassessable.
Section 5.7 Corporate Documents. The Company has furnished or made
available or will furnish and make available prior to the Initial Closing Date
to the Investor Agent true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 5.8 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of Common Stock
and the Warrants do not and will not (i) result in a violation of the Company's
Certificate of Incorporation or By-Laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its subsidiaries is a party, or (iii) result in a
violation of any federal, state, local or foreign law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, in conflict with
or in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (iii), such representations and warranties
are made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of the Investors under or pursuant to any such foreign law, rule or
regulation). The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock or the Warrants in accordance with
the terms hereof (other than any SEC, NASD or state securities filings which may
be required to be made by the Company subsequent to any Closing, and any
registration statement which may be filed pursuant hereto and other than any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Nasdaq National Market referenced in Section 5.6); provided
that, for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.
Section 5.9 SEC Documents. The Company has delivered or made available to
the Investor Agent true and complete copies of the SEC Documents (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Investor Agent any information which, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof
<PAGE> 17
by the Company but which has not been so disclosed. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 5.10 No Material Adverse Effect. Since January 1, 1996, no Material
Adverse Effect has occurred or exists with respect to the Company or its
subsidiaries, except as disclosed in the SEC Documents filed prior to April 15,
1997, copies of which have been delivered or made available to the Investor
Agent prior to the date hereof.
Section 5.11 No Undisclosed Liabilities. The Company and its subsidiaries
have no liabilities or obligations which are material, individually or in the
aggregate, and are not disclosed in the SEC Documents or otherwise publicly
announced, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since the filing of the Company's most
recent SEC Document, and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company and upon any of its
subsidiaries.
Section 5.12 No Undisclosed Events or Circumstances. Since the filing of
the Company's most recent SEC Document, except for the matter of the Bio-Dental
stock certificates issue, a full and complete description of which has been
provided to the Investor Agent, no event or circumstance has occurred or exists
with respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the SEC Documents.
Section 5.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 5.14 Litigation and Other Proceedings. Except as may be set forth
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against
<PAGE> 18
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which could reasonably be expected to
have a Material Adverse Effect on the Company or which could reasonably be
expected to materially adversely affect the transactions contemplated by this
Agreement. Except as set forth in the SEC Documents no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which could
reasonably be expected to result in a Material Adverse Effect on the Company or
which could reasonably be expected to materially adversely affect the
transactions contemplated by this Agreement.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Registration Rights Agreement shall
remain in full force and effect and the Company shall comply in all respects
with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue shares of its Common
Stock incident to the Closings and incident to the exercise of the Warrants;
such amount of shares of Common Stock to be reserved to be calculated based upon
the minimum purchase price therefor under the terms of this Agreement, and
assuming the full exercise of the Warrants. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder and the
number of shares so reserved shall be increased to reflect (a) potential
increases in the Common Stock which the Company may thereafter be so obligated
to issue by reason of adjustments to the purchase price therefore and the
issuance of the Warrants and (b) stock splits and stock dividends and
distributions.
Section 6.3 Listing of Common Stock. The Company hereby agrees to maintain
the listing of the Common Stock on a Principal Market, and as soon as
practicable but in any event prior to the commencement of the Commitment Period
to list the additional shares of Common Stock issuable under this Agreement
(including Common Stock issuable upon exercise of the Warrant). The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Principal Market, it will include in such application the Common Stock
issuable under this Agreement (including Common Stock issuable upon exercise of
the Warrant), and will take such other action as is necessary or desirable to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company shall undertake its best efforts to obtain the
shareholder approval referenced in Section 5.6 required for the issuance of
Common Stock under this Agreement within such time period as shall not at any
time preclude the Company from providing an Optional Purchase Notice for the
maximum Investment Amount provided by Section 2.2.
Section 6.4 Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting
<PAGE> 19
and filing obligations under said Act, and will not take any action or file any
document (whether or not permitted by said Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said Act. The Company will take all action to
continue the listing and trading of its Common Stock on the Principal Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal Market.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
issued to the Investors at each Closing after the First Effective Date and upon
the exercise of the Warrants, subject to the continued effectiveness of the
appropriate registration statement, shall be free of legends, so-called "stop
transfer," or "stock transfer restrictions," or other restrictions upon transfer
by the Investors to a bona fide third party which is not an affiliate of the
Company. Notwithstanding the absence or such legends or restrictions, the
Investors agree to comply with Securities Act prospectus delivery requirements
in any sale of Common Stock not made in compliance with Rule 144 or another
available exemption. Immediately following the First Effective Date, the
Investors shall have the right to surrender certificates representing the
Initial Shares in exchange for new certificates free of legends, "stop transfer"
or "stock transfer restrictions," of other restrictions upon transfer, and the
Company agrees to perform whatever acts are reasonably necessary to facilitate
such exchange on a timely basis.
Section 6.6 Corporate Existence. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company will furnish to the
Investor Agent upon request copies of all SEC Documents furnished or submitted
to the SEC.
Section 6.8 "Blackout Period." (a) The Company will immediately notify the
Investor Agent upon the occurrence of any of the following events in respect of
a registration statement or related prospectus in respect of an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
which makes any statement made in the registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the registration statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (vi) the Company's
reasonable determination that a post-
<PAGE> 20
effective amendment to the registration statement would be appropriate; and the
Company will promptly make available to the Investor any such supplement or
amendment to the related prospectus. The Company shall not deliver to the
Investor any Optional Purchase Notice during the continuation of any of the
foregoing events.
Section 6.9 Expectations Regarding Optional Purchase Notices. Within 10
days after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify the
Investor Agent as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance of
Optional Purchase Notices. Such notification shall constitute only the Company's
good faith estimate and shall in no way obligate the Company to raise such
amount, or any amount, or otherwise limit its ability to deliver Optional
Purchase Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor Agent at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.10 Penalties for Failure to Obtain or Maintain Effectiveness of
Registration Statements. In the event the Company fails to obtain the
effectiveness of a Registration Statement on or before August 30, 1997 as set
forth in Section 3.2(a), the Company shall pay to the Investor Agent for the
benefit of the Investors at the end of each thirty (30) day period following the
date by which such Registration Statement was required to have been declared
effective, in cash, an amount equal to $60,000 for the first 30 days such
registration is not declared effective, pro-rated on a daily basis, and $90,000
per each 30-day period thereafter, pro-rated on a daily basis. Notwithstanding
the foregoing, the date by which a Registration Statement is required to become
effective shall be extended for up to sixty (60) days (that is, up to October
30, 1997) in the event that the failure to obtain the effectiveness of a
Registration Statement by August 30, 1997 results solely from the SEC's
disapproval of the structure of the transactions contemplated by this Agreement.
In such event, the parties agree to cooperate with one another in good faith to
arrive at a resolution acceptable to the SEC and the parties hereto.
ARTICLE VII
Legends
Section 7.1 Legends. The Initial Shares and each Warrant will bear the
following legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
<PAGE> 21
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock coterminous with the Company's appointment
of any such substitute or replacement transfer agent) irrevocable instructions.
Such instructions shall be irrevocable by the Company from and after the date
hereof or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time upon transfer of Common Stock by the Investors to
issue certificates evidencing Common Stock free of the Legend during the
following periods and under the following circumstances and without consultation
by the transfer agent with the Company or its counsel and without the need for
any further advice or instruction or documentation to the transfer agent by or
from the Company or its counsel or the Investor:
(a) At any time after the First Effective Date: (i) incident to any Closing
or other issuance of shares of Common Stock; (ii) incident to the exercise of
any Warrant; or (iii) upon any surrender of one or more certificates evidencing
Common Stock which bear the Legend, to the extent accompanied by a notice
requesting the issuance of new certificates free of the Legend to replace those
surrendered; and
(b) At any time upon any surrender of one or more certificates evidencing
Common Stock which bear the Legend, to the extent accompanied by a notice
requesting the issuance of new certificates free of the Legend to replace those
surrendered and containing representations that (i) the Investor has a bona fide
intention to dispose of such Common Stock pursuant to Rule 144 under the
Securities Act or is otherwise permitted to dispose thereof without limitation
as to amount or manner of sale pursuant to Rule 144(k) under the Securities Act;
or (ii) the Investor has sold, pledged or otherwise transferred or agreed to
sell, pledge or otherwise transfer such Common Stock in a manner other than
pursuant to an effective registration statement, to a transferee who will upon
such transfer be entitled to freely tradeable securities; provided that in
connection with an event described in clause (i) or (ii), the transfer agent
shall be entitled to receive an opinion of counsel to the Investor that in such
circumstances the Legend may be removed and that the transferee (provided that
such transferee is not an affiliate of the Company) shall be entitled to hold
freely tradeable securities.
Section 7.2 No Other Legend or Stock Transfer Restrictions. No Legend has
been or shall be placed on the share certificates representing the Common Stock
and no instructions or "stop transfers," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article VII.
Section 7.3 Investors' Compliance. Nothing in this Article VII shall affect
in any way the Investors' obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
Section 7.4 Covenants of the Investors. During the term of this Agreement
(i) the Investors' trading activities with respect to shares of the Company's
Common Stock will be in compliance with all applicable state and federal
securities laws, rules and regulations and rules and regulations of the
Principal Market on
<PAGE> 22
which the Company's Common Stock is listed, and (ii) the Investor will not
engage in short sales of the Company's Common Stock.
ARTICLE VIII
Other Issuances of Common Stock
Section 8.1 Antidilution Prohibition. Except with the prior written consent
of the Investor Agent which consent shall not unreasonably be withheld, the
Company may not at any time within the time period commencing from the
Subscription Date to the last day of the Commitment Period, issue shares of
Common Stock without consideration (other than in the form of a dividend) at a
price per share less than the daily low trading price on the date of issue,
issue options, rights or warrants to subscribe for or purchase Common Stock (or
securities convertible into Common Stock) without consideration or at a price
per share (or having a conversion price per share, if a security convertible
into Common Stock) less than the daily low trading price of the Common Stock on
the date of issue, or in the case of securities convertible into Common Stock
having a conversion price less than the daily low trading price of the Common
Stock on the date of conversion. The foregoing prohibition shall not apply to
the issuance of shares of Common Stock which may be issued upon exercise of
options under the Company's employee or director stock option plans, upon the
conversion or exchange of convertible or exchangeable securities or upon the
exercise of warrants, or other rights, which options, convertible or
exchangeable securities, warrants or other rights are outstanding on the date of
execution and delivery of this Agreement and are listed in the SEC Documents on
file with the Commission as of the date of this Agreement.
ARTICLE IX
Choice of Law and Venue, Waiver of Jury Trial
Section 9.1 Choice of Law; Submission to Jurisdiction. THIS AGREEMENT SHALL
BE CONSTRUED UNDER THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties hereby agree that
all actions or proceedings arising directly or indirectly from or in connection
with this Agreement shall, at the option of either party, be litigated only in a
state or federal court located in the City of Chicago, Cook County, Illinois.
The parties consent to the jurisdiction and venue of the foregoing court and
consent that any process or notice of motion or other application to said court
or a judge thereof may be served inside or outside the State of Illinois by
registered mail, return receipt requested, directed to the party for which it is
intended at its address set forth in this Agreement (and service so made shall
be deemed complete five (5) days after the same has been posted as aforesaid) or
by personal service or in such other manner as may be permissible under the
rules of said court.
<PAGE> 23
ARTICLE X
Assignment; Entire Agreement, Amendment; Termination
Section 10.1 Assignment. Neither this Agreement nor any rights of the
Investors or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common Stock held by such person, and (b) the Investors' interest in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any affiliate of any Investor) upon the prior written
consent of the Company, which consent shall not to be unreasonably withheld.
Section 10.2 Entire Agreement, Amendment. This Agreement, the Registration
Rights Agreement, and the other documents delivered or to be delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
Section 10.3 Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the names of the Investors without
their consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
<PAGE> 24
ARTICLE XI
Notices, Etc.; Cost and Expenses; Indemnification
Section 11.1 Notices, Etc. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: Zila, Inc., 5227 North 7th Street, Phoenix, AZ 85014-2800;
Attention: Mr. Joseph Hines, Facsimile No.: (602) 234-2318, with copies (which
shall not constitute notice) to: Squire, Sanders & Dempsey L.L.P., 40 N. Central
Ave., Phoenix, AZ 85004, Attention: Christopher D. Johnson, Facsimile No.:
(602)253-8129; H.J. Meyers & Company, Inc., 180 Maiden Lane, New York, New York
10038, Attention: Tom Parigian, Facsimile No.: (212)248-4241; and (ii) if to the
Investors, to Deere Park Capital Management, 650 Dundee Road, Suite 460,
Northbrook, Illinois 60062, Attention: Douglas A. Gerrard, Facsimile No.: (847)
509-8529 and Bartholomew Investment, L.P., 1 Sioux Court, Justice, IL 60458,
Facsimile No.: (847)509-8529, with copies (which shall not constitute notice) to
Ungaretti & Harris, 3500 Three First National Plaza, Chicago, IL 60602;
Attention: Gary I. Levenstein, Esq., Facsimile No.: (312)977-4108. Notice shall
be deemed given on the date of service or transmission if personally served or
transmitted by telegram, telex or facsimile. Notice otherwise sent as provided
herein shall be deemed given on the third business day following the date mailed
or on the second business day following delivery of such notice by a reputable
air courier service.
Section 11.2 Indemnification.
(a) Indemnification of Investors. The Company agrees to indemnify and hold
harmless the Investor and each person, if any, who controls the Investor within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto), including
any prospectus, or in any offering circular or other document, as applicable, or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statement therein not misleading or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in any prospectus (or any amendment or supplement thereto), or in
any offering circular or other document, as applicable, or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any
<PAGE> 25
such statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 11.3(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Investors), reasonably
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i ) or (ii) above; provided, however, that
this indemnity shall not apply to any loss, liability, claim, damage or expense
to the extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Company by the Investor expressly for use in the
Registration Statement (or any amendment thereto), including any prospectus (or
any amendment or supplement thereto), or in any offering circular or other
document, as applicable.
(b) Indemnification of Company. The Investors agree to indemnify and hold
harmless the Company its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all loss, liability, claim, damage and expense described in
the indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including any prospectus (or any amendment or supplement thereto), or in
offering circular or other document, as applicable, in reliance upon and in
conformity with written information furnished to the Company by the Investors
expressly for use in the Registration Statement (or any amendment or supplement
thereto) or in any offering circular or other document, as applicable.
(c) Action against Parties; Notification. Each indemnified party shall give
notice as promptly as reasonably practicable to each indemnifying party of any
action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of his indemnity
agreement. In the case of parties indemnified pursuant to Section 11.3(a) above,
counsel to the indemnified parties shall be selected by the Investor, and in the
case of parties indemnified pursuant to Section 11.3(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with he
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnifies parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry or any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or
<PAGE> 26
contribution could be sought under this Section or Section 11.4 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnifies part form all liability arising out of such litigation ,
investigation proceeding or claim and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of an any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for the fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 11.3(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 11.4 Contribution. If the indemnification provided for in Section
11.3 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to herein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Investors on the other hand from the offering of the Common Stock
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Investors on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Investors on the other hand in connection with the offering of the Common Stock
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Common Stock
pursuant to this Agreement (before deducting expenses) received by the Company
and the total net proceeds received by the Investors (before deducting expenses)
bear to the aggregate public offering price.
