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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
July 7, 1995
Date of Report
(Date of earliest event reported)
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ADVANCED TISSUE SCIENCES, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-016607 14-1701513
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
10933 North Torrey Pines Road, La Jolla, California 92037
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 450-5730
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Item 5. Other Events
Advanced Tissue Sciences, Inc. (the "Company") completed a series private
placements on June 26, 1995, July 7, 1995 and July 12, 1995, issuing a
total of 2,614,432 shares of Common Stock and raising total gross proceeds
of approximately $18 million. The Company intends to use the proceeds from
these offerings to complete the validation of its manufacturing facility,
the up-scaling and validation of its manufacturing processes for
Dermagraft-TC trademark for the treatment of severe burns and Dermagraft
trademark for the treatment of diabetic foot ulcers, and other working capital
and general corporate purposes. The June 26, 1995 private placements were
reported on a Current Report on Form 8-K dated June 26, 1995. The July 7,
1995 and July 12, 1995 private placements are summarized below.
JULY 7, 1995 PRIVATE PLACEMENT
On July 7, 1995, the Company completed the private placement of 728,863
shares of its Common Stock (the "7/7/95 Shares") pursuant to Regulation D
to the Securities Act of 1933, yielding the Company gross proceeds of
approximately $5.0 million. The initial purchase price for the 7/7/95
Shares was $6.86 per share, representing an 11.5% discount to the closing
bid price of the Company's Common Stock on June 7, 1995. However, the
initial purchase price will be adjusted to result in a purchase price per
share to the investors equal to 88.5% of the average closing price of the
Common Stock during a period 115 to 160 calendar days after June 26, 1995
(the "7/7/95 Average Price"). To the extent 88.5% of the 7/7/95 Average
Price exceeds the initial purchase price of $6.86, the investor will
provide additional proceeds such that the total proceeds to the Company
from the investor equals the product of the 88.5% of the 7/7/95 Average
Price and the 7/7/95 Shares. If 88.5% of the 7/7/95 Average Price is below
the initial purchase price of $6.86, additional shares will be issued to
the investor such that the purchase per share to the investor equals 88.5%
of the 7/7/95 Average Price.
In addition, if 88.5% of the 7/7/95 Average Price is less than $6.86 per
share and the Company issues or sells any shares of its Common Stock or any
of its securities which are convertible into or exchangeable for its Common
Stock or any warrants, options or other rights to subscribe for or purchase
Common Stock within 160 calendar days after June 26, 1995 at a purchase
price less than $6.86 per share, then additional shares will be issued to
result in a purchase price per share to the investor equal to the lower of
(i) 88.5% of the 7/7/95 Average Price or (ii) the lowest price per share
the Company issues or sells any of the securities referred to above. This
adjustment is exclusive of shares or options issued pursuant to the
Company's option plans or shares issued upon the exercise of options,
warrants or rights outstanding on the closing date of the transaction.
The 7/7/95 Shares have not been registered under the Securities Act of 1933
or applicable state securities laws, and may not be offered or sold in the
United States absent registration under such Act and applicable state
securities laws or in reliance on available exemptions from such
registration requirements. However, the investor has certain registration
rights, including agreement by the Company to register the 7/7/95 Shares
within 105 calendar days of June 26, 1995 (by October 9, 1995).
The Investment Agreement between the Company and Kyneton Investments Ltd.
dated July 5, 1995 is attached hereto as an exhibit and is incorporated
herein by reference. The foregoing summary is qualified in its entirety by
reference to such exhibit.
In connection with the offering, the Company also issued warrants (the
"7/7/95 Warrants") to purchase 51,750 and 13,848 shares, respectively, to
designees of Cappello Capital Corp. ("Cappello") and The Kriegsman Group
("Kriegsman"). Cappello acted as a financial advisor to the Company and
Kriegsman as a finder with respect to the offering. Cappello also received
a cash commission and Kriegsman a finder's fee. The 7/7/95 Warrants are
subject to adjustment in the same manner as the 7/7/95 Shares. In
addition, Cappello and Kriegsman have certain piggyback registration rights
related to the 7/7/95 Warrants.
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Item 5. Other Events (Continued)
JULY 12, 1995 PRIVATE PLACEMENT
On July 12, 1995, the Company completed the private placement of
385,569 shares of its Common Stock (the "7/12/95 Shares") pursuant to
Regulation D to the Securities Act of 1933, yielding the Company gross
proceeds of approximately $2.6 million. The initial purchase price for the
7/12/95 Shares was $6.86 per share, representing an 11.5% discount to the
closing bid price of the Company's Common Stock on June 7, 1995. However,
the initial purchase price will be adjusted to result in a purchase price
per share to the investors equal to 88.5% of the average closing price of
the Common Stock during a period 160 to 205 calendar days after June 26,
1995 (the "7/12/95 Average Price"). To the extent 88.5% of the 7/12/95
Average Price exceeds the initial purchase price of $6.86, the investor
will provide additional proceeds such that the total proceeds to the
Company from the investor equals the product of the 88.5% of the 7/12/95
Average Price and the 7/12/95 Shares. If 88.5% of the 7/12/95 Average
Price is below the initial purchase price of $6.86, additional shares will
be issued to the investor such that the purchase per share to the investor
equals 88.5% of the 7/12/95 Average Price.
In addition, if 88.5% of the 7/12/95 Average Price is less than $6.86 per
share and the Company issues or sells any shares of its Common Stock or any
of its securities which are convertible into or exchangeable for its Common
Stock or any warrants, options or other rights to subscribe for or purchase
Common Stock within 205 calendar days from June 26, 1995 at a purchase
price less than $6.86 per share, then additional shares will be issued to
result in a purchase price per share to the investor equal to the lower of
(i) 88.5% of the 7/12/95 Average Price or (ii) the lowest price per share
the Company issues or sells any of the securities referred to above. This
adjustment is exclusive of shares or options issued pursuant to the
Company's option plans or shares issued upon the exercise of options,
warrants or rights outstanding on the closing date of the transaction.
The 7/12/95 Shares have not been registered under the Securities Act of
1933 or applicable state securities laws, and may not be offered or sold in
the United States absent registration under such Act and applicable state
securities laws or in reliance on available exemptions from such
registration requirements. However, the investor has certain registration
rights, including agreement by the Company to register the 7/12/95 Shares
within 160 calendar days of June 26, 1995 (by December 3, 1995). In the
event the registration is not effective with the 160-day period, the
purchase price per share will be determined, where applicable, using 77%
rather than 88.5% of the 7/12/95 Average Price.
The Investment Agreement between the Company and Arbco Associates, L.P. and
Offense Group Associates, L.P. dated July 11, 1995 is attached hereto as an
exhibit and is incorporated herein by reference. The foregoing summary is
qualified in its entirety by reference to such exhibit.
In connection with the offering, the Company also issued warrants (the
"7/12/95 Warrants") to purchase 23,134 and 11,567 shares, respectively, to
designees of Cappello and Kriegsman. Cappello acted as a financial advisor
to the Company and Kriegsman as a finder with respect to the offering.
Cappello also received a cash commission and Kriegsman a finder's fee. The
7/12/95 Warrants are subject to adjustment in the same manner as the
7/12/95 Shares. In addition, Cappello and Kriegsman have certain piggyback
registration rights related to the 7/12/95 Warrants.
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Item 7. Exhibits
Exhibit Method
Number Description of Filing
- ------- ----------- ---------
4.1 Investment Agreement between Advanced Filed Herewith
Tissue Sciences, Inc. and Kyneton
Investments Ltd.. dated July 5, 1995
4.2 Investment Agreement between Advanced Filed Herewith
Tissue Sciences, Inc. and Arbco
Associates, L.P. and Offense Group
Associates, L.P. dated July 11, 1995
4.3 Form of Warrant Agreement between the Incorporated by
Company and each of Linda S. Cappello, Reference to
Gerard K. Cappello, Lawrence K. Fleischman Exhibit 4.4 to
and The Kriegsman Group the Registrant's
Current Report on
Form 8-K dated
June 26, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ADVANCED TISSUE SCIENCES, INC.
Date: July 19, 1995 By: /s/ Arthur J. Benvenuto
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Arthur J. Benvenuto
Chairman, President and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit
Number Description Page
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4.1 Investment Agreement between Advanced Tissue
Sciences, Inc. and Kyneton Investments Ltd..
dated July 5, 1995
4.2 Investment Agreement between Advanced Tissue
Sciences, Inc. and Arbco Associates, L.P. and
Offense Group Associates, L.P. dated July 11, 1995
4.3 Form of Warrant Agreement between the Company and
each of Linda S. Cappello, Gerard K. Cappello,
Lawrence K. Fleischman and The Kriegsman Group
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EXHIBIT 4.1
INVESTMENT AGREEMENT
Between
ADVANCED TISSUE SCIENCES, INC.
And
KYNETON INVESTMENTS LTD.
Dated as of July 5, 1995
The securities to be purchased and sold pursuant to this
Investment Agreement have not been registered under the
Securities Act of 1933, as amended, (the "Act") or any state
securities laws. They may not be offered or sold in the
absence of an effective registration statement as to the
securities under said Act and any applicable State
securities law or an applicable exemption from the
registration requirements of the Act.
<PAGE>
INVESTMENT AGREEMENT dated as of July 5, 1995 between Kyneton
Investments Ltd., a corporation organized and existing under the laws of
the Cayman Islands ( the "Investor") and Advanced Tissue Sciences, Inc.,
a corporation organized and existing under the laws of the State of
Delaware (the "Company").
WHEREAS, the parties desire that the Investor become an
equity investor in the Company by purchasing an aggregate of 728,863
shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock
---------------------------------
Section 1.1 PURCHASE AND SALE OF COMMON STOCK. Upon the
terms and conditions set forth herein, the Company shall issue and sell
to the Investor, and the Investor shall purchase from the Company,
728,863 shares of the Company's Common Stock (the "Shares").
Section 1.2 PURCHASE PRICE. The aggregate purchase price
for the Shares (the "Purchase Price") shall equal $5,000,000 payable in
cash by wire transfer or cashier's check in immediately available funds.