The relative fault of the Company on the one hand and the Investors on the
other hand shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Investors and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and equitable
if contribution pursuant to this Section 11.4 were determined on a pro-rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 11.4. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to
<PAGE> 27
above in this Section 11.4 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 11.4, the Investors shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Common Stock purchased by it and resold to the public
exceeds the amount of any damages which the Investors have otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 11.4, each person, if any, who controls the
Investors within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act shall have the same rights to contribution as such
Investors, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Company.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument.
Section 12.2 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. The indemnity and contribution agreements contained in Sections 11.3
and 11.4 hereof shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or of the Commitment Period, (ii) any
investigation made by or on behalf of any indemnified party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Common Stock. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 12.3 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.4 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for
<PAGE> 28
the purposes of this Agreement shall be Bloomberg L.P. or any other reputable
pricing service chosen by the Investor and reasonably acceptable to the Company.
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized offices as of the date hereof.
DEERE PARK CAPITAL MANAGEMENT ZILA, INC.
By: By:
Its Its
BARTHOLOMEW INVESTMENT, L.P.
By:
Its
<PAGE> 1
EXHIBIT 10-B
AMENDMENT
TO
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
AMENDMENT TO PRIVATE EQUITY LINE OF CREDIT AGREEMENT, dated as of
______________, 1997 ("Amendment"), among DEERE PARK CAPITAL MANAGEMENT, an
Illinois limited liability company (the "Investor Agent"), BARTHOLOMEW
INVESTMENT, L.P., an Illinois limited partnership (together with the Investor
Agent, the "Investors"), and ZILA, INC., a Delaware corporation (the "Company").
R E C I T A L S:
A. The parties have heretofore entered into that certain Private
Equity Line of Credit Agreement dated as of April 30, 1997 (the "Credit
Agreement").
B. The parties desire to amend the Credit Agreement for the
purpose of clarification, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENTS. The Credit Agreement is hereby amended as follows:
(a) SECTION 1.4 is hereby amended in its entirety to read
as follows:
Section 1.4 "Closing Date" shall mean, with respect
to each purchase and sale of Common Stock pursuant to this
Agreement, (i) with respect to the Initial Shares, the fifth
Trading Day following the Subscription Date, and (ii) with
respect to Option Shares, an Optional Purchase Date, provided
in each case that all conditions to the applicable Closing
have been satisfied.
1
<PAGE> 2
(b) SECTION 1.15 is hereby amended in its entirety to
read as follows:
Section 1.15 "Market Price" shall mean (i) with
respect to sale of the Initial Shares, the closing bid price
(as reported by Bloomberg, L.P.) of the Company's Common Stock
on the Trading Day immediately preceding the Subscription Date
and (ii) with respect to Repricing Events and sale of Optional
Shares, the average of the closing bid price (as reported by
Bloomberg, L.P.) of the Company's Common Stock over the
10-Trading Day period commencing on the First Effective Date,
the Second Effective Date, and the applicable Optional
Purchase Date.
(c) SECTION 1.17 is hereby amended in its entirety to
read as follows:
Section 1.17 "Optional Purchase Date" shall mean,
during the Commitment Period, the third Trading Day following
delivery to the Investor Agent of an Optional Purchase Notice
pursuant to Section 2.6 on which the Company elects to sell
Common Stock to the Investors, in conformity with the
provisions of this Agreement.
(d) SECTION 2.5(d) is hereby amended by deleting the
second sentence thereof and inserting in lieu thereof the following:
Delivery of certificates to escrow shall occur (i)
three (3) business days following the Subscription Date, the
First or Second Effective Date, as applicable, or (ii)
concurrently with the delivery of an Optional Purchase Notice
pursuant to Section 2.5(c).
2. RATIFICATION. Except as otherwise amended herein, the parties
hereby ratify and affirm the Credit Agreement in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the date first
written above.
2
<PAGE> 3
DEERE PARK CAPITAL MANAGEMENT ZILA, INC.
By:___________________________ By:____________________________
Its:_____________________________ Its:____________________________
BARTHOLOMEW INVESTMENT, L.P.
By:______________________________
Its:______________________________
3
<PAGE> 1
EXHIBIT 10-C
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May
9, 1997 is made and entered into between ZILA, INC., a Delaware corporation (the
"Company"), and DEERE PARK CAPITAL MANAGEMENT (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Private Equity Line of Credit Agreement, dated as of April 30, 1997 (the
"Investment Agreement"), pursuant to which the Company will issue, from time to
time, to the Investor shares of Common Stock, par value $.001 per share (the
"Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Investment Agreement, the Company has
issued to the Investor a Warrant of even date herewith, exercisable from time to
time during the period commencing October 31, 1997 and ending October 31, 2000
(the "Warrant") for the purchase of an aggregate of 285,000 shares of Common
Stock at a price specified in such Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Investment Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Registrable Securities (as defined below);
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, in the Warrant and in the
Investment Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms defined in the Investment
Agreement or the Warrant shall have the same meanings herein as are ascribed to
them therein. In addition, the following terms shall have the meanings ascribed
below:
"Registrable Securities" means all of the Common Stock and any
other securities issued or issuable upon exercise of the Warrants as provided
therein until (i) a registration statement under the Act covering the offering
of such securities has been declared effective by the SEC and such securities
have been disposed of pursuant to such effective registration statement, (ii)
such securities are sold under circumstances in which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the Act
("Rule 144") are met, (iii) such securities have been otherwise transferred and
the Company has delivered a new certificate or other evidence of ownership for
such securities not bearing a restrictive legend or (iv) such time as, in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Investor, such securities may be sold without any time,
1
<PAGE> 2
volume or manner limitation pursuant to Rule 144(k) (or any similar provision
then in effect) under the Act.
"Registration Statement" See Section 2.1(a).
ARTICLE II
REGISTRATION RIGHTS
Section 2.1. Form S-3 Registration Statements.
(a) Filing of Form S-3 Registration Statements. Subject to the
terms and conditions of this Agreement and in accordance with the provisions of
Section 3.2(a) of the Investment Agreement, the Company shall file with the SEC
a registration statement on Form S-3 (the "Registration Statement") under the
Securities Act for the registration of the resale by the Investor of Common
Stock to be issued upon exercise of the Warrant.
(b) Effectiveness of Registration Statement. The Registration
Statement shall be declared effective by the SEC no later than August 30, 1997
and shall remain in effect until such time as no Registrable Securities remain
unsold.
(c) Penalties for Failure to Obtain or Maintain Effectiveness
of Registration Statement. In the event the Company fails to obtain the
effectiveness of a Registration Statement within the time period set forth in
Section 2.1(b), subject to extension as provided in Section 6.10 of the
Investment Agreement, the Company shall pay to the Investor the amounts set
forth in such Section 6.10.
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. Filings; Information. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1, the Company will use its best efforts to effect the registration of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request:
(a) The Company will as expeditiously as possible, prepare and
file with the SEC a registration statement on Form S-3 and use its best efforts
to cause such filed Registration Statement to become and remain effective
(pursuant to Rule 415 under the Act or otherwise), and the Company will as
expeditiously as possible prepare and file with the SEC 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
the time periods prescribed by Section 2.1(b) and comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the Investor set forth in such Registration Statement.
2
<PAGE> 3
(b) The Company will, prior to filing a Registration Statement
or prospectus or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), furnish to the Investor and one firm of counsel representing the
Investor, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review by
such parties, and thereafter furnish to the Investor and its counsel for their
review such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents or information as the Investor or counsel may
reasonably request in order to facilitate the disposition of the Registrable
Securities.
(c) After the filing of the Registration Statement, the
Company will promptly notify the Investor of any stop order issued or threatened
by the SEC in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as the Investor may reasonably (in
light of its intended plan of distribution) request, and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable the
Investor to consummate the disposition of the Registrable Securities; provided
that the Company will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (d), (B) subject itself to taxation in any such jurisdiction or
(C) consent or subject itself to general service of process in any such
jurisdiction.
(e) The Company will immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities; (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
which makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (vi) the Company's
reasonable determination that a post-effective amendment to the Registration
3
<PAGE> 4
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.
(f) The Company will enter into customary agreements and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (the Investor may, at its option,
require that any or all of the representations, warranties and covenants of the
Company also be made to and for the benefit of the Investor).
(g) The Company will make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, its counsel or auditors and
will also make available for inspection by the Investor and any attorney,
accountant or other professional retained by the Investor (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
Registration Statement. Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. The
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such information is made generally available to the
public. The Investor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to the Investor a signed
counterpart, addressed to the Investor, of an opinion or opinions of counsel to
the Company in customary form and covering such matters of the type customarily
covered by opinions, as the Investor therefor reasonably requests.
(i) The Company will otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
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(j) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration Statement not
later than the effective date of such Registration Statement.
The Company may require the Investor to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the SEC or the NASD. The Investor agrees to provide such
information requested in connection with such registration within ten (10)
business days after receiving such written request and the Company shall not be
responsible for (and the penalties specified in Section 2.1(c) shall not apply
in respect of) any delays in obtaining or maintaining the effectiveness of the
Registration Statement caused by the Investor's failure to timely provide such
information. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, the Investor will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(e) hereof, and, if so directed by
the Company, the Investor will deliver to the Company all copies, other than
permanent file copies then in the Investor's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such Registration Statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 3.1(e) hereof to the date when the Company shall make
available to the Investor a prospectus supplemented or amended to conform with
the requirements of Section 3.1(e) hereof.
Section 3.2. Registration Expenses. In connection with each
Registration Statement, the Company shall pay the following registration
expenses incurred in connection with the registration thereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, (vi) reasonable fees and disbursements of counsel for the Company
and customary fees and expenses, if any, for independent certified public
accountants retained by the Company, and (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration.
The Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities or any legal fees
or expenses of counsel to the Investors or the Investor Agent, such costs to be
borne by the Investors.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 Indemnification.
(a) Indemnification of Investor. The Company agrees to indemnify and
hold harmless the Investor and each person, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), including any prospectus, or in any offering circular or other
document, as applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statement
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any prospectus (or any amendment or
supplement thereto), or in any offering circular or other document, as
applicable, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such statement or omission, or any such alleged untrue statement
or omission; provided that (subject to Section 4.1(d) below) any such settlement
is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the fees and disbursements of one counsel chosen by the Investor
Agent who shall represent all Investors under the Investment Agreement),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i ) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Registration Statement (or any amendment thereto),
including any prospectus (or any amendment or supplement thereto), or in any
offering circular or other document, as applicable.
(b) Indemnification of Company. The Investor agrees to indemnify and
hold harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all loss, liability, claim, damage and expense (i) described
in the indemnity contained in subsection (a) of this Section, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement
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(or any amendment thereto), including any prospectus (or any amendment or
supplement thereto), or offering circular or other document, as applicable, in
reliance upon and in conformity with written information furnished to the
Company by the Investor expressly for use in the Registration Statement (or any
amendment or supplement thereto) or in any offering circular or other document,
as applicable and (ii) arising as a result of the Investor's failure to comply
with any prospectus delivery requirements in connection with the resale of
Registrable Securities.
(c) Action against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of his indemnity
agreement. In the case of parties indemnified pursuant to Section 4.1(a) above,
counsel to the indemnified parties shall be selected by the Investor, and in the
case of parties indemnified pursuant to Section 4.1(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnifies parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry or any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section or Section
4.2 hereof (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation , investigation proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of an any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for the fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 4.1(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 4.2 Contribution. If the indemnification provided for in
Section 4.1 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to herein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred (i) in such
proportion as is appropriate to reflect the relative
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benefits received by the Company on the one hand and the Investor on the other
hand from the offering of the Common Stock pursuant to this Agreement or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Investor on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor on the other hand in connection with the offering of the Common Stock
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Common Stock
pursuant to the Investment Agreement (before deducting expenses) received by the
Company and the total net proceeds received by the Investor (before deducting
expenses) bear to the aggregate public offering price.
The relative fault of the Company on the one hand and the Investor on
the other hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Investor and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this Section 4.2 were determined on a
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 4.2.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 4.2 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4.2, the Investor shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Common Stock purchased by it and resold to the public
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of any such untrue or alleged untrue statement or omission or
alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4.2, each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Investor,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the
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meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Company.
ARTICLE V
MISCELLANEOUS
Section 5.1. Term. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as no Registrable
Securities are outstanding; provided, however, that the provisions of Article IV
hereof shall survive any termination of this Agreement.
Section 5.2. Rule 144. The Company covenants that it will file all
reports required to be filed by it under the Act and the Exchange Act and that
it will take such further action as holders of Registrable Securities may
reasonably request, all to the extent required from time to time to enable the
Investor to sell Registrable Securities without registration under the Act
within the limitation of the exemptions provided by (a) Rule 144, as such Rule
may be amended from time to time, or (b) any successor or similar rule or
regulation hereafter adopted by the SEC. If at any time the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144. Upon the request of the
Investor, the Company will deliver to the Investor a written statement as to
whether it has complied with such requirements.
Section 5.3. Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought. The
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the holders of a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, the waiver of any provision hereof
with respect to a matter that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such holders; provided that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
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.
Section 5.4. Successors and Assigns; Entire Agreement. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Investor
may assign its rights under this Agreement to any subsequent holder of Warrants
or Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder. This
Agreement, together with the Investment Agreement and the Warrants, set forth
the entire agreement and understanding between the parties as
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to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
Section 5.5. Separability. 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 that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 5.6. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: Zila, Inc., 5227 North 7th Street, Phoenix, AZ 85014-2800;
Attention: Mr. Joseph Hines, Facsimile No.: (602) 234-2318, with copies (which
shall not constitute notice) to: Squire, Sanders & Dempsey L.L.P., 40 N. Central
Ave., Phoenix, AZ 85004, Attention: Christopher D. Johnson, Facsimile No.:
(602)253-8129; H.J. Meyers & Company, Inc., 180 Maiden Lane, New York, New York
10038, Attention: Tom Parigian, Facsimile No.: (212)248-4241; and (ii) if to the
Investors, to Deere Park Capital Management, 650 Dundee Road, Suite 460,
Northbrook, Illinois 60062, Attention: Douglas A. Gerrard, Facsimile No.: (847)
509-8529 and Bartholomew Investment, L.P., 1 Sioux Court, Justice, IL 60458,
Facsimile No.: (847)509-8529, with copies (which shall not constitute notice) to
Ungaretti & Harris, 3500 Three First National Plaza, Chicago, IL 60602;
Attention: Gary I. Levenstein, Esq., Facsimile No.: (312)977-4108. Notice shall
be deemed given on the date of service or transmission if personally served or
transmitted by telegram, telex or facsimile. Notice otherwise sent as provided
herein shall be deemed given on the third business day following the date mailed
or on the second business day following delivery of such notice by a reputable
air courier service.
Section 5.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF ILLINOIS, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
Section 5.8. Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
Section 5.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
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Section 5.10. Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 5.11. Remedies. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
ZILA, INC.
By: ________________________________
Name: __________________________
Title: _________________________
DEERE PARK CAPITAL MANAGEMENT
By: ________________________________
Name: __________________________
Title: _________________________
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EXHIBIT 10-D
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May
9, 1997 is made and entered into between ZILA, INC., a Delaware corporation (the
"Company"), and BARTHOLOMEW INVESTMENT, L.P. (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Private Equity Line of Credit Agreement, dated as of April 30, 1997 (the
"Investment Agreement"), pursuant to which the Company will issue, from time to
time, to the Investor shares of Common Stock, par value $.001 per share (the
"Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Investment Agreement, the Company has
issued to the Investor a Warrant of even date herewith, exercisable from time to
time during the period commencing October 31, 1997 and ending October 31, 2000
(the "Warrant") for the purchase of an aggregate of 285,000 shares of Common
Stock at a price specified in such Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Investment Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Registrable Securities (as defined below);
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, in the Warrant and in the
Investment Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms defined in the Investment
Agreement or the Warrant shall have the same meanings herein as are ascribed to
them therein. In addition, the following terms shall have the meanings ascribed
below:
"Registrable Securities" means all of the Common Stock and any
other securities issued or issuable upon exercise of the Warrants as provided
therein until (i) a registration statement under the Act covering the offering
of such securities has been declared effective by the SEC and such securities
have been disposed of pursuant to such effective registration statement, (ii)
such securities are sold under circumstances in which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the Act
("Rule 144") are met, (iii) such securities have been otherwise transferred and
the Company has delivered a new certificate or other evidence of ownership for
such securities not bearing a restrictive legend or (iv) such time as, in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Investor, such securities may be sold without any time,
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volume or manner limitation pursuant to Rule 144(k) (or any similar provision
then in effect) under the Act.
"Registration Statement" See Section 2.1(a).
ARTICLE II
REGISTRATION RIGHTS
Section 2.1. Form S-3 Registration Statements.
(a) Filing of Form S-3 Registration Statements. Subject to the
terms and conditions of this Agreement and in accordance with the provisions of
Section 3.2(a) of the Investment Agreement, the Company shall file with the SEC
a registration statement on Form S-3 (the "Registration Statement") under the
Securities Act for the registration of the resale by the Investor of Common
Stock to be issued upon exercise of the Warrant.
(b) Effectiveness of Registration Statement. The Registration
Statement shall be declared effective by the SEC no later than August 30, 1997
and shall remain in effect until such time as no Registrable Securities remain
unsold.
(c) Penalties for Failure to Obtain or Maintain Effectiveness
of Registration Statement. In the event the Company fails to obtain the
effectiveness of a Registration Statement within the time period set forth in
Section 2.1(b), subject to extension as provided in Section 6.10 of the
Investment Agreement, the Company shall pay to the Investor the amounts set
forth in such Section 6.10.
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. Filings; Information. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1, the Company will use its best efforts to effect the registration of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request:
(a) The Company will as expeditiously as possible, prepare and
file with the SEC a registration statement on Form S-3 and use its best efforts
to cause such filed Registration Statement to become and remain effective
(pursuant to Rule 415 under the Act or otherwise), and the Company will as
expeditiously as possible prepare and file with the SEC 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
the time periods prescribed by Section 2.1(b) and comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the Investor set forth in such Registration Statement.
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(b) The Company will, prior to filing a Registration Statement
or prospectus or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), furnish to the Investor and one firm of counsel representing the
Investor, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review by
such parties, and thereafter furnish to the Investor and its counsel for their
review such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents or information as the Investor or counsel may
reasonably request in order to facilitate the disposition of the Registrable
Securities.
(c) After the filing of the Registration Statement, the
Company will promptly notify the Investor of any stop order issued or threatened
by the SEC in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as the Investor may reasonably (in
light of its intended plan of distribution) request, and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable the
Investor to consummate the disposition of the Registrable Securities; provided
that the Company will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (d), (B) subject itself to taxation in any such jurisdiction or
(C) consent or subject itself to general service of process in any such
jurisdiction.
(e) The Company will immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities; (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
which makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (vi) the Company's
reasonable determination that a post-effective amendment to the Registration
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<PAGE> 4
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.
(f) The Company will enter into customary agreements and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (the Investor may, at its option,
require that any or all of the representations, warranties and covenants of the
Company also be made to and for the benefit of the Investor).
(g) The Company will make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, its counsel or auditors and
will also make available for inspection by the Investor and any attorney,
accountant or other professional retained by the Investor (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
Registration Statement. Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. The
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such information is made generally available to the
public. The Investor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to the Investor a signed
counterpart, addressed to the Investor, of an opinion or opinions of counsel to
the Company in customary form and covering such matters of the type customarily
covered by opinions, as the Investor therefor reasonably requests.
(i) The Company will otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
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(j) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration Statement not
later than the effective date of such Registration Statement.
The Company may require the Investor to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the SEC or the NASD. The Investor agrees to provide such
information requested in connection with such registration within ten (10)
business days after receiving such written request and the Company shall not be
responsible for (and the penalties specified in Section 2.1(c) shall not apply
in respect of) any delays in obtaining or maintaining the effectiveness of the
Registration Statement caused by the Investor's failure to timely provide such
information. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, the Investor will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(e) hereof, and, if so directed by
the Company, the Investor will deliver to the Company all copies, other than
permanent file copies then in the Investor's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such Registration Statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 3.1(e) hereof to the date when the Company shall make
available to the Investor a prospectus supplemented or amended to conform with
the requirements of Section 3.1(e) hereof.
Section 3.2. Registration Expenses. In connection with each
Registration Statement, the Company shall pay the following registration
expenses incurred in connection with the registration thereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, (vi) reasonable fees and disbursements of counsel for the Company
and customary fees and expenses, if any, for independent certified public
accountants retained by the Company, and (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration.
The Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities or any legal fees
or expenses of counsel to the Investors or the Investor Agent, such costs to be
borne by the Investors.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 Indemnification.
(a) Indemnification of Investor. The Company agrees to indemnify
and hold harmless the Investor and each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), including any prospectus, or in any offering circular or other
document, as applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statement
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any prospectus (or any amendment or
supplement thereto), or in any offering circular or other document, as
applicable, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such statement or omission, or any such alleged untrue statement
or omission; provided that (subject to Section 4.1(d) below) any such settlement
is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the fees and disbursements of one counsel chosen by the Investor
Agent who shall represent all Investors under the Investment Agreement),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i ) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Registration Statement (or any amendment thereto),
including any prospectus (or any amendment or supplement thereto), or in any
offering circular or other document, as applicable.
(b) Indemnification of Company. The Investor agrees to indemnify
and hold harmless the Company, its directors, each of its officers who signed
the Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense (i)
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement
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(or any amendment thereto), including any prospectus (or any amendment or
supplement thereto), or offering circular or other document, as applicable, in
reliance upon and in conformity with written information furnished to the
Company by the Investor expressly for use in the Registration Statement (or any
amendment or supplement thereto) or in any offering circular or other document,
as applicable and (ii) arising as a result of the Investor's failure to comply
with any prospectus delivery requirements in connection with the resale of
Registrable Securities.
(c) Action against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of his indemnity
agreement. In the case of parties indemnified pursuant to Section 4.1(a) above,
counsel to the indemnified parties shall be selected by the Investor, and in the
case of parties indemnified pursuant to Section 4.1(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnifies parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry or any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section or Section
4.2 hereof (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation , investigation proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of an any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for the fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 4.1(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 4.2 Contribution. If the indemnification provided for in
Section 4.1 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to herein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred (i) in such
proportion as is appropriate to reflect the relative
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<PAGE> 8
benefits received by the Company on the one hand and the Investor on the other
hand from the offering of the Common Stock pursuant to this Agreement or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Investor on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor on the other hand in connection with the offering of the Common Stock
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Common Stock
pursuant to the Investment Agreement (before deducting expenses) received by the
Company and the total net proceeds received by the Investor (before deducting
expenses) bear to the aggregate public offering price.
The relative fault of the Company on the one hand and the Investor on
the other hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Investor and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this Section 4.2 were determined on a
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 4.2.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 4.2 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4.2, the Investor shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Common Stock purchased by it and resold to the public
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of any such untrue or alleged untrue statement or omission or
alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4.2, each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Investor,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the
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meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Company.
ARTICLE V
MISCELLANEOUS
Section 5.1. Term. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as no Registrable
Securities are outstanding; provided, however, that the provisions of Article IV
hereof shall survive any termination of this Agreement.
Section 5.2. Rule 144. The Company covenants that it will file all
reports required to be filed by it under the Act and the Exchange Act and that
it will take such further action as holders of Registrable Securities may
reasonably request, all to the extent required from time to time to enable the
Investor to sell Registrable Securities without registration under the Act
within the limitation of the exemptions provided by (a) Rule 144, as such Rule
may be amended from time to time, or (b) any successor or similar rule or
regulation hereafter adopted by the SEC. If at any time the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144. Upon the request of the
Investor, the Company will deliver to the Investor a written statement as to
whether it has complied with such requirements.
Section 5.3. Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought. The
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the holders of a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, the waiver of any provision hereof
with respect to a matter that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such holders; provided that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
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.
Section 5.4. Successors and Assigns; Entire Agreement. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Investor
may assign its rights under this Agreement to any subsequent holder of Warrants
or Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder. This
Agreement, together with the Investment Agreement and the Warrants, set forth
the entire agreement and understanding between the parties as
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to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
Section 5.5. Separability. 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 that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 5.6. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: Zila, Inc., 5227 North 7th Street, Phoenix, AZ 85014-2800;
Attention: Mr. Joseph Hines, Facsimile No.: (602) 234-2318, with copies (which
shall not constitute notice) to: Squire, Sanders & Dempsey L.L.P., 40 N. Central
Ave., Phoenix, AZ 85004, Attention: Christopher D. Johnson, Facsimile No.:
(602)253-8129; H.J. Meyers & Company, Inc., 180 Maiden Lane, New York, New York
10038, Attention: Tom Parigian, Facsimile No.: (212)248-4241; and (ii) if to the
Investors, to Deere Park Capital Management, 650 Dundee Road, Suite 460,
Northbrook, Illinois 60062, Attention: Douglas A. Gerrard, Facsimile No.: (847)
509-8529 and Bartholomew Investment, L.P., 1 Sioux Court, Justice, IL 60458,
Facsimile No.: (847)509-8529, with copies (which shall not constitute notice) to
Ungaretti & Harris, 3500 Three First National Plaza, Chicago, IL 60602;
Attention: Gary I. Levenstein, Esq., Facsimile No.: (312)977-4108. Notice shall
be deemed given on the date of service or transmission if personally served or
transmitted by telegram, telex or facsimile. Notice otherwise sent as provided
herein shall be deemed given on the third business day following the date mailed
or on the second business day following delivery of such notice by a reputable
air courier service.
Section 5.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF ILLINOIS, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
Section 5.8. Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
Section 5.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
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Section 5.10. Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 5.11. Remedies. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
ZILA, INC.
By:____________________________________
Name:_______________________________
Title:______________________________
BARTHOLOMEW INVESTMENT, L.P.
By:____________________________________
Name:_______________________________
Title:______________________________
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EXHIBIT 10-E
NO. X - 01
Commencing Date: October 31, 1997
Expiration Date: October 31, 2000
STOCK PURCHASE WARRANT
TO PURCHASE COMMON SHARES
OF
ZILA, INC.
THIS CERTIFIES that, for value DEERE PARK CAPITAL MANAGEMENT (the
"Investor") is entitled to subscribe for and purchase from Zila, Inc.,
incorporated under the laws of the State of Delaware (hereinafter called the
"Company"), at the price of $8.6125 per share at any time during the three year
period commencing OCTOBER 31, 1997 and ending OCTOBER 31, 2000 up to TWO HUNDRED
EIGHTY FIVE THOUSAND (285,000) fully paid and non-assessable shares of Common
Stock of the Company, par value ($.001) per share (hereinafter called "Common
Stock"), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The resale of the shares of Common Stock or other
securities issuable upon exercise or exchange of this Warrant is subject to the
provisions of the Registration Rights Agreement of even date herewith (the
"Registration Rights Agreement") by and between the Company and the Investor, as
well as applicable federal and state securities laws.
1. The rights represented by this warrant may be exercised by the holder
hereof, in whole or part (but not as to a fractional share of Common
Stock), by the surrender of this Warrant (properly endorsed if
required) at the office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the holder
hereof at the address of such holder appearing on the books of the
Company at any time within the period above named) and upon payment to
it by certified check or cashiers check of the purchase price of such
shares. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of Common Stock as purchased shall
be delivered to the holder hereof at the Company's expense (including,
without limitation, the payment by it of any applicable stock transfer
or stock issuance tax) within three (3) business days, after the rights
represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the number of
shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the holder
hereof within such time. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any
fractional shares of Common Stock, then in such event the number of
shares to be issued shall be rounded up or down to the nearest whole
share and no fractional shares shall be issued.
THE SECURITIES REPRESENTED BY THIS STOCK PURCHASE WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED FOR SALE OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
<PAGE> 2
2. The Company covenants and agrees that all shares of Common Stock which
may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be fully paid and non-assessable and free
of from taxes, liens and charges with respect to the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company further covenants and
agrees that during the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock
to provide for the exercise of the rights represented by this Warrant,
and will at its expense expeditiously upon each such reservation of
shares procure the listing thereof (subject to issuance of notice of
issuance) on all stock exchanges, if any, on which such shares are then
listed.
3. The above provisions are, however, subject to the following:
(a) In the event that the Company shall declare any dividend or other
distribution upon its outstanding Common Stock payable in Common Stock
or shall subdivide its outstanding shares of Common Stock into a
greater number of shares, then the number of shares of Common Stock
which may thereafter be purchased upon the exercise of the rights
represented hereby shall be increased in proportion to the increase
through such dividend or subdivision and the purchase price per share
shall be decreased in such proportion. In the event that the Company
shall at any time combine the outstanding shares of its Common Stock
into a smaller number of shares, the number of shares of Common Stock
which may thereafter be purchased upon the exercise of the rights
represented hereby shall be decreased in proportion to the decrease
through such combination and the purchase price per share shall be
increased in such proportion.