Section 1.3 SHARE NUMBER; VALUATION PERIOD.
(a) The number of Shares that the Company shall be
obligated to issue and sell and the Investor shall be obligated to
purchase hereunder, in the aggregate, is referred to herein as the
"Share Number." Subject to adjustment as provided in Sections 1.3(c),
1.3(d) and 1.3(e), the Share Number shall initially be 728,863.
(b) The "Valuation Period" shall be a 45 calendar day
period commencing on and including the first business day which is 115
calendar days after June 26, 1995 as the same may be modified pursuant
to Section 4.2(c) hereof.
(c) Notwithstanding Section 1.3(a) above, and except
as hereinafter provided, if the Average Share Price (hereinafter
defined) during the Valuation Period is less than $7.75, then the
Company shall deliver to the Investor, at no additional cost to the
Investor, and in addition to the initial Share Number, the number of
shares of Common Stock that is obtained by subtracting (x) 728,863 from
(y) the quotient obtained by dividing the Purchase Price by 88.5% of the
Average Share Price (rounded to the nearest whole number) (together with
any additional shares issued pursuant to Section 1.3(e) herein, the
"Additional Shares").
(d) Notwithstanding Section 1.3(a) above, and except
as hereinafter provided, if the Average Share Price during the Valuation
Period is greater than $7.75, the Investor shall pay to the Company the
dollar amount by which (x) the product of 88.5% of the Average Share
Price and the Share Number exceeds (y) the product of $6.86 and the
Share Number.
(e) Notwithstanding Section 1.3(c) above, in the event
that the Company, on or prior to 160 days from June 26, 1995, issues or
sells any shares of its Common Stock or any of its
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securities which are convertible into or exchangeable for its Common Stock
or any warrants or other rights to subscribe for or to purchase or any
options for the purchase of, its Common Stock (other than shares or options
issued pursuant to the Company's option plans or shares issued upon exercise
of options, warrants or rights outstanding on the Closing Date or as
provided on Exhibit A hereto), at a purchase price which is less than
$6.86 per share (the "Subsequent Sale Price"), then the Company shall
deliver to the Investor, at no additional cost to the Investor, and in
addition to the Share Number, the number of shares of Common Stock that
is obtained by subtracting (x) 728,863 from (y) the quotient obtained by
dividing the Purchase Price by the Subsequent Sale Price (rounded to the
nearest whole number). The "Subsequent Sale Price" shall mean the
effective purchase price of the shares after all adjustments.
Notwithstanding any of the foregoing, the number of
Additional Shares issuable hereunder shall be the greater of the number
of Additional Shares issuable pursuant to Section 1.3(c) herein and the
number of Additional Shares issuable pursuant to Section 1.3(e) herein,
if any.
(f) For purposes hereof, the Average Share Price shall
mean the average of the closing trading prices of the Company's Common
Stock on the Nasdaq National Market, as reported by the Nasdaq National
Market for each trading day during the Valuation Period.
Section 1.4 THE CLOSING.
(a) The closing of the purchase and sale of the Shares
(the "Closing"), shall take place (a) at the offices of the Investor, at
10:00 a.m., local time on the later of the following: (i) July 5, 1995,
and (ii) the date on which the last to be fulfilled or waived of the
conditions set forth in Article IV hereof and applicable to the Closing
shall be fulfilled or waived in accordance herewith, or (b) at such
other time and place and/or on such other date as the Investor and the
Company may agree. The date on which the Closing occurs is referred to
herein as the "Closing Date."
(b) (i) On the Closing Date, the Company shall deliver
to the Investor certificates representing the Share Number to be issued
and sold to the Investor on such date and registered in the name of the
Investor or deposit such Share Number into the accounts designated by
the Investor and (ii) on the Closing Date, the Investor shall deliver to
the Company the Purchase Price by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in
writing by the Company. In addition, each of the Company and the
Investor shall deliver all documents, instruments and writings required
to be delivered by either of them pursuant to this Agreement at or prior
to the Closing.
Section 1.5. COVENANT TO REGISTER. For purposes of this
Section 1.5, the following definitions shall apply:
(a) (i) The terms "register," "registered," and
"registration" refer to a registration under the Securities Act of 1933,
as amended (the "Act") effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means the
Shares and any Additional Shares issued pursuant to Section 1.3 hereof
and any securities of the Company or securities of any successor
corporation issued as, or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as a dividend or
other distribution with respect to, or in exchange for, or in
replacement of, the Shares and any Additional Shares issued pursuant to
Section 1.3 hereof.
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(b) (i) The Company shall, as expeditiously as
possible following the Closing, file a registration statement on Form S-
3 or an equivalent thereof with the Securities and Exchange Commission
(the "SEC") promptly after the Closing Date, covering all the
Registrable Securities, and shall use its best efforts to cause such
registration statement to become effective within 105 days of June 26,
1995 (the "Initial Registration"). In the event such registration is
not so declared effective, the holder of the Registrable Securities
shall have the right to require by notice in writing that the Company
register all or any part of the Registrable Securities held by such
holder (a "Demand Registration") and the Company shall thereupon effect
such registration in accordance herewith. The parties agree that if the
holder of Registrable Securities demands registration of less than all
of the Registrable Securities, the Company, at its option, may
nevertheless file a registration statement covering all of the
Registrable Securities. If such registration statement is declared
effective with respect to all Registrable Securities the demand
registration rights granted pursuant to this Section 1.5 (b) (i) shall
cease. If such registration statement is not declared effective with
respect to all Registrable Securities the demand registration rights
described herein shall remain in effect until all Registrable Securities
have been registered under the Act.
(ii) The Company shall not be obligated to effect
Demand Registration (i) if all of the Registrable Securities held by the
holder of Registrable Securities which are intended to be covered by the
Demand Registration are, at the time of the request of a Demand
Registration, included in an effective registration statement and the
Company is in compliance with its obligations under Subsection (d) (ii)
through (v) hereof.
(iii) The Company may suspend the effectiveness of
any such registration effected pursuant to this Section 1.5(b) in the
event, and for such period of time as, such a suspension is required by
the rules and regulations of the SEC.
(iv) If the registration statement covering the
Registrable Securities is not effective within 105 days of June 26,
1995, then the Company shall pay the Investor a one time penalty, in
cash, equal to 1.0% of the Purchase Price but the Company's obligation
to register the Registrable Securities shall not be diminished.
(c) If the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders
other than the Investor) any of its stock or other securities under the
Act in connection with a public offering of such securities (other than
a registration on Form S-4, Form S-8 or other limited purpose form) and
the Registrable Securities have not heretofore been included in a
registration statement under Subsection (b), which remains effective,
the Company shall, at such time, promptly give the holder of Registrable
Securities written notice of such registration. Upon the written
request of the holder of Registrable Securities given within twenty (20)
days after receipt of such notice by the holder of Registrable
Securities, the Company shall use its best efforts to cause to be
registered under the Act all Registrable Securities that the holder of
Registrable Securities requests to be registered. However, the Company
shall have no obligation under this Subsection (c) to the extent that,
with respect to a public offering registration, any underwriter of such
public offering reasonably requests that the Registrable Securities or a
portion thereof be excluded therefrom.
(d) Whenever required under this Section 1.5 to effect
the registration of any Registrable Securities, including, without
limitation, the Initial Registration, the Company shall, as
expeditiously as reasonably possible:
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(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective and, upon the
request of the Investor, keep such registration statement effective,
pursuant to the provisions of Regulation Section 230.415 or otherwise, for
so long as the holder of Registrable Securities desires to dispose of the
securities covered by such registration statement (but not after the
holder of Registrable Securities, in the reasonable opinion of its
counsel, is free to sell such securities in any three month period under
the provisions of Rule 144 under the Act).
(ii) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of
all securities covered by such registration statement.
(iii) Furnish to the holder of Registrable
Securities such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act,
and such other documents as the holder of Registrable Securities may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by the holder of Registrable Securities.
(iv) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or "Blue Sky" laws of such jurisdictions as shall be
reasonably requested by the holder of Registrable Securities, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service and process in any such states or jurisdictions.
(v) Notify the holder of Registrable Securities of
the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(vi) Furnish, at the request of the holder of
Registrable Securities, an opinion of counsel of the Company, dated the
effective date of the registration statement, as to the due
authorization and issuance of the securities being registered and
compliance with securities laws by the Company in connection with the
authorization and issuance thereof.
(vii) Use its best efforts to list the Registrable
Securities covered by such registration statement with any securities
exchange on which the Common Stock is then listed;
(viii) Make available for inspection by the holder
of Registrable Securities, upon request, all SEC Documents filed
subsequent to the Closing and require the Company's officers, directors
and employees to supply all information reasonably requested by any
holder of Registrable Securities in connection with such registration
statement.
(e) The holder of Registrable Securities will furnish
to the Company in connection with any registration under this Section
1.5 such information regarding itself, the Registrable Securities and
other securities of the Company held by it, and the intended method of
disposition of such securities as shall be required to effect the
registration of the Registrable Securities held by holder of Registrable
Securities.
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(f) (i) The Company shall indemnify, defend and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of Subsections (b) or
(c) from and against, and shall reimburse such holder with respect to,
any and all claims, suits, demands, causes of action, losses, damages,
liabilities, costs or expenses ("Liabilities") to which such holder may
become subject under the Act or otherwise, arising from or relating to
(A) any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or (B) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided,
however, that the Company shall not be liable in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holders in writing
specifically for use in the preparation thereof.
(ii) Promptly after receipt by the holder of
Registrable Securities of notice of the commencement of any action, the
holder of Registrable Securities shall, if a claim in respect thereof is
to be made against the Company hereunder, notify the Company in writing
thereof, but the omission so to notify the Company shall not relieve the
Company from any Liability which it may have to the holder of
Registrable Securities other than under this section and shall only
relieve it from any Liability which it may have to the holder of
Registrable Securities under this section if and to the extent the
Company is prejudiced by such omission. In case any such action shall
be brought against the holder of Registrable Securities and the holder
of Registrable Securities shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to the holder of Registrable Securities,
and, after notice from the Company to the holder of Registrable
Securities of its election so to assume and undertake the defense
thereof, the Company shall not be liable to the holder of Registrable
Securities under this section for any legal expenses subsequently
incurred by the holder of Registrable Securities in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, PROVIDED, HOWEVER, that if the
defendants in any such action include both the Company and the holder of
Registrable Securities and the holder of Registrable Securities shall
have reasonably concluded that there may be reasonable defenses
available to it which are different from or additional to those
available to the Company or if the interests of the holder of
Registrable Securities reasonably may be deemed to conflict with the
interests of the Company, the holder of Registrable Securities shall
have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the Company as
incurred.
(g) (i) With respect to the inclusion of Registrable
Securities in a registration statement pursuant to subsections (b) or
(c), all fees, costs and expenses of and incidental to such
registration, inclusion and public offering shall be borne by the
Company; provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discounts and commissions, if any, incurred in connection with such
registration.
(ii) The fees, costs and expenses of registration
to be borne by the Company as provided in this Subsection (g) shall
include, without limitation, all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for
the Company, and all legal fees and disbursements and other expenses of
complying with state securities or Blue Sky laws of any jurisdiction or
jurisdictions in which securities to be offered are to be registered and
qualified.
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Fees and disbursements of counsel and accountants for the selling security-
holders shall, however, be borne by the respective selling securityholder.
(h) (i) The rights to cause the Company to register
all or any portion of Registrable Securities pursuant to this Section
1.5 may be assigned by Investor to a transferee or assignee of 20% or
more, in the aggregate, of the Shares and the Additional Shares. Within
a reasonable time after such transfer the Investor shall notify the
Company of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being
assigned. Such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by
the transferee or assignee is restricted under the Act. Any transferee
shall agree in writing at the time of transfer to be bound by the
provisions of this Section 1.5.
(ii) From and after the date of this Agreement,
the Company shall not agree to allow the holders of any securities of
the Company to include any of their securities in any registration
statement filed by the Company pursuant to Subsection (b) unless the
inclusion of such securities will not reduce the amount of the
Registrable Securities included therein.
Section 1.6. ADJUSTMENTS. If the Investor shall be
entitled to the issuance of Additional Shares, the Company shall deliver
to the Investor at the offices of the Investor on the third (3rd)
business day after the end of the Valuation Period one or more
certificates representing the Additional Shares so to be delivered in
accordance with this Agreement, registered in the name of the Investor,
or deposit such Additional Shares into accounts designated by the
Investor; provided, however, that if the sum of the shares then
beneficially owned by the Investor, and any Additional Shares then
issuable to the Investor, as determined by the Investor, in its sole
determination, shall equal 5.0% or more of the shares of Company's
Common Stock issued and outstanding (as determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934) just prior to the
Closing, then, and in such event, (x) the number of Additional Shares to
be issued to the Investor pursuant to this paragraph shall be reduced to
the number which, together with the Share Number, shall equal 4.99% of
the shares of the Company's Common Stock issued and outstanding (as so
determined) just prior to the Closing, and (y) in consideration for such
reduction in Additional Shares, the Company shall pay to the Investor a
sum equal to the greater of (a) the product of 88.5% of the Average
Share Price and the reduction in the Additional Shares to be issued as a
result of the preceding clause (x), and (b) the product of the
Subsequent Sale Price and the reduction in the Additional Shares to be
issued as a result of the preceding clause (x).
Section 1.7 RESCHEDULING. If after the date hereof and
prior to the expiration of the Valuation Period any person shall (a)
publicly announce a tender offer or exchange offer for the Company's
Common Stock, or (b) publicly announce plans for a merger, consolidation
or potential change in control of the Company, the Investor may in its
sole discretion elect by written notice to the Company to shorten the
Valuation Period so as to end on a date which is either before or after
the consummation of the record date for the consummation of any such
transaction, which election must be made prior to consummation of any
such transaction. For purposes of the foregoing, it is understood and
agreed that the Investor may, but shall not be required to, reduce or
entirely eliminate the Valuation Period or to reschedule the Valuation
Period.
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ARTICLE II
Representations and Warranties
------------------------------
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to
the Investor:
(a) 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.
The Company does not have any active subsidiaries, except for those
identified in the SEC Documents (as hereinafter defined). Each of the
Company and its subsidiaries 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 and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any adverse
effect on the operations, properties, prospects, or financial condition
of the entity with respect to which such term is used and which is
material to such entity and other entities controlling or controlled by
such entity taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has
the requisite corporate power and authority to enter into and perform
this Agreement and to issue the Shares and the Additional Shares in
accordance with the terms hereof, (ii) the execution 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, (iii)
this Agreement has been duly executed and delivered by the Company, and
(iv) this Agreement constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
(c) CAPITALIZATION. The authorized capital stock of
the Company and the shares thereof currently issued and outstanding are
as most recently described in the SEC Documents and there have been no
changes (except for changes described on Exhibit A and additional option
exercises under the Company's option plans) therein since such
description. All of the outstanding shares of the Company's Common Stock
have been validly issued and are fully paid and nonassessable. Except
as set forth in Exhibit A hereto and as described in the SEC Documents,
no shares of Common Stock are entitled to preemptive rights and there
are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares
of capital stock of the Company or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares, or
securities or rights convertible into shares, of capital stock of the
Company. The Company has furnished to the Investor true and correct
copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Certificate"), and the Company's By-Laws, as in effect
on the date hereof (the "By-Laws").
(d) ISSUANCE OF SHARES. The issuance of the Shares
and Additional Shares has been duly authorized and, when paid for or
issued in accordance with the terms hereof, shall be validly issued,
fully paid and non-assessable.
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(e) NO CONFLICTS. The execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby do not and will not (i)
result in a violation of the Company's Certificate 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 agreement, indenture or instrument to which the Company is a party
and which has previously been filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1994 or any material agreement
entered into subsequent thereto and is still in effect, or 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 by which any property or
asset of the Company 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); provided that, for purposes of such
representation as to Federal, state, local or foreign law, rule or
regulation, no representation is made herein with respect to any of the
same applicable solely to the Investor and not to the Company. The
business of the Company is not being conducted in violation of any law,
ordinance or regulations of any governmental entity, except for possible
violations which either singly or in the aggregate do not have a
Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States 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 Shares or the Additional Shares in accordance with
the terms hereof (other than the filing of a Form D with the SEC, any
filings required by the National Association of Securities Dealers, Inc.
or their affiliated exchanges (the "NASD") or state securities filings
which may be required to be made by the Company subsequent to the
Closing, and any registration statement which may be filed in accordance
with Section 1.5 herein); 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.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common
Stock of the Company is registered pursuant to Section 12(g) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the
Company with the SEC (all of the foregoing filed prior to the date
hereof, as well as the draft of the Form 8-K with respect to the private
placement of June 26, 1995, being hereinafter referred to herein as the
"SEC Documents"). The Company has delivered to the Investor true and
complete copies of the quarterly and annual (including, without
limitation, proxy information and solicitation materials) SEC Documents
filed with the SEC since December 31, 1994. The Company has not
provided to the Investor any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to
the transactions contemplated by this Agreement. As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the 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
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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).
(g) NO MATERIAL ADVERSE CHANGE. Since December 31,
1994, the date through which the most recent annual report of the
Company on Form 10-K has been prepared and filed with the SEC, a copy of
which is included in the SEC Documents, no Material Adverse Effect has
occurred or exists with respect to the Company except as otherwise
disclosed or reflected in other SEC Documents prepared through or as of
a date subsequent to December 31, 1994.
(h) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations not disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company's business
since March 31, 1995 and which, individually or in the aggregate, do not
or would not have a Material Adverse Effect on the Company.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event
or circumstance has occurred or exists with respect to the Company or
its business, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby makes the following representations and warranties
to the Company:
(a) AUTHORIZATION; ENFORCEMENT. (i) The Investor has
the requisite power and authority to enter into and perform this
Agreement and to purchase the Shares being sold hereunder, (ii) the
execution and delivery of this Agreement by the Investor 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 Investor or its Board of Directors,
stockholders, or partners as the case may be, is required, (iii) this
Agreement has been duly authorized, executed and delivered by the
Investor, and (iv) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
(b) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation by the Investor of
the transactions contemplated hereby or relating hereto do not and will
not (i) result in a violation of the Investor's charter documents 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 agreement, indenture or instrument to which the
Investor is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or its properties (except
for such conflicts, defaults and violations as would not, individually
or in the aggregate have a Material Adverse Effect on the Investor).
The businesses of the Investor are 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
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have a Material Adverse Effect. The Investor is not required 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
purchase the Shares or the Additional Shares in accordance with the
terms hereof; provided that for purposes of the representation made in
this sentence, the Investor is assuming and relying upon the accuracy of
the relevant representations and agreements of the Company herein.
(c) OWNERSHIP. The Investor is duly organized and
validly existing under the laws of the place hereinabove provided and is
not a U.S. Person as defined within Regulation S under the Act and is
not purchasing the Shares for the account or benefit of a U.S. Person.
On the date hereof and on the Closing Date, the Investor is and will be,
as the case may be, located outside of the United States. The Investor
has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment
contemplated by this Agreement. The Investor has been afforded, to the
satisfaction of the Investor, the opportunity to review the SEC
Documents and obtain such additional publicly available information
concerning the Company and its business, and to ask such questions and
receive such answers (based upon publicly available information), as the
Investor deems necessary to make an informed investment decision.
(d) INVESTMENT REPRESENTATION: The Investor is
purchasing the Shares and, if any, the Additional Shares for investment
purposes and not with a view towards distribution. Investor has no
present intention to sell the Shares or the Additional Shares and the
Investor has no present arrangement (whether or not legally binding) at
any time to sell the Shares or the Additional Shares to or through any
person or entity; provided, however, except as provided in subsection
(g) below, that by making the representations herein, the Investor does
not agree to hold the Shares or the Additional Shares for any minimum or
other specific term and reserves the right to dispose of the Shares or
the Additional Shares at any time in accordance with Federal and state
securities laws applicable to such disposition.
(e) ACCREDITED INVESTOR: The Investor is an
accredited investor as defined in Regulation Section 230.501 promulgated
under the Act.