(b) In the event that the Company shall declare a dividend upon the
Common Stock payable otherwise than out of earnings or surplus (other
than paid-in surplus) or otherwise than in Common Stock, the purchase
price per share in effect immediately prior to the declaration of such
dividend shall be reduced by an amount equal, in the case of a dividend
in cash, to the amount thereof payable per share of the Common Stock
or, in the case of any other dividend, to the fair value thereof per
share of the Common Stock as determined by the Board of Directors of
the Company. For the purposes of the foregoing a dividend other than in
cash shall be considered payable out of earnings or surplus (other than
paid-in surplus) only to the extent that such earnings or surplus are
charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions
shall take effect as of the date on which a record is taken for the
purpose of such dividend, or, if a record is not taken, the date as of
which the holders of Common Stock of record entitled to such dividend
are to be determined.
(c) If any capital reorganization or reclassification of the Common
Stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected, then, as a condition
of such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant and
in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number
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of shares of such Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby had such
reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holder of this Warrant
to the end that the provisions hereof (including without limitation
provisions for adjustment of the purchase price per share and of the
number of shares of Common Stock purchasable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than
the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument
executed and mailed or delivered to the holder hereof at the last
address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase. Any such shares of stock, securities or
assets which the holder hereof may be entitled to purchase pursuant to
this paragraph (c) shall be included within the term "Common Stock" as
used herein.
(d) Upon any adjustment of the number of shares of Common Stock which
may be purchased upon the exercise of the rights represented hereby
and/or of the purchase price per share, then and in each such case the
Company shall give written notice thereof, by first class mail, postage
prepaid, addressed to the holder of this Warrant at the address of such
holder as shown on the books of the Company, which notice shall state
the purchase price per share resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at
such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based.
(e) In case at any time:
(i) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular
cash dividends paid at an established annual rate) to the
holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of its common stock any additional shares of stock of
any class or other rights;
(iii) there shall be any capital reorganization or
reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the
holders of this warrant:
(aa) at least twenty days' prior written notice of the date on
which the books of the Company shall close or a record shall be
taken for such dividend, distribution or
-3-
<PAGE> 4
subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up; and, in
the case of any such dividend, distribution or subscription
rights such notice shall also specify the date on which the
holders of Common Stock shall be entitled thereto; and
(bb) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding
up, at least twenty days' prior written notice of the date when
the same shall take place, and said notice shall also specify
the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding
up, as the case may be; and,
(cc) each such written notice shall be given by first class
mail, postage prepaid, addressed to the holder of this Warrant
at the address of such holder as shown on the books of the
Company.
4. This Warrant shall be transferable only on the books of the Company by
the holder hereof in person, or by duly authorized attorney on surrender
of this Warrant properly assigned.
5. The holder represents that this Warrant is being acquired with no
present intention of selling or distributing any Common Stock received
upon the exercise hereof, unless registered under Federal and applicable
state laws or pursuant to an exemption from such registration.
6. Neither this Warrant, nor the shares of Common Stock issuable hereunder,
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the laws of any other jurisdiction, and neither
this Warrant nor the Warrant shares may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless so registered, or
unless an exemption from registration is available pursuant to law.
The sale, assignment or other disposition of this Warrant and the shares
of Common Stock issuable hereunder are further restricted by Rule 144,
promulgated by the Securities and Exchange Commission.
The certificate or certificates representing the Common Stock issued
upon the exercise of this Warrant will bear and be subject to a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED
PURSUANT TO THE PROVISIONS OF THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR AVAILABLE EXEMPTION FROM SUCH REGISTRATION."
7. This warrant shall be construed in accordance with the laws of the
State of Delaware.
8. This Warrant shall be deemed an original even in the event it shall be a
carbon copy or shall be mechanically reproduced, so long as it bears the
original signatures of the designated corporate officers.
-4-
<PAGE> 5
9. Assuming the conditions of Section 7 above regarding registration or
exemption have been satisfied, the holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant, in whole or in part. The
holder shall deliver a written notice to the Company, substantially in
the form of the Assignment attached hereto as Exhibit B, indicating the
person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The
Company shall effect the assignment within ten (10) days, and shall
deliver to the assignee(s) designated by the holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.
10. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by facsimile at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company: Zila, Inc.
5227 North 7th Street
Phoenix, AZ 85014-2800
Attention: Mr. Joseph Hines
Facsimile No.: 602/234-2264
to the Investor: Deere Park Capital Management
650 Dundee Road, Suite 460
Northbrook, IL 60062
Attention: Mr. Douglas A. Gerrard
Facsimile No.: 847/509-8529
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 10 by giving prior
written notice of such change in the manner provided for giving notice
as set forth herein.
11. This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision.
-5-
<PAGE> 6
12. The holder shall deliver to the Company, along with the original
Warrant, the "Form of Warrant Exercise" in order to exercise the
Warrant, attached hereto as Exhibit A.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers as of the 9th day of May, 1997, the
original issue date.
ZILA, INC.
_______________________________________
Joseph Hines
President
ATTEST:
___________________________________
Janice L. Backus
Corporate Secretary
-6-
<PAGE> 7
EXHIBIT A
FORM OF WARRANT EXERCISE
I/we hereby exercise Zila, Inc. Common Stock Purchase Warrant #_________________
(a) Number of share of Zila common stock covered in
Purchase Warrant #___________ #_________________
(b) Total Exercise price ($8.6125 per share) #_________________
_______________________________________________
___________________
Signature Social Security No.
_______________________________________________
Name (please print)
________________________________________________________________
__________________
Address
________________________________________________________________
__________________
_____________________________________________
Telephone Number
_____________________________________________
________________________
Signature Social Security No.
_____________________________________________
Name (please print)
________________________________________________________________
__________________
Address
________________________________________________________________
__________________
_____________________________________________
Telephone Number
I wish to register my shares of Zila Common stock as follows:
-7-
<PAGE> 8
a. ( ) Individual Ownership
b. ( ) Husband and Wife as Community Property
c. ( ) Joint Tenants w/Right to Survivorship (JTROS)
d. ( ) Tenants in Common
e. ( ) Other
________________________________________________________________
Dated: ________________________________19_______.
-8-
<PAGE> 9
EXHIBIT B
FORM OF ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to
transfer the Warrant)
FOR VALUED RECEIVED, the undersigned holder of the attached Warrant
hereby sells, assigns and transfers unto the persons below named the right to
purchase ________________ shares of the Common Stock of Zila, Inc. evidenced by
the attached Warrant and does hereby irrevocably constitute and appoints Zila's
Corporate Secretary to transfer the said Warrant on the books of the Company,
with full power of substitution in the premises.
Dated: __________________________ 19 ____
_________________________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
_________________________________________
Please print name and address of assignee
(including zip code number)
NOTICE: The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-9-
<PAGE> 1
EXHIBIT 10-F
NO. X - 02
Commencing Date: October 31, 1997
Expiration Date: October 31, 2000
STOCK PURCHASE WARRANT
TO PURCHASE COMMON SHARES
OF
ZILA, INC.
THIS CERTIFIES that, for value BARTHOLOMEW INVESTMENT, L.P. (the
"Investor") is entitled to subscribe for and purchase from Zila, Inc.,
incorporated under the laws of the State of Delaware (hereinafter called the
"Company"), at the price of $8.6125 per share at any time during the three year
period commencing OCTOBER 31, 1997 and ending OCTOBER 31, 2000 up to FIFTEEN
THOUSAND (15,000) fully paid and non-assessable shares of Common Stock of the
Company, par value ($.001) per share (hereinafter called "Common Stock"),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The resale of the shares of Common Stock or other
securities issuable upon exercise or exchange of this Warrant is subject to the
provisions of the Registration Rights Agreement of even date herewith (the
"Registration Rights Agreement") by and between the Company and the Investor, as
well as applicable federal and state securities laws.
1. The rights represented by this warrant may be exercised by the holder
hereof, in whole or part (but not as to a fractional share of Common
Stock), by the surrender of this Warrant (properly endorsed if
required) at the office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the holder
hereof at the address of such holder appearing on the books of the
Company at any time within the period above named) and upon payment to
it by certified check or cashiers check of the purchase price of such
shares. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of Common Stock as purchased shall
be delivered to the holder hereof at the Company's expense (including,
without limitation, the payment by it of any applicable stock transfer
or stock issuance tax) within three (3) business days, after the rights
represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the number of
shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the holder
hereof within such time. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any
fractional shares of Common Stock, then in such event the number of
shares to be issued shall be rounded up or down to the nearest whole
share and no fractional shares shall be issued.
THE SECURITIES REPRESENTED BY THIS STOCK PURCHASE WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED FOR SALE OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
<PAGE> 2
2. The Company covenants and agrees that all shares of Common Stock which
may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be fully paid and non-assessable and free
of from taxes, liens and charges with respect to the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company further covenants and
agrees that during the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock
to provide for the exercise of the rights represented by this Warrant,
and will at its expense expeditiously upon each such reservation of
shares procure the listing thereof (subject to issuance of notice of
issuance) on all stock exchanges, if any, on which such shares are then
listed.
3. The above provisions are, however, subject to the following:
(a) In the event that the Company shall declare any dividend or other
distribution upon its outstanding Common Stock payable in Common Stock
or shall subdivide its outstanding shares of Common Stock into a
greater number of shares, then the number of shares of Common Stock
which may thereafter be purchased upon the exercise of the rights
represented hereby shall be increased in proportion to the increase
through such dividend or subdivision and the purchase price per share
shall be decreased in such proportion. In the event that the Company
shall at any time combine the outstanding shares of its Common Stock
into a smaller number of shares, the number of shares of Common Stock
which may thereafter be purchased upon the exercise of the rights
represented hereby shall be decreased in proportion to the decrease
through such combination and the purchase price per share shall be
increased in such proportion.
(b) In the event that the Company shall declare a dividend upon the
Common Stock payable otherwise than out of earnings or surplus (other
than paid-in surplus) or otherwise than in Common Stock, the purchase
price per share in effect immediately prior to the declaration of such
dividend shall be reduced by an amount equal, in the case of a dividend
in cash, to the amount thereof payable per share of the Common Stock
or, in the case of any other dividend, to the fair value thereof per
share of the Common Stock as determined by the Board of Directors of
the Company. For the purposes of the foregoing a dividend other than in
cash shall be considered payable out of earnings or surplus (other than
paid-in surplus) only to the extent that such earnings or surplus are
charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions
shall take effect as of the date on which a record is taken for the
purpose of such dividend, or, if a record is not taken, the date as of
which the holders of Common Stock of record entitled to such dividend
are to be determined.
(c) If any capital reorganization or reclassification of the Common
Stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected, then, as a condition
of such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant and
in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number
-2-
<PAGE> 3
of shares of such Common Stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby had such
reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holder of this Warrant
to the end that the provisions hereof (including without limitation
provisions for adjustment of the purchase price per share and of the
number of shares of Common Stock purchasable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than
the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument
executed and mailed or delivered to the holder hereof at the last
address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase. Any such shares of stock, securities or
assets which the holder hereof may be entitled to purchase pursuant to
this paragraph (c) shall be included within the term "Common Stock" as
used herein.
(d) Upon any adjustment of the number of shares of Common Stock which
may be purchased upon the exercise of the rights represented hereby
and/or of the purchase price per share, then and in each such case the
Company shall give written notice thereof, by first class mail, postage
prepaid, addressed to the holder of this Warrant at the address of such
holder as shown on the books of the Company, which notice shall state
the purchase price per share resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at
such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based.
(e) In case at any time:
(i) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular
cash dividends paid at an established annual rate) to the
holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of its common stock any additional shares of stock of
any class or other rights;
(iii) there shall be any capital reorganization or
reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the
holders of this warrant:
(aa) at least twenty days' prior written notice of the date on
which the books of the Company shall close or a record shall be
taken for such dividend, distribution or
-3-
<PAGE> 4
subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up; and, in
the case of any such dividend, distribution or subscription
rights such notice shall also specify the date on which the
holders of Common Stock shall be entitled thereto; and
(bb) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding
up, at least twenty days' prior written notice of the date when
the same shall take place, and said notice shall also specify
the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding
up, as the case may be; and,
(cc) each such written notice shall be given by first class
mail, postage prepaid, addressed to the holder of this Warrant
at the address of such holder as shown on the books of the
Company.
4. This Warrant shall be transferable only on the books of the Company by
the holder hereof in person, or by duly authorized attorney on
surrender of this Warrant properly assigned.
5. The holder represents that this Warrant is being acquired with no
present intention of selling or distributing any Common Stock received
upon the exercise hereof, unless registered under Federal and
applicable state laws or pursuant to an exemption from such
registration.
6. Neither this Warrant, nor the shares of Common Stock issuable
hereunder, have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or the laws of any other jurisdiction,
and neither this Warrant nor the Warrant shares may be offered, sold,
transferred, pledged, hypothecated or otherwise disposed of unless so
registered, or unless an exemption from registration is available
pursuant to law.
The sale, assignment or other disposition of this Warrant and the
shares of Common Stock issuable hereunder are further restricted by
Rule 144, promulgated by the Securities and Exchange Commission.
The certificate or certificates representing the Common Stock issued
upon the exercise of this Warrant will bear and be subject to a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AVAILABLE EXEMPTION FROM SUCH REGISTRATION."
7. This warrant shall be construed in accordance with the laws of the
State of Delaware.
8. This Warrant shall be deemed an original even in the event it shall be
a carbon copy or shall be mechanically reproduced, so long as it bears
the original signatures of the designated corporate officers.
-4-
<PAGE> 5
9. Assuming the conditions of Section 7 above regarding registration or
exemption have been satisfied, the holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant, in whole or in part. The
holder shall deliver a written notice to the Company, substantially in
the form of the Assignment attached hereto as Exhibit B, indicating the
person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The
Company shall effect the assignment within ten (10) days, and shall
deliver to the assignee(s) designated by the holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.
10. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by facsimile at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company: Zila, Inc.
5227 North 7th Street
Phoenix, AZ 85014-2800
Attention: Mr. Joseph Hines
Facsimile No.: 602/234-2264
to the Investor: Bartholomew Investment, L.P.
Deere Park Capital Management
650 Dundee Road, Suite 460
Northbrook, IL 60062
Attention: Mr. Douglas A. Gerrard
Facsimile No.: 847/509-8529
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 10 by giving prior
written notice of such change in the manner provided for giving notice
as set forth herein.
11. This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision.
-5-
<PAGE> 6
12. The holder shall deliver to the Company, along with the original
Warrant, the "Form of Warrant Exercise" in order to exercise the
Warrant, attached hereto as Exhibit A.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers as of the 9th day of May, 1997, the
original issue date.
ZILA, INC.
____________________________________
Joseph Hines
President
ATTEST:
___________________________________
Janice L. Backus
Corporate Secretary
-6-
<PAGE> 7
EXHIBIT A
FORM OF WARRANT EXERCISE
I/we hereby exercise Zila, Inc. Common Stock Purchase Warrant #_________________
(a) Number of share of Zila common stock covered in
Purchase Warrant #___________ #_________________
(b) Total Exercise price ($8.6125 per share) #_________________
_____________________________________________
________________________
Signature Social Security No.