(f) RULE 144. The Investor understands that the
Shares and any Additional Shares must be held indefinitely unless such
Shares or Additional Shares are subsequently registered under the Act or
an exemption from registration is available. The Investor has been
advised or is aware of the provisions of Rule 144 promulgated under the
Act.
(g) LOCK-UP PERIOD. Notwithstanding the foregoing,
the Investor shall not sell (including a short sale), transfer or
otherwise dispose of the Shares, or any Additional Shares issued to such
Investor, at any time during the 105 day period following June 26, 1995.
Notwithstanding the foregoing, during the remainder of the Valuation
Period Investor will only transfer or otherwise dispose of its shares in
accordance with the representations contained in Exhibit C.
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ARTICLE III
Covenants
---------
Section 3.1 REGULATION S
(a) Notwithstanding any of the foregoing, the Company
acknowledges and agrees that in the event that a registration statement
covering all of the Registrable Securities shall not have become
effective within 105 days of the Closing Date, the legend described in
Article V herein shall be removed on the 106th day following the
Closing, in accordance with Article V herein, it being acknowledged by
the Company that, in such event, the Investor shall be free to transfer,
sell, pledge, or otherwise hypothecate the Shares and the Additional
Shares issued pursuant to this Agreement in accordance with (i)
Regulation S under the Act and (ii) the terms and conditions described
in the letter attached hereto as Exhibit C.
(b) The Company acknowledges and agrees that, in the
event the Investor sells, transfers, pledges or otherwise hypothecates
the Shares or Additional Shares in accordance with Section 3.1(a)
herein, for purposes of clarifying and specifying the applicable
Restricted Period under Regulation S, the Investor intends to observe as
the Restricted Period (as defined in Regulation S) for the Shares being
delivered at the Closing the period of 40 days commencing upon the
Closing Date and ending 40 days thereafter, and to observe as the
Restricted Period applicable to the Additional Shares, if any, the
period of 40 days commencing upon the date upon which the same are
delivered to the Investor hereunder.
Neither the Company nor any of its affiliates has
engaged or will engage in any "directed selling efforts" (as such term
is defined under Regulation S) with respect to the Shares or the
Additional Shares, and the Company and its affiliates have complied and
will comply with the "offering restrictions" requirements of Regulation
S.
(c) In the event the Investor sells, transfers or
otherwise disposes of the Shares or the Additional Shares in accordance
with Section 3.1(a) herein, the Investor covenants and agrees that such
sale, transfer or other disposition will be made in compliance with the
terms of Regulation S under the Act, as in effect at that time,
including (i) that the Shares and the Additional Shares will not be
offered or sold within the United States or to, or for the account or
benefit of, any "U.S. person" (as such term is defined in Rule 902 (o)
promulgated under the Act) except in accordance with the provisions of
Rule 903 or Rule 904 of Regulation S under the Act, pursuant to
registration under the Act, or pursuant to an exemption from the
registration requirements of the Act and (ii) that neither it, its
affiliates, nor persons acting on their behalf, have engaged or will
engage in "directed selling efforts" (as such term is defined by
Regulation S) with respect to the Shares or the Additional Shares and
that each of them has complied and will comply with the "offering
restrictions" requirements of Regulation S.
Section 3.2 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and the NASD, in
accordance with their requirements, of the transactions contemplated by
this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
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regulation, including, without limitation, the filing of a Form D with
the SEC, for the legal and valid issuance of the Shares and the
Additional Shares to the Investor.
(b) The Investor understands that the Shares and, if
any, the Additional Shares, are being offered and sold to it in reliance
on a transactional exemption from the registration requirements of
Federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in
order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Shares and, if any, the
Additional Shares.
Section 3.3 CORPORATE. (a) From the date hereof through
the end of the Valuation Period the Company shall not (i) amend its
Certificate or By-Laws so as to adversely affect any rights of the
Investor; (ii) split, combine or reclassify its outstanding capital
stock; (iii) declare or set aside or pay any dividend or other
distribution with respect to the Company's outstanding Common Stock;
(iv) issue or sell, directly or indirectly, shares of the Company's
Common Stock in a manner or upon terms as could reasonably be expected
to affect the market for the Common Stock materially and adversely; or
(v) enter into any agreement with respect to the foregoing; and (vi) the
Company shall at all times reserve and keep available, solely for
issuance and delivery as Shares or Additional Shares hereunder, such
shares of Common Stock as shall from time to time be issuable or
reasonably be expected to be issuable as Shares or Additional Shares
hereunder.
(b) The Company will cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing
obligations under said act, will comply with all requirements related to
any registration statement filed pursuant to Section 1.5 herein, 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, except as permitted herein. The Company
will take all action necessary to continue the listing or trading of its
Common Stock on the Nasdaq National 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 Nasdaq.
ARTICLE IV
Conditions
----------
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE SHARES. The obligation hereunder of the Company to
issue and/or sell the Shares or the Additional Shares to the Investor is
further subject to the satisfaction, at or before the respective
issuance and deliveries thereof, of each of the following conditions set
forth below. These conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE INVESTOR REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Investor shall be
true and correct in all material respects as of the date when made and
as of the date of such issuance and delivery as though made at that
time.
(b) PERFORMANCE BY THE INVESTOR. The Investor 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 Investor at or prior to
such date.
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(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 jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTOR TO PURCHASE THE SHARES. The obligation of the Investor
hereunder to acquire and pay for the Shares is subject to the
satisfaction, at or before the Closing of each of the following
conditions set forth below. These conditions are for the Investor's
sole benefit and may be waived by the Investor at any time in its sole
discretion.
(a) 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 the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) 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 the
Closing.
(c) NASDAQ. From the date hereof to the Closing Date,
as to the Shares to be issued and delivered on the Closing Date, trading
in the Company's Common Stock shall not have been suspended by the SEC
or the Nasdaq National Market (except for any suspension of trading of
limited duration agreed to between the Company and the Nasdaq National
Market solely to permit dissemination of material information regarding
the Company), and trading in securities generally as reported by Nasdaq
shall not have been suspended or limited or minimum prices shall not
have been established on securities whose trades are reported by Nasdaq.
Notwithstanding the foregoing sentence, in the event that at any point
on or prior to the first day of the Valuation Period, trading in the
Common Stock is suspended by the SEC or the Nasdaq National Market, (i)
calculation of the Average Stock Price shall be suspended for such
period of time as trading in the Common Stock is suspended and (ii) the
Valuation Period shall be reset so that such Valuation Period shall
begin on the 115th calendar day following June 26, 1995 and shall end on
the 45th calendar day thereafter for which quotations for the Company's
Common Stock on the Nasdaq National Market have been available for a
total of 45 calendar days. In the event that the Company's Common Stock
is delisted from the Nasdaq National Market at any time during the
Valuation Period or in the event that trading in the Common Stock is
suspended for a period of more than thirty (30) days subsequent to the
commencement of the Valuation Period, (iii) the Valuation Period will be
deemed to have concluded on the date on which the Common Stock was
delisted or such trading was suspended, (iv) the Average Stock Price
shall be calculated based on the number of days in such shortened
Valuation Period, and (v) the Investor shall receive any Additional
Shares owed to it pursuant to Section 1.3(c) herein within five (5)
business days of the conclusion of the shortened Valuation Period. In
no event shall the Investor be required to deliver any shares for
cancellation pursuant to Section 1.3(d) herein if the Common Stock is
delisted from the Nasdaq National Market or if trading in the Common
Stock is suspended for more than thirty (30) days during the Valuation
Period or prior to the effectiveness of the Company's Initial
Registration.
(d) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or
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governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(e) OPINION OF COUNSEL, ETC. At the Closing the
Investor shall have received an opinion of Brobeck Phleger & Harrison,
counsel to the Company, in form and substance satisfactory to the
Investor and its counsel (in substantially the form of Exhibit B
hereto), and such other certificates and documents as the Investor or
its counsel shall reasonably require incident to the Closing.
ARTICLE V
Legend on Stock
---------------
Each certificate representing the Shares issued pursuant to
Section 1.3 shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT. THIS
LEGEND SHALL CEASE TO HAVE ANY FORCE OR EFFECT AND
WILL BE REMOVED ON OCTOBER 7, 1995 UNLESS AN OPINION
OF COUNSEL TO THE COMPANY, IN FORM AND SUBSTANCE
SATISFACTORY TO THE INVESTOR AND ITS COUNSEL, IS
DELIVERED TO THE COMPANY'S TRANSFER AGENT ON OR
PRIOR TO SUCH DATE STATING THAT REMOVAL OF THIS
LEGEND IS NOT PERMITTED UNDER LAW DUE TO A CHANGE IN
LAW SUBSEQUENT TO JUNE 23, 1995.
Not withstanding the foregoing, this legend shall cease to
have any force or effect and will be removed on October 7, 1995, unless
an opinion on counsel to the Company in form and substance satisfactory
to the Investor and its counsel, is delivered to the Company's transfer
agent, on or prior to such date stating that removal of this legend is
not permitted under law due to a change in law subsequent to the date
hereof.
No certificate representing Additional Shares, if any,
required to be issued pursuant to this Agreement will bear a restrictive
legend unless an opinion of the Company's counsel, in form and substance
satisfactory to the Investor, has been issued to the Company's transfer
agent on or prior to the issuance of such Additional Shares stating that
such a legend is required by law due to a change in law subsequent to
the date hereof.
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ARTICLE VI
Termination
-----------
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement
may be terminated at any time prior to the Closing by the mutual consent
of the Company and the Investor, by action of their respective Boards of
Directors or other governing body.
Section 6.2 OTHER TERMINATION. This Agreement may be
terminated by action of the Board of Directors or other governing body
of the Investor or the Company at any time after July 7, 1995 if the
Closing shall not have been consummated by July 7, 1995.
Section 6.3 AUTOMATIC TERMINATION. This Agreement shall
automatically terminate without any further action of either party
hereto if the Closing shall not have occurred by July 7, 1995.
ARTICLE VII
Miscellaneous
-------------
Section 7.1 FEES AND EXPENSES. Each party shall pay the
fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the Company shall pay, at the Closing, all
attorneys' fees and expenses incurred by the Investor and Cappello
Capital Corp., up to a maximum of $5,000, in connection with the
preparation, negotiation, execution and delivery of this Agreement and
the transactions contemplated hereunder. Without limiting the
generality of the foregoing, The Kriegsman Group shall be entitled to a
finders fee pursuant to a separate agreement with respect thereto
between such finder and the Company, and the Company shall be solely
responsible for the full payment thereof and shall indemnify and hold
harmless the Investor from and against all loss, cost, damage or expense
arising therefrom. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares or the
Additional Shares pursuant hereto.
Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court and other courts of the United States sitting in
California for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the
Company and the Investor consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and
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agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth
herein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 7.4 NOTICES. 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 telex (with
correct answer back received), telecopy or 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:
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attn: Chief Executive Officer
with copies to:
Brobeck Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attn: Laura M. Brower, Esq.
to the Investor:
Kyneton Investments Ltd.
c/o Slofam Managed Investments
51 Wessel Road
Rivonia 2128
South Africa
with copies to:
Cappello Capital Corp.
1299 Ocean Avenue, Suite 306
Santa Monica, California 90401
Attn: Gerard K. Cappello
-17-
<PAGE>
O'Melveny & Myers
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660
Attn: Barton Beek, Esq.
Either party hereto may from time to time change its address for notices
under this Section 7.4 by giving at least 10 days' written notice of
such changed address to the other party hereto.
Section 7.5 WAIVERS. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 7.6 HEADINGS. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall
not be deemed to limit or affect any of the provisions hereof.
Section 7.7 SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the parties and their
successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party. Neither the
Company nor the Investor shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other
(which consent may be withheld for any reason in the sole discretion of
the party from whom consent is sought); provided, however, that the
Company may assign its rights and obligations hereunder to any acquirer
of substantially all of the assets or a controlling equity interest of
the Company. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this
Agreement.
Section 7.8 NO THIRD PARTY BENEFICIARIES. This Agreement
is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.
Section 7.9 GOVERNING LAW. This Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of California without regard to the principles of conflict of laws.
Section 7.10 SURVIVAL. The representations and warranties
of the Company and the Investor contained in Article II and the
agreements and covenants set forth in Articles I and III shall survive
the Closing.
Section 7.11 EXECUTION. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause four additional executed
signature pages to be physically delivered to the other party within
five days of the execution and delivery hereof.
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<PAGE>
Section 7.12 PUBLICITY. The Company and the Investor shall
consult and cooperate with each other in issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby, provided the foregoing shall not interfere with the
legal obligations of either party with respect to public disclosure; and
provided further, that neither the Company nor the Investor shall be
required to consult with the other if any such press release or public
statement does not specifically name the other.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as
of the date hereof.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ Arthur J. Benvenuto
-----------------------------
Name: Arthur J. Benvenuto
Its: Chairman, President and
Chief Executive Officer
KYNETON INVESTMENTS LTD.
By: /s/ Ansel A. Slome
--------------------------------
Name: Ansel A. Slome
Its: Duly Authorized Agent
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<PAGE>
EXHIBIT A
CAPITALIZATION SUMMARY
The following table reconciles the Company's outstanding Common Stock
and options and warrants as reported in the Company's Quarterly Report
on Form 10-Q as of March 31, 1995 to June 13, 1995.
Common Options and
Stock Warrants
Outstanding Outstanding
----------- -----------
Outstanding per Form 10-Q 30,570,993 4,186,957
Options and warrants exercised 561,200 (561,200)
Options and warrants granted - 125,000
Options and warrants canceled - (139,209)
---------- ---------
Outstanding as of June 13, 1995 31,132,193 3,611,548
========== =========
As of June 13, 1995, the Company had 1,900,462 remaining available for
grant under its 1992 Stock Option/Stock Issuance Plan. Additional
shares previously granted under the Plan have been exercised subsequent
to June 13, 1995.
The Company issued 1,500,000 shares of Common Stock (subject to
adjustment) on June 26, 1995 (the "Private Placement"). In connection
with the Private Placement, the Company issued warrants to purchase
135,000 shares of Common Stock (subject to adjustment) to certain
investment advisors on June 26, 1995 at an initial exercise price of
$6.86 per share. In addition, the Company will issue warrants to
purchase 65,598 shares of Common Stock (subject to adjustment) to
certain investment advisors involved in this transaction on the Closing
Date at an initial exercise price of $6.86 per share.
On January 5, 1995, the Company's Board of Directors (the "Board")
adopted a Shareholder Rights Plan (the "Rights Plan"). Pursuant to the
Rights Plan, the Board declared a dividend of one preferred share
purchase right (the "Right") for each share of Common Stock outstanding
on January 20, 1995. Each Right entitles the registered holder to
purchase from the Company one-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $55 per one-
hundredth share, subject to adjustment.
<PAGE>
EXHIBIT C
July 5, 1995
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attention: Arthur Benvenuto
Re: Regulation S Offering
---------------------
Ladies and Gentlemen:
Reference is made to the Investment Agreement of even date and delivery
herewith (the "Agreement") between the undersigned ("Investor") and
Advanced Tissue Sciences, Inc. Capitalized terms contained in this
letter shall have the same meaning ascribed to them in the Agreement.
In addition to the representations and covenants of the Investor
contained in the Agreement, Investor further covenants and agrees as
follows:
1. In the event the Investor engages in short sales
transactions or other hedging activities during the period from
105 days following June 26, 1995 through 160 days following June
26, 1995 which involve, among other things, sales of Common Stock
of the Company, Investor will, to the extent within its reasonable
control, conduct such activities so as not to complete or effect
any such sale on any trading day during such period at a price
which is lower than the lowest sale effected on such day by
persons other than the Investor;
2. Investor covenants that it will comply with all applicable
laws, rules and regulations regarding the foregoing activities
and/or the financing of the Shares and Additional Shares
including, if applicable, compliance with Regulation S.
Very truly yours,
KYNETON INVESTMENTS LTD.
By: /s/ Ansel A. Slome
---------------------------
Name: Ansel A. Slome
Its: Duly Authorized Agent
<PAGE>
EXHIBIT 4.2
INVESTMENT AGREEMENT
Between
ADVANCED TISSUE SCIENCES, INC.
And
ARBCO ASSOCIATES, L.P. AND
OFFENSE GROUP ASSOCIATES, L.P.
Dated as of July 11, 1995
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING
SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
<PAGE>
INVESTMENT AGREEMENT dated as of July 11, 1995 between Advanced
Tissue Sciences, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company") and the entities identified on Schedule
I hereto (individually, an "Investor" and collectively, the "Investors").
WHEREAS, the parties desire that the Investors become equity
investors in the Company by purchasing an aggregate of 385,569 shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock
---------------------------------
Section 1.1 PURCHASE AND SALE OF COMMON STOCK. Upon the terms
and conditions set forth herein, the Company shall issue and sell to the
Investors, and the Investors shall purchase from the Company, 385,569 shares
of the Company's Common Stock (the "Shares") in the amounts indicated on
Schedule I hereto.
Section 1.2 PURCHASE PRICE. The aggregate purchase price for the
Shares (the "Purchase Price") shall equal $2,645,000 payable in cash by wire
transfer or cashier's check in immediately available funds.
Section 1.3 SHARE NUMBER; VALUATION PERIOD.
(a) The number of Shares that the Company shall be obligated
to issue and sell and the Investors shall be obligated to purchase hereunder,
in the aggregate, is referred to herein as the "Share Number." Subject to
adjustment as provided in Sections 1.3(c) and 1.3(e), the Share Number shall
initially be 385,569.
(b) The "Valuation Period" shall be a 45 calendar day period
commencing on and including the first business day which is 160 calendar days
after June 26, 1995 as the same may be modified pursuant to Section 4.2(c)
hereof.
(c) Notwithstanding Section 1.3(a) above, and except as
hereinafter provided, if the Average Share Price (hereinafter defined) during
the Valuation Period is less than $7.75, then the Company shall deliver to the
Investors, at no additional cost to the Investors, in proportion to their
relative investment, and in addition to the initial Share Number, the number
of shares of Common Stock that is obtained by subtracting (x) 385,569 from (y)
the quotient obtained by dividing the Purchase Price by 88.5% of the Average
Share Price (rounded to the nearest whole number) (together with any
additional shares issued pursuant to Section 1.3(e) herein, the "Additional
Shares").
(d) Notwithstanding Section 1.3(a) above, and except as
hereinafter provided, if the Average Share Price during the Valuation Period
is greater than $7.75, the Investors shall pay
<PAGE>
to the Company, in proportion to their relative investment, the dollar amount
by which (x) the product of 88.5% of the Average Share Price and the Share
Number exceeds (y) the product of $6.86 and the Share Number.
(e) Notwithstanding Section 1.3(c) above, in the event that
the Company, on or prior to 205 days from June 26, 1995, issues or sells any
shares of its Common Stock or any of its securities which are convertible into
or exchangeable for its Common Stock or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of, its Common
Stock (other than shares or options issued pursuant to the Company's option
plans or shares issued upon exercise of options, warrants or rights
outstanding on the Closing Date or as provided on Exhibit A hereto), at an
initial purchase price which is less than $6.86 per share (the "Subsequent
Sale Price"), then the Company shall deliver to the Investors, at no
additional cost to the Investors, in proportion to their relative investment,
and in addition to the Share Number, the number of shares of Common Stock that
is obtained by subtracting (x) 385,569 from (y) the quotient obtained by
dividing the Purchase Price by the Subsequent Sale Price (rounded to the
nearest whole number).
(f) Notwithstanding any of the foregoing, in the event both
subsections 1.3(c) and 1.3(e) are applicable, the number of Additional Shares
issuable hereunder shall be the greater of the number of Additional Shares
issuable pursuant to Section 1.3(c) herein and the number of Additional Shares
issuable pursuant to Section 1.3(e) herein.
(g) For purposes hereof, the Average Share Price shall mean
the average of the closing trading prices of the Company's Common Stock on the
Nasdaq National Market, as reported by the Nasdaq National Market for each
trading day during the Valuation Period.