_____________________________________________
Name (please print)
________________________________________________________________
__________________
Address
________________________________________________________________
__________________
_____________________________________________
Telephone Number
_____________________________________________
________________________
Signature Social Security No.
_____________________________________________
Name (please print)
________________________________________________________________
__________________
Address
________________________________________________________________
__________________
_____________________________________________
Telephone Number
I wish to register my shares of Zila Common stock as follows:
-7-
<PAGE> 8
a. ( ) Individual Ownership
b. ( ) Husband and Wife as Community Property
c. ( ) Joint Tenants w/Right to Survivorship (JTROS)
d. ( ) Tenants in Common
e. ( ) Other
________________________________________________________________
Dated: ________________________________19_______.
-8-
<PAGE> 9
EXHIBIT B
FORM OF ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to
transfer the Warrant)
FOR VALUED RECEIVED, the undersigned holder of the attached Warrant
hereby sells, assigns and transfers unto the persons below named the right to
purchase ________________ shares of the Common Stock of Zila, Inc. evidenced by
the attached Warrant and does hereby irrevocably constitute and appoints Zila's
Corporate Secretary to transfer the said Warrant on the books of the Company,
with full power of substitution in the premises.
Dated: __________________________ 19 ____
_________________________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
_________________________________________
Please print name and address of assignee
(including zip code number)
NOTICE: The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-9-
<PAGE> 1
EXHIBIT 10-G
MERGER AGREEMENT
By this MERGER AGREEMENT dated as of April 3, 1997 (this "Agreement"),
ZILA, INC., a Delaware corporation ("Zila"), CYGNUS IMAGING, INC., an Arizona
corporation ("Cygnus"), CYGNUS MERGER CORPORATION, a Delaware corporation
("CMC"), and EGIDIO CIANCIOSI ("Cianciosi"), JAMES T. JENSEN and KENNETH D. KIRK
(collectively, and jointly and severally, "Shareholders"), hereby represent,
warrant, covenant and agree as follows:
ARTICLE 1
THE MERGER
1.1 Approval of Merger. The respective boards of directors of Zila, CMC
and Cygnus have, the Shareholders (as shareholders of Cygnus) have, and the sole
shareholder of CMC has, by resolutions duly adopted, approved the following
provisions of this Article 1 as the plan of merger required by the laws of the
states of Delaware and Arizona in connection with the merger described herein.
1.2 Present Structure. Shareholders own 100% of the issued and
outstanding capital stock (the "Cygnus Common Stock") of Cygnus, as follows:
<TABLE>
<CAPTION>
Shareholder Shares %
----------- ------ -----
<S> <C> <C>
Egidio Cianciosi 3,000,000 91.94
James T. Jensen 100,000 3.06
Kenneth D. Kirk 163,158 5.00
3,263,158 100.00
========= ======
</TABLE>
1.3 Merger Structure. The respective boards of directors of CMC and
Cygnus have determined that it is advisable to consummate the merger transaction
described herein (the "Merger"), as a result of which all of the Cygnus Common
Stock will be converted into shares of the common stock, $.001 par value per
share, of Zila ("Zila Common Stock") and Cygnus will be wholly owned directly or
indirectly by Zila, all on the terms and subject to the conditions set forth in
this Agreement.
1.4 Effective Time of Merger. At the Effective Time (as defined below),
in accordance with this Agreement and applicable law, CMC shall be merged with
and into Cygnus, the separate existence of CMC (except as may be continued by
operation of law) shall cease, and Cygnus shall
<PAGE> 2
continue as the surviving corporation under the name "Cygnus Imaging, Inc."
Cygnus, in its capacity as the corporation surviving the Merger, sometimes is
referred to herein as the "Surviving Corporation."
1.5 Effect of the Merger. The Surviving Corporation shall possess all
the rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of CMC and Cygnus (collectively, the "Constituent
Corporation"); and all property, real, personal, and mixed, and all debts due on
whatever account, including subscriptions to shares, and all other choses in
action, and all and every other interest of or belonging to or due to each of
the Constituent Corporations, shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; and the
Surviving Corporation shall be responsible and liable for all liabilities and
obligations of each of the Constituent Corporations.
1.6 Consummation of the Merger. The date on which the consummation of
the transactions contemplated by this Agreement (the "Closing") actually takes
place is referred to in this Agreement as the "Closing Date." On the Closing
Date, the parties hereto will cause articles of merger relating to the Merger to
be delivered to the Secretaries of State of the states of Delaware and Arizona
in such form as required by, and executed in accordance with, the relevant
provisions of applicable law. The Merger shall be effective at such time as such
articles of merger are duly filed with and accepted by the Secretaries of State
of the states of Delaware and Arizona in accordance with applicable law (the
"Effective Time").
1.7 Articles of Incorporation and Bylaws, Directors and Officers. The
Articles of Incorporation and Bylaws of Cygnus, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation immediately after the Effective Time and shall thereafter
continue to be its Articles of Incorporation and Bylaws until amended as
provided therein and under the applicable law. The directors of CMC holding
office immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time. The officers of
Cygnus holding office immediately prior to the Effective Time shall be the
officers (holding the same offices as they held with Cygnus) of the Surviving
Corporation immediately after the Effective Time.
1.8 Conversion of Securities. Subject to Section 1.10(b), at the
Effective Time, by virtue of the Merger and without any action on the part of
CMC, Cygnus or the holder of any of the following securities:
(a) The shares of Cygnus Common Stock issued and outstanding
immediately prior to the Effective Time shall automatically be canceled
and extinguished and be converted into and become a right to receive an
aggregate number of shares of Zila Common Stock having a value (as
determined pursuant to the next sentence) equal to $1,725,000. For
purposes of determining the number of shares of Zila Common Stock to be
issued in exchange for the Cygnus Common Stock, the value of such Zila
Common Stock shall be deemed to be an amount equal to the average of
the closing bid prices for the Zila Common Stock
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as reported by the Nasdaq Small-Cap Market (or such other exchange upon
which the Zila Common Stock is listed for trading at such time) for the
five trading days immediately preceding the Closing Date.
(b) Each share of Cygnus Common Stock issued and outstanding
immediately prior to the Effective Time and held in the treasury of
Cygnus or owned by Zila or CMC shall automatically be canceled and
extinguished and no payment shall be made with respect thereto.
(c) Each share of CMC common stock, par value $.001 per share,
issued and outstanding immediately prior to the Effective Time shall
automatically be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
(d) If any shares of Cygnus Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase
option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with Cygnus,
then the shares of Zila Common Stock issued in exchange for such shares
of Cygnus Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Zila Common Stock may
accordingly be marked with appropriate legends.
1.9 Closing of Cygnus Transfer Books. At the Effective Time,
Shareholders, as holders of certificates representing shares of Cygnus Common
Stock that were outstanding immediately prior to the Effective Time, shall cease
to have any rights as shareholders of Cygnus, and the stock transfer books of
Cygnus shall be closed and no transfer of shares of Cygnus Common Stock issued
and outstanding immediately prior to the Effective Time shall thereafter be
made. If, after the Effective Time, valid certificates previously representing
such shares are presented to the Surviving Corporation or the Disbursing Agent
(as defined in Section 1.10), they shall be exchanged as provided in Section
1.10.
1.10 Exchange of Certificates.
(a) After the Effective Time, a transfer agent or disbursing agent
to be designated by Zila (which may not be Zila or a subsidiary of
Zila) shall act as disbursing agent (the "Disbursing Agent") in
effecting the exchange of Zila Common Stock for certificates which,
immediately prior to the Effective Time, represented shares of Cygnus
Common Stock. As soon as practicable after the Effective Time, the
Disbursing Agent or Zila shall advise each holder of certificates
theretofore representing such shares of the procedure for surrendering
such certificates to Zila or the Disbursing Agent. Upon the surrender
and exchange of a certificate theretofore representing shares of Cygnus
Common Stock, the holder shall be issued a certificate representing the
number of shares of Zila
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Common Stock to which such person is entitled pursuant to Section
1.8(a) and the certificate theretofore representing shares of Cygnus
Common Stock shall forthwith be canceled. Until so surrendered and
exchanged, each Certificate theretofore representing shares of Cygnus
Common Stock shall represent solely the right to receive the Zila
Common Stock into which the shares it theretofore represented shall
have been converted pursuant to Section 1.8(a), and the Surviving
Corporation shall not be required to pay the holder thereof the Zila
Common Stock to which such holder otherwise would be entitled; provided
that procedures allowing for payment against lost or destroyed
certificates against receipt of customary and appropriate
certifications and indemnities shall be provided.
(b) No fractional shares of Zila Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any
fractional share interest in Zila Common Stock which a holder of Cygnus
Common Stock would otherwise be entitled to receive in the Merger
(after aggregating all fractional shares of Zila Common Stock that
would otherwise be issuable to such holder) shall be rounded up to the
nearest whole share if such fraction is 0.5 or greater and shall be
rounded down to the nearest whole share if such fraction is less than
0.5.
1.11 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"). The parties to this
Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.12 Cygnus Indebtedness. The indebtedness of Cygnus as of the Closing
Date will include indebtedness in the aggregate amount of $418,438 owing to
Egidio Cianciosi, Sandra Jackman and Kenneth D. Kirk (the "Shareholder
Indebtedness"). The parties acknowledge and agree that such Shareholder
Indebtedness shall will be assumed by the Surviving Corporation and shall remain
indebtedness of Cygnus, as the Surviving Corporation, following the Effective
Time and that, within fifteen (15) business days following the Effective Time,
Cygnus, as the Surviving Corporation, will repay the outstanding principal and
interest of such indebtedness.
1.13 Taking of Necessary Action; Further Action. Zila and CMC, on the
one hand, and Cygnus and the Shareholders, on the other hand, shall use all
reasonable efforts to take all such action (including without limitation action
to cause the satisfaction of the conditions of the other to effect the Merger)
as may be necessary or appropriate in order to effectuate the Merger as promptly
as possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation and Zila with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations, the
officers and directors of the Surviving Corporation and Zila are fully
authorized in the name of the Constituent Corporations or otherwise to take, and
shall take, all such action.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CIANCIOSI AND CYGNUS
Except as specifically provided otherwise in this Article 2, as of the
execution and delivery of this Agreement (and as of the Effective Time with
respect to representations and warranties contained in all certificates and
other documents delivered pursuant to Section 7.2), each of Cianciosi, in his
individual capacity and as an officer and director of Cygnus, and Cygnus
represents and warrants to Zila and CMC as follows:
2.1 Due Execution. This Agreement has been duly executed and delivered
by Shareholders and constitutes the valid and binding agreement of each of them
in accordance with its terms. Shareholders have full power and authority to
execute, deliver and perform this Agreement. Cygnus has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Cygnus
and the consummation by Cygnus of the transactions contemplated hereby have been
duly authorized by the Board of Directors and Shareholders of Cygnus, and no
other corporate proceedings on the part of Cygnus are necessary to authorize
this Agreement and such transactions. This Agreement has been duly executed and
delivered by Cygnus and constitutes a valid and binding obligation of Cygnus,
enforceable in accordance with its terms. No authorization, consent or approval
of, or filing with, any public body, court or authority is necessary on the part
of Cygnus or Shareholders for the consummation by Cygnus or Shareholders of the
transactions contemplated by this Agreement.
2.2 No Violation of Other Instruments. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, violate any provisions (including provisions requiring any
consent or approval) of any charter, bylaw, mortgage, lien, order, judgment,
decree, or of any material lease, agreement or instrument to which any
Shareholder or Cygnus is a party or by which any Shareholder or Cygnus is bound,
and will not violate any other material restriction of any kind or character to
which any Shareholder or Cygnus is subject.
2.3 Corporate Status. Cygnus is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona and is
qualified in each jurisdiction in which its owning, leasing, utilization of
property or conduct of business makes such qualification necessary. Cygnus has
all requisite power and authority to own, lease and utilize its properties and
assets and to conduct its businesses as now being conducted.
2.4 Corporate Records. The corporate minute book of Cygnus has been
made available to Zila and is complete, including therein the Articles of
Incorporation and Bylaws of Cygnus (or the equivalent documents or copies
thereof) together with any amendments thereto; the minutes contained therein
accurately reflect the actions and proceedings of the board of directors and any
committee thereof and of the shareholders of Cygnus; and the signatures
appearing on all documents contained therein are the true signatures of the
persons purporting to have signed the same.
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2.5 The Cygnus Common Stock. The Cygnus Common Stock constitutes all
the issued and outstanding capital stock of Cygnus. The Cygnus Common Stock is
validly issued, fully paid and nonassessable and is owned of record and
beneficially by Shareholders as described in Section 1.1, free and clear of any
and all liens, security interests and other encumbrances, stockholders'
agreements and voting trusts. There is no (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to acquire any
shares of the capital stock or other securities of Cygnus; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of Cygnus;
(iii) contract or agreement under which Cygnus is or may become obligated to
sell or otherwise issue any shares or its capital stock or any other securities;
or (iv) condition or circumstance that may give rise to or provide a basis for
the assertion of a claim by any person or entity to the effect that such person
or entity is entitled to acquire or receive any shares of capital stock or other
securities of Cygnus. All outstanding shares of Cygnus Common Stock have been
issued and granted in compliance with (i) all applicable securities laws and
other applicable laws and regulations, and (ii) all requirements set forth in
applicable contracts and agreements.
2.6 Subsidiaries. Cygnus does not own, beneficially or otherwise, any
capital stock or other equity interest, partnership interest, joint venture
interest, or any other security issued by any other corporation, organization or
entity, and Cygnus has not agreed and is not obligated to make any future
investment in or capital contribution to any such corporation, organization or
entity.
2.7 No Partnership. Cygnus is not a party to any joint venture,
partnership or other profit or loss sharing agreement.
2.8 Financial Statements. Cygnus has heretofore delivered or caused to
be delivered to Zila statements of financial condition and related statements of
operations respecting the consolidated business and operations of Cygnus for and
as of the fiscal years ended December 31, 1996 and 1995 (such financial
statements are hereinafter collectively called the "Financial Statements"). The
Financial Statements are correct and complete, present fairly the financial
position, results of operations, and changes in financial position of the
consolidated business and operations of Cygnus as of the dates or for the
periods indicated, are consistent with the books and records of the entities to
which they relate and have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
2.9 Inventories. The inventories of Cygnus disclosed in the December
31, 1996 financial statements referred to at Section 2.8 hereof (the "12/96
Financials"), including finished goods, work in process, raw materials and
supplies, consisted of items, valued at cost or market, whichever is lower, that
were merchantable or usable in the ordinary course of the businesses of Cygnus
in quantities and amounts not in excess of the reasonable needs of such
businesses, except only for obsolete, defective and excess items for which the
carrying value (net of applicable reserves, if any) did not exceed net
realizable values, after giving full consideration to the cost of carrying or
disposing of or marketing such items. Since December 31, 1996, there have been
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no changes in such inventories except as a consequence of sales and purchases in
the ordinary course of business.