Section 1.4 THE CLOSING.
(a) The closing of the purchase and sale of the Shares (the
"Closing"), shall take place (a) at the offices of the Investors, at 10:00
a.m., local time on the later of the following: (i) July 12, 1995, and (ii)
the date on which the last to be fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to the Closing shall be fulfilled or
waived in accordance herewith, or (b) at such other time and place and/or on
such other date as the Investors and the Company may agree. The date on which
the Closing occurs is referred to herein as the "Closing Date."
(b) (i) On the Closing Date, the Company shall deliver to
the Investors certificates representing the Share Number to be issued and sold
to the Investors on such date and registered in the name of the Investors or
deposit such Share Number into the accounts designated by the Investors and
(ii) on the Closing Date, the Investors shall deliver to the Company the
Purchase Price by cashier's check or wire transfer in immediately available
funds to such account as shall be designated in writing by the Company. In
addition, each of the Company and the Investors shall deliver all documents,
instruments and writings required to be delivered by either of them pursuant
to this Agreement at or prior to the Closing.
Section 1.5 COVENANT TO REGISTER. For purposes of this Section
1.5, the following definitions shall apply:
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<PAGE>
(a) (i) The terms "register," "registered," and
"registration" refer to a registration under the Securities Act of 1933, as
amended (the "Act") effected by preparing and filing a registration statement
or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement, document or
amendment thereto.
(ii) The term "Registrable Securities" means the Shares
and any Additional Shares issued pursuant to Section 1.3 hereof and any
securities of the Company or securities of any successor corporation issued
as, or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as a dividend or other distribution with respect to,
or in exchange for, or in replacement of, the Shares and any Additional Shares
issued pursuant to Section 1.3 hereof.
(b) (i) The Company shall, as expeditiously as possible
following the Closing, file a registration statement on Form S-3 or an
equivalent thereof with the Securities and Exchange Commission (the "SEC")
promptly after the Closing Date, covering all the Registrable Securities, and
shall use its best efforts to cause such registration statement to become
effective within 160 days of June 26, 1995 (the "Initial Registration"). In
the event such registration is not so declared effective, the holder of the
Registrable Securities shall have the right to require by notice in writing
that the Company register all or any part of the Registrable Securities held
by such holder (a "Demand Registration") and the Company shall thereupon
effect such registration in accordance herewith. The parties agree that if
the holder of Registrable Securities demands registration of less than all of
the Registrable Securities, the Company, at its option, may nevertheless file
a registration statement covering all of the Registrable Securities. If such
registration statement is declared effective with respect to all Registrable
Securities the demand registration rights granted pursuant to this Section 1.5
(b) (i) shall cease. If such registration statement is not declared effective
with respect to all Registrable Securities the demand registration rights
described herein shall remain in effect until all Registrable Securities have
been registered under the Act.
(ii) The Company shall not be obligated to effect the
Demand Registration (i) if all of the Registrable Securities held by the
holder of Registrable Securities which are intended to be covered by the
Demand Registration are, at the time of the request of a Demand Registration,
included in an effective registration statement and the Company is in
compliance with its obligations under Subsection (d) (ii) through (v) hereof.
(iii) The Company may suspend the effectiveness of any
such registration effected pursuant to this Section 1.5(b) in the event, and
for such period of time as, such a suspension is required by the rules and
regulations of the SEC.
(iv) If the registration statement covering the
Registrable Securities is not effective within 160 days of June 26, 1995, then
the adjustments required by Sections 1.3(c) or (d) or Section 1.6 shall be
calculated using 77.0% of the Average Share Price.
(c) If the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Investors) any of its stock or other securities under the Act in connection
with a public offering of such securities (other than a registration on Form
S-4, Form S-8 or other limited purpose form) and the Registrable Securities
have not heretofore been included in a registration statement under Subsection
(b), which remains effective, the Company shall, at such time, promptly give
the holder of Registrable Securities written
-3-
<PAGE>
notice of such registration. Upon the written request of the holder of
Registrable Securities given within twenty (20) days after receipt of such
notice by the holder of Registrable Securities, the Company shall use its
best efforts to cause to be registered under the Act all Registrable
Securities that the holder of Registrable Securities requests to be
registered. However, the Company shall have no obligation under this
Subsection (c) to the extent that, with respect to a public offering
registration, any underwriter of such public offering reasonably requests
that the Registrable Securities or a portion thereof be excluded therefrom.
(d) Whenever required under this Section 1.5 to effect the
registration of any Registrable Securities, including, without limitation, the
Initial Registration, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration to become effective and, upon the request of the
Investors, keep such registration statement effective, pursuant to the
provisions of Regulation Section 230.415 or otherwise, for so long as the
holders of Registrable Securities desires to dispose of the securities
covered by such registration statement (but not after the holders of
Registrable Securities, in the reasonable opinion of its counsel, is free
to sell all of such securities in any three month period under the
provisions of Rule 144 under the Act).
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the holders of Registrable Securities
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
holders of Registrable Securities may reasonably require in order to
facilitate the disposition of Registrable Securities owned by the holders of
Registrable Securities.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or "Blue Sky" laws of such jurisdictions as shall be reasonably requested by
the holders of Registrable Securities, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service and process in any such
states or jurisdictions.
(v) Notify the holders of Registrable Securities of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing.
(vi) Furnish, at the request of the holders of
Registrable Securities, an opinion of counsel of the Company, dated the
effective date of the registration statement, as to the due authorization and
issuance of the securities being registered and compliance with securities
laws by the Company in connection with the authorization and issuance thereof.
-4-
<PAGE>
(vii) Use its best efforts to list the Registrable
Securities covered by such registration statement with any securities exchange
on which the Common Stock is then listed;
(viii) Make available for inspection by the holders of
Registrable Securities, upon request, all SEC Documents filed subsequent to
the Closing and require the Company's officers, directors and employees to
supply all information reasonably requested by any holder of Registrable
Securities in connection with such registration statement.
(e) The holders of Registrable Securities will furnish to
the Company in connection with any registration under this Section 1.5 such
information regarding itself, the Registrable Securities and other securities
of the Company held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of the Registrable
Securities held by the holders of Registrable Securities.
(f) (i) The Company shall indemnify, defend and hold
harmless each holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of subsections (b) or (c)
from and against, and shall reimburse such holder with respect to, any and all
claims, suits, demands, causes of action, losses, damages, liabilities, costs
or expenses ("Liabilities") to which such holder may become subject under the
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent that any such Liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by such holders in
writing specifically for use in the preparation thereof.
(ii) Promptly after receipt by the holders of
Registrable Securities of notice of the commencement of any action, the
holders of Registrable Securities shall, if a claim in respect thereof is to
be made against the Company hereunder, notify the Company in writing thereof,
but the omission so to notify the Company shall not relieve the Company from
any Liability which it may have to the holders of Registrable Securities other
than under this section and shall only relieve it from any Liability which it
may have to the holders of Registrable Securities under this section if and to
the extent the Company is prejudiced by such omission. In case any such
action shall be brought against the holders of Registrable Securities and the
holders of Registrable Securities shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to the holders of Registrable Securities, and, after
notice from the Company to the holders of Registrable Securities of its
election so to assume and undertake the defense thereof, the Company shall not
be liable to the holders of Registrable Securities under this section for any
legal expenses subsequently incurred by the holders of Registrable Securities
in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected, PROVIDED, HOWEVER, that
if the defendants in any such action include both the Company and the holders
of Registrable Securities and the holders of Registrable Securities shall have
reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the Company or if
the interests of the holders of Registrable Securities reasonably may be
deemed to conflict with the interests of the Company, the holders of
Registrable Securities shall have
-5-
<PAGE>
the right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses
and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Company as incurred.
(g) (i) Except as provided in subparagraph (ii) below, with
respect to the inclusion of Registrable Securities in a registration statement
pursuant to subsections (b) or (c), all fees, costs and expenses of and
incidental to such registration, inclusion and public offering shall be borne
by the Company; provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discounts and commissions, if any, incurred in connection with such
registration.
(ii) The fees, costs and expenses of registration to be
borne by the Company as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, and all legal
fees and disbursements and other expenses of complying with state securities
or Blue Sky laws of any jurisdiction or jurisdictions in which securities to
be offered are to be registered and qualified. Fees and disbursements of
counsel and accountants for the selling securityholders shall, however, be
borne by the respective selling securityholder.
(h) (i) The rights to cause the Company to register all or
any portion of Registrable Securities pursuant to this Section 1.5 may be
assigned by the Investors to a transferee or assignee of 20% or more, in the
aggregate, of the Shares and the Additional Shares. Within a reasonable time
after such transfer the Investors shall notify the Company of the name and
address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned. Such assignment shall be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
Any transferee shall agree in writing at the time of transfer to be bound by
the provisions of this Section 1.5.
(ii) From and after the date of this Agreement, the
Company shall not agree to allow the holders of any securities of the Company
to include any of their securities in any registration statement filed by the
Company pursuant to subsection (b) unless the inclusion of such securities
will not reduce the amount of the Registrable Securities included therein.
Section 1.6 ADJUSTMENTS. If the Investors shall be entitled to
the issuance of Additional Shares, the Company shall deliver to the Investors
at the offices of the Investors on the third (3rd) business day after the end
of the Valuation Period one or more certificates representing the Additional
Shares so to be delivered in accordance with this Agreement, registered in the
name of the Investors, or deposit such Additional Shares into accounts
designated by the Investors; provided, however, that if the sum of the shares
then beneficially owned by the Investors, and any Additional Shares then
issuable to the Investors, as determined by the Investors, in their sole
determination, shall equal 5.0% or more of the shares of Company's Common
Stock issued and outstanding (as determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934) just prior to the Closing, then, and
in such event, (x) the number of Additional Shares to be issued to the
Investors pursuant to this paragraph shall be reduced to the number which,
together with the Share Number, shall equal 4.99% of the shares of the
Company's Common Stock issued and outstanding (as so determined) just prior to
the Closing, and (y) in consideration for such reduction in Additional Shares,
the Company shall pay to the Investors a sum equal to the greater of (a) the
product of 88.5% of the Average Share Price and the reduction in the
Additional Shares to be issued as a result of the
-6-
<PAGE>
preceding clause (x), and (b) the product of the Subsequent Sale Price and the
reduction in the Additional Shares to be issued as a result of the preceding
clause (x). Similarly, if the Company shall be entitled to additional funds
pursuant to Section 1.3(d), the Investors shall deliver to the Company at
its offices on the third (3rd) business day after the end of the Valuation
Period, such proceeds (in proportion to their relative investment) in cash
by wire transfer or cashier's check in immediately available funds.