2.10 Accounts Receivable. Except to the extent of reserves set forth in
the 12/96 Financials, all of the accounts receivable, notes, and other
obligations for payment of money to Cygnus as of December 31, 1996 were (i)
valid and legally enforceable obligations of the persons purported to be liable
thereon; and (ii) free of any defense, counterclaim, setoff or deduction. Since
December 31, 1996, there have been no changes in such receivables, notes and
other obligations except for changes arising in the ordinary course of Cygnus'
business.
2.11 Title to Properties and Assets. Cygnus has good and marketable
title to the properties and assets reflected in the 12/96 Financials and the
Exhibits to this Agreement, except properties and assets disposed of since
December 31, 1996 in the ordinary course of Cygnus' business. The properties and
assets of Cygnus are not subject to any mortgage, pledge, lien, security
interest, lease, encumbrance or charge other than those (i) disclosed in the
12/96 Financials, (ii) arising from taxes not yet due or payable or being
contested in good faith by appropriate proceedings diligently conducted; or
(iii) disclosed in Exhibit 2.11 to this Agreement. Exhibit 2.11 to this
Agreement accurately sets forth in summary form all real property owned, leased
or used by Cygnus and the nature of any mortgage, pledge, lien, security
interest, lease, encumbrance or charge materially affecting such real property.
2.12 Liabilities. Cygnus does not have any liabilities, for borrowed
money or otherwise, except (i) as disclosed in the 12/96 Financials; or (ii) as
incurred in the ordinary course of business since December 31, 1996 and
identified in Exhibit 2.12 to this Agreement. Cygnus is not directly or
indirectly liable upon or obligated in any other way to provide funds to or to
guarantee or assume any debt or obligation of any individual or any legal entity
other than of Cygnus, except as a consequence of endorsements made in the
ordinary course of business in connection with the deposit of items for
collection.
2.13 Material Contracts. A true and complete schedule of all Material
Contracts is attached to this Agreement as Exhibit 2.13. For purposes of this
Agreement, a "Material Contract" is any contract or agreement (i) which is
disclosed or identified in any Exhibit to this Agreement; (ii) which is outside
the ordinary course of business of Cygnus; or (iii) which is within the ordinary
course of business of Cygnus having an unfulfilled direct or contingent
commitment of Cygnus which involves (a) an obligation on the part of Cygnus to
pay in excess of $10,000 or to provide goods and/or services in excess of such
amount, or (b) an obligation of any person or entity to provide goods and/or
services to Cygnus in excess of such amount or which are otherwise critical to
the businesses of Cygnus. Each Material Contract is in full force and effect, is
valid and binding upon the parties thereto and is enforceable by them in
accordance with its terms. Shareholders are not aware of any circumstance which
could reasonably be expected to adversely affect Cygnus in the performance of
its obligations under a Material Contract or in the realization of the benefits
contemplated by a Material Contract. To the knowledge of Shareholders, Cygnus is
not bound by any Material Contract to perform services
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or provide goods which, upon performance by Cygnus, could reasonably be expected
to result in a loss to Cygnus.
2.14 Pending Litigation; Contingencies. Except as set forth on Exhibit
2.14 to this Agreement, there are no actions, suits, proceedings or formal
inquiries before any court, arbitration board, regulatory agency or governmental
body pending (or to the knowledge of Shareholders, threatened) against or
affecting Cygnus or any of its assets, business operations, rights or prospects.
None of such matters is reasonably likely to result in a material adverse change
in the business, operations, assets or prospects of Cygnus.
2.15 No Defaults. No event has occurred and no condition exists which
constitutes, or with the giving of notice or lapse of time, or both, would
constitute, a default by Cygnus in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in (i) any indenture
or other agreement creating, evidencing or securing indebtedness of Cygnus, or
(ii) any other Material Contract or any material permit to which Cygnus is a
party or by which Cygnus or its business or properties may be bound or adversely
affected. Cygnus is not in default with respect to any order, writ, injunction
or decree of any court or in default under any order, material regulation or
demand of any federal, state, municipal or other governmental agency.
2.16 Compliance with Statutes and Regulations. Cygnus is in compliance
in all material respects with, and has at all times complied in all material
respects with, all applicable statutes, permit and licensing requirements,
zoning and building codes, land use regulations, health, safety and
environmental standards and orders of, and all restrictions imposed by, all
governmental authorities having jurisdiction over it or the conduct of its
business and the ownership and operation of its assets. No consent, approval or
other order of any governmental or administrative board or body is required as a
condition to the validity of this Agreement or to the consummation of the
transactions contemplated hereby.
2.17 Tax Matters. Cygnus has timely filed all federal, state, local and
foreign tax returns for income taxes, sales taxes, withholding and payroll
taxes, property taxes and other taxes of every kind whatsoever required by law
to have been filed prior to the Effective Time. For purposes of the preceding
sentence, a return shall be deemed to have been timely filed if it was filed
after the date due but within any period allowed in an extension granted by the
responsible taxing authority. All such tax returns were complete and accurate in
all material respects as of their filing dates. Cygnus has paid or caused to be
paid all taxes which have become due, together with any interest, if any, due
thereon and any penalties or late fees associated therewith, whether pursuant to
such returns or pursuant to any assessments or otherwise. The amounts
established as provisions for taxes in the Financial Statements are sufficient
for the payment of all unpaid federal, state, county, local and foreign taxes
(including all assessments and other governmental charges respecting income,
receipts, assets or franchises) applicable to the period ended on the date and
for all years and periods prior thereto to which each Financial Statement
relates and for which Cygnus may be liable in its own right or as transferee of
the assets of, or as successor to any other corporation, association,
partnership, joint venture or other entity. The Merger and any
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other transaction contemplated by this Agreement will not result in the
imposition of any tax liability (including any liability for stock transfer,
stamp or similar taxes) upon Zila, CMC or Cygnus.
2.18 Employment of Labor. Cygnus has complied in all material respects
with applicable federal and state laws and regulations relating to the
employment of labor, including the provisions thereof relating to wages, hours,
safety, and fair employment practices. No employees of Cygnus are represented by
a collective bargaining unit. To the knowledge of Shareholders, no such
collective bargaining unit is attempting to represent any employees of Cygnus.
Except as disclosed in the Disclosure Materials (hereinafter defined) or as
otherwise specifically set forth in an Exhibit to this Agreement, Cygnus does
not have any obligation to or customary arrangement with employees for bonuses,
incentive compensation, vacations, severance pay, insurance or other benefits or
perquisites.
2.19 Insurance. There is in effect for Cygnus such insurance against
loss or damage of the kinds customarily insured against by corporations engaged
in the same or similar business or having similar properties, with reputable
insurers, in such amounts and by such methods as is customary in the case of
such corporations.
2.20 Employee Benefit Plans. With respect to the employee benefits
provided to employees and former employees of Cygnus:
(a) Cygnus currently maintains only the employee pension benefit
plans, as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), as are listed in Exhibit
2.20 to this Agreement (the "Pension Plans").
(b) Cygnus currently maintains only the employee welfare benefit
plans, as defined in Section 3(l) of ERISA (including but not limited
to, life insurance, medical, hospitalization, holiday, vacation,
disability dental and vision plans), as are listed in Exhibit 2.20 to
this Agreement (the "Welfare Plans").
(c) Cygnus currently maintains, or has entered into, only the
compensation programs and/or employment arrangements, (including but
not limited to, incentive compensation, bonus, severance, sick pay,
salary continuation, deferred compensation, supplemental executive
compensation plans, and employment and consulting agreements) as are
listed in Exhibit 2.20 to this Agreement (the "Compensation Programs").
(d) Cygnus does not contribute, and has not contributed within the
last five years, to any multiemployer plan, as defined by Section 3(37)
of ERISA.
(e) Each Pension Plan and Welfare Plan as written and as
administered is in compliance with ERISA; each Pension Plan which is
intended to be qualified
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under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") has been determined by the Internal Revenue Service to be
so qualified or a request for such determination has been timely filed
with the Internal Revenue Service (and to Cygnus' knowledge nothing has
occurred since the date of the last such determination which could
reasonably be expected to cause the Internal Revenue Service to revoke
such determination).
(f) Any Pension Plan or any Welfare Plan designed to satisfy the
requirements of Section 125, Section 401, Section 401(k), Section 409,
Section 501(c)(9), Section 4975(e)(7), and/or Section 4980B of the
Code, satisfies such section.
(g) No accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, exists (whether or not waived) with respect to any
Pension Plan as of the date hereof.
(h) All amounts required to be paid by Cygnus with respect to each
Pension Plan, Welfare Plan and Compensation Program have been
indefeasibly paid in full.
(i) None of the Pension Plans or Cygnus or any party in interest
or disqualified person has engaged in any non-exempt "prohibited
transactions" as defined in Section 406 of ERISA or Section 4975 of the
Code.
(j) Except as disclosed in Exhibit 2.20 to this Agreement, no
Pension Plan or Welfare Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with
respect to current or former employees beyond their retirement or other
termination of service other than (i) coverage mandated by applicable
law, (ii) retirement benefits under a Pension Plan, (iii) death
benefits under a Welfare Plan, (iv) deferred compensation accrued on
the books of Cygnus, or (v) benefits the full cost of which is borne by
the current or former employee (or his or her beneficiary).
(k) No "leased employee," as that term is defined in Section
414(n) of the Code, performs services for Cygnus.
(l) No liability has been, or is expected by Cygnus to be,
incurred by Cygnus under Section 4062 of ERISA with respect to any
Pension Plan.
(m) No reportable event within the meaning of Title IV of ERISA
has occurred with respect to any Pension Plan.
(n) Cygnus has furnished Zila with correct and complete copies of
each Pension Plan, Welfare Plan, and Compensation Program, together
with any trust
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agreements, summary plan descriptions, employee informational material,
financial statements relating thereto and participant listings.
2.21 Proprietary Rights. Except as set forth in Exhibit 2.21, Cygnus
does not own, nor is it licensed under, any patent, patent application,
trademark, trademark application, trade name, service mark, copyright,
franchise, corporate name, trade secret or other proprietary right or asset (all
of the foregoing are hereinafter referred to as "Proprietary Rights"). Cygnus
owns and possesses all rights, titles and interest, or a valid license, in and
to the Proprietary Rights set forth in Exhibit 2.21. Exhibit 2.21 describes all
Proprietary Rights which have been licensed to third parties and all Proprietary
Rights which are licensed from third parties by Cygnus. Cygnus has taken all
necessary action to protect the Proprietary Rights set forth in Exhibit 2.21.
Cygnus has not received any notice of, nor is it aware of any facts which
indicate a likelihood of, any infringement, misappropriation, or conflict from
any third party with respect to the Proprietary Rights which are listed on
Exhibit 2.21; Cygnus has not infringed, misappropriated or otherwise conflicted
with any Proprietary Rights or similar rights or assets of any third parties,
nor is it aware of any such infringement, misappropriation or conflict which
will occur in the continued operation of the business of Cygnus; and no claim by
any third party contesting the validity of any Proprietary Rights listed in
Exhibit 2.21 has been made, is currently outstanding or, to the best knowledge
of Cygnus, is threatened.
2.22 Questionable Payments. To the knowledge of Shareholders, Cygnus
has not, directly or indirectly: used corporate funds for unlawful
contributions, gifts, entertainment, or for other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977 applicable to the conduct of its business;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entry on its books or records; or
made any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment to any person or entity, private or public, regardless of form, whether
in money, property, or services, to obtain favorable treatment in securing
business or to obtain special concessions, or to pay for favorable treatment for
business secured or for special concessions already obtained.
2.23 Disclosure Materials; Untrue Statements. In connection with the
execution and delivery of this Agreement, Shareholders have provided or caused
to be provided to Zila (including its agents, advisors and representatives)
various documents and other materials relating to Cygnus. Such documents and
other materials, together with the representations and warranties of
Shareholders contained in this Agreement, and the schedules, exhibits and
certificates furnished by Shareholders or Cygnus to Zila (including its agents,
advisors and representatives) in connection with the execution of this Agreement
or in connection with the transactions contemplated hereby are referred to
herein as the "Disclosure Materials." The Disclosure Materials, taken as a
whole, contain an accurate description of the current businesses and operations
of Cygnus. Shareholders have not directly or indirectly made, in connection with
the offer and sale of the Cygnus Common Stock to Zila, (a) any statement which
as of the date thereof
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is false or misleading with respect to any material fact, or (b) an omission or
failure to state any material fact (i) necessary in order to make the statements
made in the light of the circumstances in which they were made, not false or
misleading, or (ii) necessary to correct an earlier statement which has
subsequently become false or misleading.
2.24 Absence of Adverse Changes. Other than as described in Schedule
2.24 to this Agreement, since December 31, 1996, Cygnus taken as a whole:
(a) has not suffered any material adverse change in its
businesses, assets, financial affairs or prospects;
(b) has conducted its businesses in the ordinary course and has
not made any unusual commitments, acquisitions, borrowings, purchases,
payments or sales;
(c) has not suffered any damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting its
properties, assets or business;
(d) has not made any declaration or setting aside or payment of
any dividend or other distribution in respect of the capital stock of
Cygnus, or any direct or indirect redemption, purchase or other
acquisition of any stock; and
(e) has not made any material change in compensation (including
bonus compensation) payable to or to become payable to any of its
officers, employees or agents or any changes in employee fringe
benefits.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ZILA AND CMC
Zila and CMC represent and warrants to Shareholders, and each of them,
as follows:
3.1 Corporate Status. Each of Zila and CMC is a corporation duly
organized and in good standing under the laws of the State of Delaware. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, violate any provision of any charter,
bylaw, mortgage, lien, lease, agreement, instrument, order, judgment or decree
to which Zila or CMC is a party or by which Zila or CMC is bound, and will not
violate any other restriction of any kind or character to which Zila or CMC is
subject.
3.2 Due Authorization. The execution and delivery of this Agreement by
Zila and CMC has been duly and validly authorized and all requisite corporate
actions have been taken to make it valid and binding upon Zila and CMC,
respectively, in accordance with its terms.
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ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS OF ZILA AND CMC
The obligations of Zila and CMC arising under this Agreement to be
performed at the Effective Time are subject to fulfillment at or prior to the
Effective Time of each of the following conditions:
4.1 Representations and Warranties True. Each of the representations
and warranties of Shareholders and Cygnus contained in this Agreement shall have
been true and correct when made.
4.2 Financial Statements. Zila shall have received the Financial
Statements and the 12/96 Financials.
4.3 Contract Amendments. To the extent requested by Zila, all contracts
between Cygnus and any Shareholder or any member of the family of any
Shareholder shall have been amended to make such reasonable changes to the terms
thereof which shall be satisfactory to Zila (the "Contract Amendments"), and
Zila shall have received evidence thereof satisfactory to it.
4.4 Approvals. Zila shall have received evidence satisfactory to it
that the transactions contemplated by this Agreement have been approved by the
Board of Directors and shareholders of Cygnus, and by any lenders or creditors
of Cygnus or other parties of which consent is required in order for Cygnus to
enter into the transactions contemplated by this Agreement.
4.5 Access to Properties and Information. Cygnus shall have permitted
Zila and its representatives full access during normal business hours to all of
the properties, books, tax returns, contracts and records of Cygnus, and shall
have provided all documents and information with respect to its affairs, as may
have been reasonably requested by Zila or such representatives.
4.6 Satisfactory Investigation. Zila and its consultants and
representatives shall have completed their investigation and review of the
business and affairs of Cygnus, and such investigation and review shall have
disclosed no event or condition which would, in the reasonable judgment of Zila,
make it inadvisable to consummate the transactions contemplated by this
Agreement.
4.7 No Litigation. There shall be no action, proceeding or threatened,
pending or actual litigation to enjoin, restrain or prohibit the consummation of
the transactions contemplated by this Agreement or which would have the effect,
if successful, of imposing any liability upon Zila or impairing the right of
Zila to own all of the issued and outstanding common stock of the Surviving
Corporation upon the Effective Time or to continue the business of Cygnus as
presently conducted.
4.8 Compliance with Section 7.2. Shareholders and Cygnus shall have
complied with Section 7.2.
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ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDERS AND CYGNUS
The obligations of Shareholders and Cygnus arising under this Agreement
to be performed at the Effective Time are subject to fulfillment at or prior to
the Effective Time of each of the following conditions:
5.1 Representations and Warranties True. Each of the representations
and warranties of Zila and CMC contained in this Agreement shall be true and
correct.
5.2 Stock Options. Mr. Egidio Cianciosi shall have been granted
options, pursuant to Zila's existing employee stock option plan, to purchase
75,000 shares of Zila Common Stock at an exercise price equal to the average of
the closing bid and ask prices on the Closing Date as reported by the Nasdaq
Small-Cap Market (or such other exchange upon which the Zila Common Stock is
listed for trading at such time). Such options shall vest at the rate of 25,000
shares per year, with the first 25,000 shares vesting one year following the
Closing Date, and shall be subject to other customary terms and conditions.
5.3 Compliance with Section 7.3. Zila and CMC shall have complied with
Section 7.3.
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 Conduct of Business Pending the Closing. Cygnus and Shareholders
covenant and agrees that, prior to the Effective Time, unless Zila shall
otherwise consent in writing or as otherwise expressly contemplated or permitted
by this Agreement:
(a) The business of Cygnus shall be conducted only in, and Cygnus
shall not take any action except in, the ordinary course, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and past custom and practice;
and Cygnus shall maintain its facilities in good condition and repair
and in accordance with Cygnus' policies and procedures relating thereto
as in effect prior to the execution of this Agreement;
(b) Cygnus shall not, directly or indirectly, do or pen-nit to
occur any of the following: (i) issue, sell, pledge, dispose of or
encumber (A) any additional shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of,
any of its capital stock, except for issuances upon the exercise of
options or warrants outstanding on the date hereof, or (B) any of its
assets, except for fair value in the ordinary course of business; (ii)
amend or propose to amend its Articles of Incorporation or Bylaws;
(iii) split, combine or reclassify any outstanding shares of the Cygnus
Common Stock or other securities of Cygnus, or declare, set aside or
pay any dividend of other distribution payable in cash, stock, property
or otherwise with respect to any of the Cygnus Common
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<PAGE> 15
Stock or other securities of Cygnus; (iv) redeem, purchase or acquire
or offer to acquire any of the Cygnus Common Stock or other securities
of Cygnus; (v) acquire (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets
thereof; (vi) incur or guarantee any indebtedness for borrowed money or
issue any debt securities; or (vii) enter into or propose to enter
into, or modify or propose to modify, any agreement, arrangement or
understanding with respect to any of the matters set forth in this
Section 6.1(b);
(c) Cygnus shall not, directly or indirectly, (i) enter into or
modify any contract, agreement or understanding with Egidio Cianciosi;
(ii) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officers or directors
or consultants; (iii) make any capital expenditures, including any
capitalizable lease obligations, other than expenditures necessary to
maintain existing assets in good repair and other capital expenditures
in amounts not exceeding $5,000 in the aggregate; or (iv) in the case
of employees who are not officers or directors or consultants, grant or
take any action with respect to the granting of any salary increases,
severance or termination pay or increases in other benefits, other than
grants or such actions as are in the ordinary course of Cygnus'
business and are consistent with Cygnus' historic compensation
practices, or grant or take any actions with respect to the granting of
any bonuses;
(d) Cygnus shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group
arrangement for the benefit or welfare of any employees or any bonus,
profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or arrangements for the benefit or welfare of
any director;
(e) Cygnus shall use its best efforts to cause its current
insurance (or reinsurance) policies not to be canceled or terminated or
reduced in coverage amount or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation, reduction in
coverage amount or lapse, replacement policies providing coverage equal
to or greater than the coverage under the canceled, terminated, reduced
or lapsed policies for substantially similar premiums are in full force
and effect;
(f) Cygnus (i) shall use its best efforts to preserve intact its
business organization and good will, keep available the services of its
officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with it; (ii) shall
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confer at Zila's request (but in no event less frequently than weekly)
with representatives of Zila to report on operational matters and the
general status of ongoing operations; (iii) shall not take any action
which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement or in any other
agreement or instrument executed in connection with the transactions
contemplated hereby untrue at, or at any time prior to, the Effective
Time; (iv) shall notify Zila of any emergency or other change in the
normal course of its business or in the operation of its properties and
of any governmental or third party complaints, investigations or
hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or
hearing would be material, individually or in the aggregate, to the
business, operations or financial condition of Cygnus or to Cygnus' or
Zila's ability to consummate the transactions contemplated by this
Agreement; and (v) shall notify Zila if Cygnus shall discover that any
representation or warranty made by it in this Agreement was when made,
or has subsequently become, untrue;
(g) Cygnus shall not change any of its methods of accounting or
accounting practices in any material respect, and Cygnus shall not make
any tax election;
(h) Cygnus will not waive or agree to waive any applicable statute
of limitations or any similar statutory or judicial doctrine benefiting
Cygnus; and
(i) Cygnus shall not commence or settle any material legal action
or proceeding.
6.2 Notification. During the period subsequent to the execution of
this agreement and prior to the Closing Date (the "Pre-Closing Period"), Cygnus
shall promptly notify Zila in writing of:
(a) the discovery by Cygnus of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of
any representation or warranty made by Cygnus in this Agreement;
(b) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty
made by Cygnus in this Agreement if (i) such representation or warranty
had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or (ii) such event,
condition, fact or circumstance had occurred, arisen or existed on or
prior to the date of this Agreement;
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<PAGE> 17
(c) any breach of any covenant or obligation of Cygnus; and
(d) any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions set forth in Article 4
impossible or unlikely.
ARTICLE 7
CLOSING
7.1 General. The Closing shall take place at __________ __.m. on
_______________, 1997, at the offices of Squire, Sanders & Dempsey L.L.P., 40
North Central Ave., Suite 2700, Phoenix, Arizona 84004, or at such other time,
date or place as shall be mutually agreed upon by the parties.
7.2 Actions by Shareholders. At the Closing, Shareholders shall
deliver or cause to be delivered to Zila (and to the other parties to the
instruments referred to below as applicable), in form and substance reasonably
acceptable to Zila, each of the following instruments or materials, duly
executed:
(a) A certified copy of the Articles of Incorporation of Cygnus as
in effect on the Closing Date.
(b) A certificate executed by the Secretary and by the President
of Cygnus, dated the Closing Date, to the effect that: (i) the copy of
the Bylaws of Cygnus attached to such certificate is a true, correct
and complete copy of the Bylaws of such corporation as currently in
effect; (ii) Cygnus owns no shares of capital stock of any other
corporation; (iii) the Contract Amendments are in full force and
effect; and (iv) a true copy of each consent required by a Material
Contract is attached to such certificate and each such consent is in
effect.
(c) A certificate executed by Cygnus and Cianciosi, dated the
Closing Date, to the effect that: (i) Cygnus and Shareholders are in
compliance with all the terms, covenants and conditions contained in
this Agreement on their part to be complied with; (ii) all
representations and warranties of Cygnus and Cianciosi contained in
this Agreement were true and correct when made and are true and correct
as of the Closing Date except as to changes required or contemplated by
this Agreement; (iii) the 12/96 Financials are correct and complete,
present fairly the financial position, results of operations, and
changes in financial position of the consolidated business and
operations of Cygnus as of the dates or for the periods indicated, are
consistent with the books and records of the entities to which they
relate and have been prepared in accordance with generally accepted
accounting principles consistent with those followed in the preparation
of the Financial Statements; (iv) the inventories of Cygnus in the
12/96 Financials, including finished goods, work in process, raw
materials and supplies, consisted of items,
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<PAGE> 18
valued at cost or market, whichever is lower, that were merchantable or
usable in the ordinary course of the businesses of Cygnus in quantities
and amounts not in excess of the reasonable needs of such businesses
except only for obsolete, defective and excess items for which the
carrying value (net of applicable reserves, if any) did not exceed net
realizable values, after giving full consideration to the cost of
carrying or disposing of or marketing such items; and since December
31, 1996, there have been no changes in such inventories except as a
consequence of sales and purchases in the ordinary course of business;
(v) except as disclosed in the Disclosure Materials, all of the
accounts receivable, notes, and other obligations for payment of money
to Cygnus as of December 31, 1996 are valid and legally enforceable
obligations of and collectible from the persons purported to be liable
thereon and are free of any defense, counterclaim, setoff or deduction;
and since December 31, 1996, there have been no changes in such
receivables, notes and other obligations except for changes arising in
the ordinary course of business; (vi) no Shareholder or member of the
family of a Shareholder has any unsatisfied claim against Cygnus or any
asset thereof, except as specifically set forth on an Exhibit to this
Agreement; and (vii) upon the Effective Time, all of the common stock
of the Surviving Corporation will be validly issued, fully paid,
nonassessable and owned of record by Zila.
(d) The resignation of Shareholders from all directorships held
by them respecting Cygnus.
(e) The opinion of counsel to Shareholders and to Cygnus,
satisfactory in form and substance to Zila, dated the Closing Date, to
the effect that:
(i) Cygnus is duly organized, validly existing and in good
standing under the laws of the State of Arizona, is qualified as a
foreign corporation in each jurisdiction in which its owning,
leasing or licensing of property or conduct of business requires
such qualification and has all requisite power to own all of its
properties and to carry on its business as presently being
conducted;
(ii) Shareholders are the record owners of the Cygnus Common
Stock and have good and marketable title to the Cygnus Common
Stock;
(iii) Upon the Effective Time, the common stock of the
Surviving Corporation will be validly issued, fully paid,
nonassessable and owned of record by Zila, and such shares will
constitute 100% of the issued and outstanding capital stock of
Cygnus;
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<PAGE> 19
(iv) To the knowledge of such counsel after reasonable
inquiry, there are no outstanding subscriptions, warrants or
options for the purchase of shares of capital stock or any
securities convertible into or exchangeable for shares of capital
stock or any other commitments of any kind for the issuance of
additional shares of capital stock of Cygnus;
(v) Neither the execution and delivery of this Agreement
nor the performance of the transactions contemplated hereby will
constitute a breach or violation of the Articles of Incorporation
or Bylaws (or the equivalent instruments) of Cygnus or of any
Material Contract, or of any law, order, regulation or decree by
which Cygnus or any Shareholder is bound;
(vi) This Agreement has been duly authorized, executed and
delivered by Shareholders and constitutes the valid and legally
binding obligation of Shareholders enforceable in accordance with
its terms;
(vii) Such counsel is not aware of any action, suit,
proceeding or claim pending or threatened against Cygnus or its
properties or businesses, except as set forth in Exhibit 2.14 to
this Agreement;
(viii) The Contract Amendments have been duly and validly
authorized, executed and delivered by the parties thereto,
constitute the valid and legally binding obligation of such
parties and each such Contract Amendment is enforceable in
accordance with its terms;
(ix) Nothing has come to the attention of such counsel
which would give them reasonable cause to believe that any of the
representations and warranties of Shareholders contained in
Article 2 of this Agreement or in any certificate delivered to
Zila pursuant to this Section 7.2 are false or misleading.
With respect to any opinion of such counsel relating to the
enforceability of any agreement or contract, such opinion may be
qualified as to the application of bankruptcy, receivership or similar
laws of general application restricting the enforcement of contractual
rights, and no opinion need be expressed as to the ability to
specifically enforce any of the provisions, other than obligations to
pay money, of such agreements. Insofar as the opinion of such counsel
involves matters governed by the laws of any jurisdiction other than
the State of Arizona and the United States of America, such counsel may
render their opinion as to such
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<PAGE> 20
matters in reliance upon an opinion of counsel in such jurisdiction, a
copy of which shall be attached to their opinion.
7.3 Actions by Zila. At the Closing, Zila shall deliver or cause to be
delivered to Shareholders and Cygnus, in form and substance reasonably
acceptable to Shareholders and Cygnus, each of the following instruments or
materials, duly executed:
(a) The opinion of counsel to Zila, Squire, Sanders & Dempsey
L.L.P., dated the Closing Date, to the effect that:
(i) Each of Zila and CMC is duly organized, validly
existing and in good standing under the laws of the State of
Delaware;
(ii) This Agreement has been duly authorized, executed and
delivered by Zila and CMC and constitutes the valid and legally
binding obligation of Zila an CMC enforceable in accordance with
its terms;
(iii) Neither the execution and delivery of this Agreement
nor the performance of the transactions contemplated hereby will
constitute a breach or violation of the Articles of Incorporation
or Bylaws of Zila or CMC or, to the knowledge of such counsel, of
any law, order, regulation or decree by which Zila or CMC is
bound.
With respect to any opinion of such counsel relating to the
enforceability of any agreement or contract, such opinion may be
qualified as to the application of bankruptcy, receivership or similar
laws of general application restricting the enforcement of contractual
rights, and no opinion need be expressed as to the ability to
specifically enforce any of the provisions, other than obligations to
pay money, of such agreements. Insofar as the opinion of such counsel
involves matters governed by the laws of any jurisdiction other than
the State of Arizona and the United States of America, such counsel may
render their opinion as to such matters in reliance upon an opinion of
counsel in such jurisdiction, a copy of which shall be attached to
their opinion.
(b) A certificate executed by the President of Zila to the effect
that: (i) Zila is in compliance with all the terms, covenants and
conditions contained in this Agreement on its part to be complied with;
and (ii) all representations and warranties of Zila contained in this
Agreement were true and correct in all material respects when made and
are true and correct in all material respects as of the Closing Date.
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7.4 Simultaneous Action. All actions taken at the Closing shall be
deemed to occur simultaneously.