Section 1.7 RESCHEDULING. If after the date hereof and prior to the
expiration of the Valuation Period any person shall (a) publicly announce a
tender offer or exchange offer for the Company's Common Stock, or (b) publicly
announce plans for a merger, consolidation or potential change in control of
the Company, the Investors, together but not individually, may in their sole
discretion elect by written notice to the Company to shorten the Valuation
Period so as to end on a date which is either before or after the consummation
of the record date for the consummation of any such transaction, which
election must be made prior to consummation of any such transaction. For
purposes of the foregoing, it is understood and agreed that the Investors may,
but shall not be required to, reduce or entirely eliminate the Valuation
Period or to reschedule the Valuation Period.
ARTICLE II
Representations and Warranties
------------------------------
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Investors:
(a) 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. The Company
does not have any active subsidiaries, except for those identified in the SEC
Documents (as hereinafter defined). Each of the Company and its subsidiaries
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 and where the
failure so to qualify would have a Material Adverse Effect. "Material Adverse
Effect" means any adverse effect on the operations, properties, prospects, or
financial condition of the entity with respect to which such term is used and
which is material to such entity and other entities controlling or controlled
by such entity taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement and to issue the Shares and the Additional Shares in accordance with
the terms hereof, (ii) the execution 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, (iii) this Agreement has been duly executed and
delivered by the Company, and (iv) this Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application.
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(c) CAPITALIZATION. The authorized capital stock of the
Company and the shares thereof currently issued and outstanding are as most
recently described in the SEC Documents and there have been no changes (except
for changes described on Exhibit A and additional option exercises under the
Company's option plans) therein since such description. All of the outstanding
shares of the Company's Common Stock have been validly issued and are fully
paid and nonassessable. Except as set forth in Exhibit A hereto and as
described in the SEC Documents, no shares of Common Stock are entitled to
preemptive rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares, or securities
or rights convertible into shares, of capital stock of the Company. The
Company has furnished to the Investors true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as in effect on the date hereof
(the "By-Laws").
(d) ISSUANCE OF SHARES. The issuance of the Shares and
Additional Shares has been duly authorized and, when paid for or issued in
accordance with the terms hereof, shall be validly issued, fully paid and non-
assessable.
(e) NO CONFLICTS. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) result in a violation
of the Company's Certificate 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 agreement, indenture or instrument to
which the Company is a party and which has previously been filed as an exhibit
to the Company's Form 10-K for the year ended December 31, 1994 or any
material agreement entered into subsequent thereto that is still in effect, or
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 by which any property or
asset of the Company 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); provided that, for purposes of such representation as to
Federal, state, local or foreign law, rule or regulation, no representation is
made herein with respect to any of the same applicable solely to the Investors
and not to the Company. The business of the Company is not being conducted in
violation of any law, ordinance or regulations of any governmental entity,
except for possible violations which either singly or in the aggregate do not
have a Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States 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
Shares or the Additional Shares in accordance with the terms hereof (other
than the filing of a Form D with the SEC, any filings required by the National
Association of Securities Dealers, Inc. or their affiliated exchanges (the
"NASD") or state securities filings which may be required to be made by the
Company subsequent to the Closing, and any registration statement which may be
filed in accordance with Section 1.5 herein); 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 each
Investor herein.
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(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock
of the Company is registered pursuant to Section 12(g) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") and the Company has
filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in
addition to one or more registration statements and amendments thereto
heretofore filed by the Company with the SEC (all of the foregoing filed prior
to the date hereof, as well as the drafts of the Form 8-K with respect to the
private placements of June 26, 1995 and July 7, 1995, being hereinafter
referred to herein as the "SEC Documents"). The Company has delivered to the
Investors true and complete copies of the quarterly and annual (including,
without limitation, proxy information and solicitation materials) SEC
Documents filed with the SEC since December 31, 1994. The Company has not
provided to the Investors any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the 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).
(g) NO MATERIAL ADVERSE CHANGE. Since December 31, 1994,
the date through which the most recent annual report of the Company on Form
10-K has been prepared and filed with the SEC, a copy of which is included in
the SEC Documents, no Material Adverse Effect has occurred or exists with
respect to the Company except as otherwise disclosed or reflected in other SEC
Documents prepared through or as of a date subsequent to December 31, 1994.
(h) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations not disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company's business since March
31, 1995 and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect on the Company.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstance has occurred or exists with respect to the Company or its
business, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each of the Investors hereby makes the following representations and
warranties to the Company:
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(a) AUTHORIZATION; ENFORCEMENT. (i) The Investor has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Shares being sold hereunder, (ii) the execution and delivery of
this Agreement by the Investor 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 Investor or its Board
of Directors, stockholders, or partners as the case may be, is required, (iii)
this Agreement has been duly authorized, executed and delivered by the
Investor, and (iv) this Agreement constitutes a valid and binding obligation
of the Investor enforceable against the Investor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance
of this Agreement and the consummation by the Investor of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of the Investor's charter documents 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 agreement,
indenture or instrument to which the Investor is a party, or result in a
violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Investor or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate have a Material Adverse Effect on the Investor). The
businesses of the Investor are 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 have a Material
Adverse Effect. The Investor is not required 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 purchase the Shares or the Additional
Shares in accordance with the terms hereof; provided that for purposes of the
representation made in this sentence, the Investor is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Company herein.
(c) SOPHISTICATION. The Investor has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment contemplated by this Agreement. The
Investor has been afforded, to the satisfaction of the Investor, the
opportunity to review the SEC Documents and obtain such additional publicly
available information concerning the Company and its business, and to ask such
questions and receive such answers (based upon publicly available
information), as the Investor deems necessary to make an informed investment
decision.
(d) INVESTMENT REPRESENTATION. The Investor is purchasing
the Shares and, if any, the Additional Shares for investment purposes and not
with a view towards distribution. Investor has no present intention to sell
the Shares or the Additional Shares and the Investor has no present
arrangement (whether or not legally binding) at any time to sell the Shares or
the Additional Shares to or through any person or entity; provided, however,
except as provided in subsection (g) below, that by making the representations
herein, the Investor does not agree to hold the Shares or the Additional
Shares for any minimum or other specific term and reserves the right to
dispose of the Shares or the Additional Shares at any time in accordance with
Federal and state securities laws applicable to such disposition.
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(e) ACCREDITED INVESTOR. The Investor is an accredited
investor as defined in Regulation Section 230.501 promulgated under the Act.
(f) RULE 144. The Investor understands that the Shares and
any Additional Shares must be held indefinitely unless such Shares or
Additional Shares are subsequently registered under the Act or an exemption
from registration is available. The Investor has been advised or is aware of
the provisions of Rule 144 promulgated under the Act.
(g) LOCK-UP PERIOD. Notwithstanding the foregoing, the
Investor shall not sell (including a short sale), transfer or otherwise
dispose of the Shares, or any Additional Shares issued to such Investor, at
any time during the 160-day period following June 26, 1995. The foregoing
shall not preclude the Investor from entering into derivative transactions in
the Shares so long as no Shares are used to cover the derivative position
during the 160-day period.
ARTICLE III
Covenants
---------
Section 3.1 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and the NASD, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, including,
without limitation, the filing of a Form D with the SEC, for the legal and
valid issuance of the Shares and the Additional Shares to the Investors.
(b) Each Investor understands that the Shares and, if any,
the Additional Shares, are being offered and sold to it in reliance on a
transactional exemption from the registration requirements of Federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to
acquire the Shares and, if any, the Additional Shares.
Section 3.2 CORPORATE.
(a) From the date hereof through the end of the Valuation
Period the Company shall not (i) amend its Certificate or By-Laws so as to
adversely affect any rights of the Investor; (ii) split, combine or reclassify
its outstanding capital stock; (iii) declare or set aside or pay any dividend
or other distribution with respect to the Company's outstanding Common Stock;
(iv) issue or sell, directly or indirectly, shares of the Company's Common
Stock in a manner or upon terms as could reasonably be expected to affect the
market for the Common Stock materially and adversely; or (v) enter into any
agreement with respect to the foregoing; and (vi) the Company shall at all
times reserve and keep available, solely for issuance and delivery as Shares
or Additional Shares hereunder, such shares of Common Stock as shall from time
to time be issuable or reasonably be expected to be issuable as Shares or
Additional Shares hereunder.
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(b) The Company will cause its Common Stock to continue to
be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply
in all respects with its reporting and filing obligations under said act, will
comply with all requirements related to any registration statement filed
pursuant to Section 1.5 herein, 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, except as permitted herein.
The Company will take all action necessary to continue the listing or trading
of its Common Stock on the Nasdaq National 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 Nasdaq.
ARTICLE IV
Conditions
----------
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO SELL THE SHARES. The obligation hereunder of the Company to issue and/or
sell the Shares or the Additional Shares to the Investors is further subject
to the satisfaction, at or before the respective issuance and deliveries
thereof, of each of the following conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) ACCURACY OF THE INVESTORS REPRESENTATIONS AND
WARRANTIES. The representations and warranties of each Investor shall be true
and correct in all material respects as of the date when made and as of the
date of such issuance and delivery as though made at that 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 date.
(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
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
INVESTORS TO PURCHASE THE SHARES. The obligation of each Investor hereunder
to acquire and pay for the Shares is subject to the satisfaction, at or before
the Closing of each of the following conditions set forth below. These
conditions are for the Investors' sole benefit and may be waived by the
Investors at any time in their sole discretion.