7.5 Employment Agreement. Zila and Mr. Egidio Cianciosi shall use
commercially reasonable efforts to enter into an employment agreement within 10
business days following the Closing Date, pursuant to which Mr. Cianciosi shall
be employed as an employee of Zila or a subsidiary of Zila. Such employment
agreement shall be in form and substance acceptable to Zila and Mr. Cianciosi
and shall provide, among other things, for a three-year term, for a base salary
in the first year of $90,000 annually and for participation by Mr. Cianciosi in
Zila's existing Incentive Bonus Plan.
ARTICLE 8
INDEMNIFICATION
8.1 General. Cianciosi shall indemnify and hold Zila harmless against
any damage (including costs, fees of counsel and expenses reasonably incurred),
loss or reduction in value suffered by Zila by reason of the incorrectness or
breach of any of the representations or warranties of Cygnus, Cianciosi or any
of the other Shareholders contained in this Agreement or in any certificate
delivered to Zila at the Closing or otherwise in connection with the
transactions contemplated by this Agreement.
8.2 Limitations on Indemnification Under Section 8.1. Unless the
indemnification right provided to Zila in Section 8.1 shall arise by reason of
fraud or fraudulent concealment on the part of any Shareholder, then (a) Zila
shall be entitled to recover its damages, losses or reductions in value
resulting from all such breaches or incorrectness, up to a maximum aggregate
amount of $1,725,000; and (b) the indemnification rights of Zila set forth in
Section 8.1 shall expire on the second anniversary of the Effective Time, except
as to claims to an indemnification asserted by Zila prior to such anniversary
date which had not been satisfied or otherwise resolved as of such date. The
assertion, waiver or failure to assert any indemnification rights provided in
this Article 8 shall not preclude Zila from seeking any other rights or remedies
to which it may be entitled.
ARTICLE 9
APPOINTMENT OF AGENT
9.1 Grant of Authority. Mr. Egidio Cianciosi is hereby appointed
attorney-in-fact, agent and representative for Shareholders for any and all
purposes arising out of or in connection with this Agreement. Mr. Cianciosi
shall have full power and authority on behalf of each Shareholder (i) to deal
with Zila as to any matter arising under this Agreement; (ii) to accept any
payment by Zila on behalf of any Shareholder; (iii) to accept and give Notices
and other communications relating to this Agreement; (iv) to settle any dispute
relating to the terms of this Agreement; (v) to waive any condition to the
obligations of any Shareholder arising under this Agreement or waive any breach,
circumstance of nonperformance or default by Zila arising under this Agreement;
(vi) to modify or amend this Agreement; and (vii) to execute any instrument or
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<PAGE> 22
document that Mr. Cianciosi may, in his sole discretion, consider necessary or
desirable in the exercise of his authority under this Article 9.
9.2 Termination of Authority. The authority of Mr. Cianciosi pursuant
to this Article 9 shall terminate upon (i) his resignation (accomplished by
Notice to all parties to this Agreement); (ii) his death; or (iii) the
revocation of his authority as to a Shareholder by such Shareholder
(accomplished by Notice to all parties to this Agreement). Prior to the
effectiveness of any Notice of resignation or revocation of authority, Zila
shall have no duty to inquire into the authority of Mr. Cianciosi, shall have
the right to rely upon all acts of Mr. Cianciosi and all such acts shall be
fully binding upon each Shareholder.
ARTICLE 10
MISCELLANEOUS
10.1 Survival. All covenants, agreements, representations and
warranties contained in this Agreement or any certificate or other document
delivered pursuant to this Agreement shall survive the Closing, the payment of
all amounts due hereunder and any investigation conducted by or on behalf of
Zila or Shareholders.
10.2 Finders. Each of Zila, Cygnus and Shareholders represent and
warrant to each other that they have no obligation to any third party which
might give rise to a claim for a brokerage commission, finder's fee or similar
payment to any person in connection with the Merger or the other transactions
contemplated by this Agreement. Zila and Shareholders shall indemnify and hold
the other harmless, and Shareholders shall indemnify and hold Cygnus harmless,
against all claims by their respective finder, broker or similar person, with
respect to the consummation of this Agreement and all transactions contemplated
hereby.
10.3 Expenses. All expenses incurred by Zila, CMC or Shareholders
(including fees of counsel and accountants) in connection with the preparation
of this Agreement and the transactions contemplated hereby shall be borne by the
party incurring the same. All expenses incurred by Cygnus in connection with the
transactions contemplated by this Agreement shall be borne by Shareholders.
10.4 Attorneys' Fees. In the event either party hereto institutes an
action or other proceeding to enforce any rights arising under this Agreement,
the party prevailing in such action or other proceeding shall be paid all
reasonable costs and attorneys' fees by the other party, such fees to be set by
the court or arbitrators, as the case may be, and not by a jury and to be
included in any judgment entered in such proceeding.
10.5 Further Actions. Cygnus and Shareholders shall, without further
consideration, execute and deliver any further or additional instruments and
perform any acts which may become reasonably necessary in order to effectuate
and carry out the purposes of this Agreement.
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<PAGE> 23
10.6 Severability. In the event any term or provision of this
Agreement is declared to be invalid or illegal, for any reason, this Agreement
shall remain in full force and effect and the same shall be interpreted as
though such invalid and illegal provision were not a part hereof.
10.7 Notices. Any notice or communication to be given under the terms
of this Agreement ("Notice") shall be in writing and shall be personally
delivered or sent by telex or mail. Notice shall be effective (i) if personally
delivered, when delivered; (ii) if by telex, on the second business day after
transmission thereof on a proper telex or TWX machine with confirmed answerback;
(iii) if mailed, at midnight on the fourth business day after deposit in the
mail with airmail postage prepaid. Notices shall be addressed as follows:
If to Zila: Joseph Hines, President
Zila, Inc.
5227 North 7th Street
Phoenix, Arizona 85014
Telephone: (602) 266-6700
Fax: (602) 234-2264
With copy to: Christopher D. Johnson, Esq.
Squire, Sanders & Dempsey L.L.P.
40 North Central Ave., Suite 2700
Phoenix, Arizona 85004
Telephone: (602) 528-4000
Fax: (602) 253-8129
If to Mr. Cianciosi
or to Shareholders: Mr. Egidio Cianciosi
8260 East Gelding Drive
Scottsdale, Arizona 85260
Telephone: (602) ___-_____
Fax: (602) ___-_____
With copy to: David D. Dodge, Esq.
Lieberman, Dodge, Sendrow & Gerding, Ltd.
3550 North Central Avenue, Suite 1801
Phoenix, Arizona 85012
Telephone: (602) 277-3000
Fax: (602) 277-7478
or at such other address as a party may from time to time designate by Notice
hereunder.
10.8 Modification and Amendments. No provision of this Agreement may be
modified or amended except by a writing executed by the party sought to be
charged with such modification or amendment.
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<PAGE> 24
10.9 Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement. Any waiver shall be effective only if in writing and executed by
the party sought to be charged with such waiver.
10.10 Entire Agreement. This Agreement, together with any other and
further documents executed and delivered at the Closing, constitutes and
embodies the full and complete understanding and agreement of the parties hereto
and supersedes all prior understandings or agreements whether oral or in
writing.
10.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona (without reference to the
provisions thereof relating to conflicts of laws).
10.12 Headings; Interpretation. The Section headings and Article
headings used herein are for convenience and reference only and are not intended
to define, limit or describe the scope or intent of any provision of this
Agreement. When used in this Agreement, the term "including" shall mean without
limitation by reason of enumeration. The definition of a term in the plural form
shall include the singular form, and the singular the plural, as the context
requires. Any masculine personal pronoun shall be considered to mean the
corresponding feminine personal pronoun, as the context requires.
10.13 Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors or assigns, as the case may be. Zila or CMC may
assign any of its respective rights or obligations hereunder to a wholly owned
subsidiary of Zila, provided that as a condition to any such assignment, Zila
shall not be released from its liabilities and obligations arising under this
Agreement.
10.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed a duplicate original.
10.15 Satisfaction of Conditions Precedent. Each party shall cooperate
with the other parties hereto and use its or his best efforts to satisfy each of
the conditions precedent to the accomplishment of the transactions contemplated
by this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be executed as of the 3rd day of April, 1997.
ZILA, INC.
By
---------------------------------------
Its President
--------------------------------------
CYGNUS MERGER CORPORATION
By
---------------------------------------
Its President
--------------------------------------
CYGNUS IMAGING, INC.
By
---------------------------------------
Its President
--------------------------------------
-----------------------------------------
EGIDIO CIANCIOSI
-----------------------------------------
JAMES T. JENSEN
-----------------------------------------
KENNETH D. KIRK
"SHAREHOLDERS"
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<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Zila, Inc. on Form S-3 of our report dated October 18, 1996, appearing in the
Annual Report on Form 10-K of Zila, Inc. for the year ended July 31, 1996 and to
the reference to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
/s/DELOITTE & TOUCHE LLP
- ------------------------
Deloitte & Touche LLP
Phoenix, Arizona
July 18, 1997
EXHIBIT 23-A
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Zila, Inc. on Form S-3 of our report dated June 30, 1997, appearing in the
Current Report on Form 8-K of Zila, Inc., dated July 18, 1997 and to the
reference to us under the heading "Experts" in such Prospectus, which is part of
this Registration Statement.
/s/DELOITTE & TOUCHE LLP
- ------------------------
Deloitte & Touche LLP
Phoenix, Arizona
July 18, 1997
EXHIBIT 23-B
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Zila, Inc. on Form S-3 of our report dated _____ __, 1996, appearing in
the Current Report on Form 8-K of Zila, Inc., dated July 18, 1997 and to the
reference to us under the heading "Experts" in such Prospectus, which is part of
this Registration Statement.
/s/GRANT THORNTON LLP
- ---------------------
Grant Thornton LLP
Phoenix, Arizona
June 18, 1997
EXHIBIT 23-C
<PAGE> 1
EXHIBIT 24-A
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints CLARENCE J. BAUDHUIN his true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign a Form S-3 Registration
Statement for filing with the Securities and Exchange Commission respecting the
registration of shares of Common Stock, $.001 par value, of Zila, Inc., a
Delaware corporation, together with any and all amendments (including
post-effective amendments) to such Registration Statement, and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting such attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
DATED: July 7 , 1997
-------
/s/ Joseph Hines
------------------------------
JOSEPH HINES
STATE OF ARIZONA }
} ss.
County of Maricopa }
On this 7 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Joseph Hines, known to me to be the person whose name is
subscribed to the within instrument and acknowledged that he executed the same
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janice Backus
------------------------------
Notary Public
My commission expires: October 23, 1997
<PAGE> 1
EXHIBIT 24-B
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints JOSEPH HINES his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign a Form S-3 Registration Statement for
filing with the Securities and Exchange Commission respecting the registration
of shares of Common Stock, $.001 par value, of Zila, Inc., a Delaware
corporation, together with any and all amendments (including post-effective
amendments) to such Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that such
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
DATED: July 7 , 1997
-------
/s/ Clarence J. Baudhuin
------------------------------
CLARENCE J. BAUDHUIN
STATE OF ARIZONA }
} ss.
County of Maricopa }
On this 7 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Clarence J. Baudhuin, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janice Backus
------------------------------
Notary Public
My commission expires: October 23, 1997
<PAGE> 1
EXHIBIT 24-C
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints JOSEPH HINES and CLARENCE J. BAUDHUIN, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form S-3 Registration Statement for filing with the
Securities and Exchange Commission respecting the registration of shares of
Common Stock, $.001 par value, of Zila, Inc., a Delaware corporation, together
with any and all amendments (including post-effective amendments) to such
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: July 7 , 1997
-------
/s/ Patrick M. Lonergan
------------------------------
PATRICK M. LONERGAN
STATE OF ARIZONA }
} ss.
County of Maricopa }
On this 7 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Patrick M. Lonergan, known to me to be the person whose name
is subscribed to the within instrument and acknowledged that he executed the
same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janice Backus
------------------------------
Notary Public
My commission expires: October 23, 1997
<PAGE> 1
EXHIBIT 24-D
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints JOSEPH HINES and CLARENCE J. BAUDHUIN, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form S-3 Registration Statement for filing with the
Securities and Exchange Commission respecting the registration of shares of
Common Stock, $.001 par value, of Zila, Inc., a Delaware corporation, together
with any and all amendments (including post-effective amendments) to such
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: July 7 , 1997
--------
/s/ Michael S. Lesser
------------------------------
MICHAEL S. LESSER
STATE OF ARIZONA }
} ss.
County of Maricopa }
On this 7 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Michael S. Lesser, known to me to be the person whose name
is subscribed to the within instrument and acknowledged that he executed the
same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janice Backus
------------------------------
Notary Public
My commission expires: October 23, 1997
<PAGE> 1
EXHIBIT 24-E
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints JOSEPH HINES and CLARENCE J. BAUDHUIN, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form S-3 Registration Statement for filing with the
Securities and Exchange Commission respecting the registration of shares of
Common Stock, $.001 par value, of Zila, Inc., a Delaware corporation, together
with any and all amendments (including post-effective amendments) to such
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: July 7 , 1997
--------
/s/ Carl A. Schroeder
------------------------------
CARL A. SCHROEDER
STATE OF ARIZONA }
} ss.
County of Maricopa }
On this 7 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Carl A. Schroeder, known to me to be the person whose name
is subscribed to the within instrument and acknowledged that he executed the
same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janice Backus
------------------------------
Notary Public
My commission expires: October 23, 1997
<PAGE> 1
EXHIBIT 24-F
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints JOSEPH HINES and CLARENCE J. BAUDHUIN, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form S-3 Registration Statement for filing with the
Securities and Exchange Commission respecting the registration of shares of
Common Stock, $.001 par value, of Zila, Inc., a Delaware corporation, together
with any and all amendments (including post-effective amendments) to such
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: July 8 , 1997
--------
/s/ Curtis M. Rocca
------------------------------
CURTIS M. ROCCA
STATE OF CA }
} ss.
County of Sacramento }
On this 8 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Curtis M. Rocca, known to me to be the person whose name is
subscribed to the within instrument and acknowledged that he executed the same
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Maxine Holland
------------------------------
Notary Public
My commission expires: March 26, 1999
<PAGE> 1
EXHIBIT 24-G
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints JOSEPH HINES and CLARENCE J. BAUDHUIN, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign a Form S-3 Registration Statement for filing with the
Securities and Exchange Commission respecting the registration of shares of
Common Stock, $.001 par value, of Zila, Inc., a Delaware corporation, together
with any and all amendments (including post-effective amendments) to such
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
DATED: July 8 , 1997
--------
/s/ Douglas L. Ayer
------------------------------
DOUGLAS L. AYER
STATE OF CT }
} ss.
County of Fairfield }
On this 8 day of July , 1997, before me, the undersigned Notary Public,
personally appeared Douglas L. Ayer, known to me to be the person whose name is
subscribed to the within instrument and acknowledged that he executed the same
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/
------------------------------
Notary Public
My commission expires: March 31, 2000