(a) 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 the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required
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by this Agreement to be performed, satisfied or complied with by the Company
at or prior to the Closing.
(c) NASDAQ. From the date hereof to the Closing Date, as to
the Shares to be issued and delivered on the Closing Date, trading in the
Company's Common Stock shall not have been suspended by the SEC or the Nasdaq
National Market (except for any suspension of trading of limited duration
agreed to between the Company and the Nasdaq National Market solely to permit
dissemination of material information regarding the Company), and trading in
securities generally as reported by Nasdaq shall not have been suspended or
limited or minimum prices shall not have been established on securities whose
trades are reported by Nasdaq. Notwithstanding the foregoing sentence, in the
event that at any point on or prior to the first day of the Valuation Period,
trading in the Common Stock is suspended by the SEC or the Nasdaq National
Market, (i) calculation of the Average Share Price shall be suspended for such
period of time as trading in the Common Stock is suspended and (ii) the
Valuation Period shall be reset so that such Valuation Period shall begin on
the 160th calendar day following June 26, 1995 and shall end on the 45th
calendar day thereafter for which quotations for the Company's Common Stock on
the Nasdaq National Market have been available for a total of 45 calendar
days. In the event that the Company's Common Stock is delisted from the
Nasdaq National Market at any time during the Valuation Period or in the event
that trading in the Common Stock is suspended for a period of more than thirty
(30) days subsequent to the commencement of the Valuation Period, (x) the
Valuation Period will be deemed to have concluded on the date on which the
Common Stock was delisted or such trading was suspended, (y) the Average Stock
Price shall be calculated based on the number of days in such shortened
Valuation Period, and (z) each Investor shall receive any Additional Shares
owed to it pursuant to Section 1.3(c) herein within five (5) business days of
the conclusion of the shortened Valuation Period.
(d) 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 the consummation of any of the transactions
contemplated by this Agreement.
(e) OPINION OF COUNSEL, ETC. At the Closing the Investors
shall have received an opinion of Brobeck Phleger & Harrison, counsel to the
Company, in form and substance satisfactory to the Investors and their counsel
(in substantially the form of Exhibit C hereto), and such other certificates
and documents as the Investors or their counsel shall reasonably require
incident to the Closing.
ARTICLE V
Legend on Stock
---------------
Each certificate representing the Shares or Additional Shares (if
a registration statement is not effective with respect to the Additional
Shares at the time of such issuance) issued pursuant to Section 1.3 shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED (THE "ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING
SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
ARTICLE VI
Termination
-----------
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the mutual consent of the
Company and the Investors, by action of their respective Boards of Directors
or other governing body.
Section 6.2 OTHER TERMINATION. This Agreement may be terminated
by action of the Board of Directors or other governing body of the Investors
or the Company at any time after July 12, 1995 if the Closing shall not have
been consummated by July 12, 1995.
Section 6.3 AUTOMATIC TERMINATION. This Agreement shall
automatically terminate without any further action of either party hereto if
the Closing shall not have occurred by July 12, 1995.
ARTICLE VII
Miscellaneous
-------------
Section 7.1 FEES AND EXPENSES. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided
that the Company shall pay, at the Closing, all attorneys' fees and expenses
incurred by the Investors and Cappello Capital Corp., up to a maximum of
$2,500, in connection with the preparation, negotiation, execution and
delivery of this Agreement and the transactions contemplated hereunder.
Without limiting the generality of the foregoing, The Kriegsman Group shall be
entitled to a finders fee pursuant to a separate agreement with respect
thereto between such finder and the Company, and the Company shall be solely
responsible for the full payment thereof and shall indemnify and hold harmless
the Investors from and against all loss, cost, damage or expense arising
therefrom. The Company shall pay all stamp and other taxes and duties levied
in connection with the issuance of the Shares or the Additional Shares
pursuant hereto.
Section 7.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in
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accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by law
or equity.
(b) Each of the Company and the Investors (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States
District Court and other courts of the United States sitting in California for
the purposes of any suit, action or proceeding arising out of or relating to
this Agreement and (ii) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Investors consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.
Section 7.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein,
neither the Company nor the Investors makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed
by the party against whom enforcement of any such amendment or waiver is
sought.
Section 7.4 NOTICES. 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 telex (with correct answer back
received), telecopy or 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:
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attn: Chief Executive Officer
with copies to:
Brobeck Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attn: Laura M. Brower, Esq.
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to the Investors:
c/o Kayne, Anderson Investment Management, Inc.
1800 Avenue of the Stars
Suite 1425
Los Angeles, California 90067
Attn: Mr. Jerry R. Welch
with copies to:
Cappello Capital Corp.
1299 Ocean Avenue, Suite 306
Santa Monica, California 90401
Attn: Mr. Gerard K. Cappello
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Los Angeles, California 90017
Attn: Eric Schunk, Esq.
Either party hereto may from time to time change its address for notices under
this Section 7.4 by giving at least 10 days' written notice of such changed
address to the other party hereto.
Section 7.5 WAIVERS. No waiver by either party of any default
with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 7.6 HEADINGS. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 7.7 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. The parties hereto may amend this Agreement without notice to or the
consent of any third party. Except as otherwise provided herein, neither the
Company nor the Investors shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent may be withheld for any reason in the sole discretion of the party
from whom consent is sought); provided, however, that the Company may assign
its rights and obligations hereunder to any acquirer of substantially all of
the assets or a controlling equity interest of the Company. The assignment by
a party of this Agreement or any rights hereunder shall not affect the
obligations of such party under this Agreement.
Section 7.8 NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
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Section 7.9 GOVERNING LAW. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of California
without regard to the principles of conflict of laws.
Section 7.10 SURVIVAL. The representations and warranties of the
Company and the Investors contained in Article II and the agreements and
covenants set forth in Articles I and III shall survive the Closing.
Section 7.11 EXECUTION. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party
and delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event any signature is delivered by
facsimile transmission, the party using such means of delivery shall cause
four additional executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
Section 7.12 PUBLICITY. The Company and the Investors shall
consult and cooperate with each other in issuing any press releases or
otherwise making public statements with respect to the transactions
contemplated hereby, provided the foregoing shall not interfere with the legal
obligations of either party with respect to public disclosure; and provided
further, that neither the Company nor the Investors shall be required to
consult with the other if any such press release or public statement does not
specifically name the other.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the date
hereof.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ Arthur J. Benvenuto
----------------------------
Name: Arthur J. Benvenuto
Its: Chairman, President and
Chief Executive Officer
ARBCO ASSOCIATES, L.P., a California
Limited Partnership
OFFENSE GROUP ASSOCIATES, L.P.,
a California Limited Partnership
By: KAIM Non-Traditional, L.P., a
California Limited Partnership,
General Partner
By: Kayne, Anderson Investment
Management, Inc., a California
Corporation, General Partner
By: /s/ Jerry R. Welch
-------------------------------------
Jerry R. Welch,
Senior Vice President
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<PAGE>
SCHEDULE I
LIST OF INVESTORS
Name Number of Shares Purchase Price
---- ---------------- --------------
Arbco Associates, L.P.,
a California Limited Partnership 239,796 $1,645,000
Offense Group Associates, L.P.,
a California Limited Partnership 145,773 1,000,000
------- ----------
Total: 385,569 $2,645,000
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<PAGE>
EXHIBIT A
CAPITALIZATION SUMMARY
The following table reconciles the Company's outstanding Common Stock and
options and warrants as reported in the Company's Quarterly Report on Form 10-
Q as of March 31, 1995 to June 13, 1995.
Common Options and
Stock Warrants
Outstanding Outstanding
----------- -----------
Outstanding per Form 10-Q 30,570,993 4,186,957
Options and warrants exercised 561,200 (561,200)
Options and warrants granted - 125,000
Options and warrants canceled - (139,209)
---------- ---------
Outstanding as of June 13, 1995 31,132,193 3,611,548
========== =========
As of June 13, 1995, the Company had 1,900,462 remaining available for grant
under its 1992 Stock Option/Stock Issuance Plan. Additional shares previously
granted under the Plan have been exercised subsequent to June 13, 1995.
The Company issued an aggregate of 2,228,863 shares of Common Stock (subject
to adjustment) on June 26, 1995 and July 7, 1995 (the "Private Placements").
In connection with the Private Placements, the Company issued warrants to
purchase 200,598 shares of Common Stock to certain investment advisors on
June 26, 1995 and July 7, 1995 at an initial exercise price of $6.86 per
share. In addition, the Company will issue warrants to purchase 34,701 shares
of Common Stock (subject to adjustment) to certain investment advisors
involved in this transaction on the Closing Date at an initial exercise price
of $6.86 per share.
On January 5, 1995, the Company's Board of Directors (the "Board") adopted a
Shareholder Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan, the
Board declared a dividend of one preferred share purchase right (the "Right")
for each share of Common Stock outstanding on January 20, 1995. Each Right
entitles the registered holder to purchase from the Company one-hundredth of a
share of Series A Junior Participating Preferred Stock at an exercise price of
$55 per one-hundredth share, subject to adjustment.
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<PAGE>
EXHIBIT B
July 11, 1995
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
Attention: Mr. Arthur J. Benvenuto
Re: REGULATION D OFFERING
Ladies and Gentlemen:
Reference is made to the Investment Agreement of even date and
delivery herewith (the "Agreement") between the undersigned ("Investors")
and Advanced Tissue Sciences, Inc. Capitalized terms contained in this
letter shall have the same meaning ascribed to them in the Agreement.
In addition to the representations and covenants of the Investors
contained in the Agreement, each of the Investors further covenant and agree
as follows:
1. In the event the Investors engage in short sales transactions
or other hedging activities during the period from 160 days following June 26,
1995 through 205 days following June 26, 1995 which involve, among other
things, sales of Common Stock of the Company, each Investor will, to the
extent within its reasonable control, conduct such activities (a) in such a
manner so as not to complete or effect any such sale on any trading day
during such period at a price which is lower than the lowest sale effected
on such day by persons other than the Investors and (b) only in such amounts
that would not reasonably be expected to affect the market for the Common
Stock materially and adversely.
2. Each Investor covenants that it will comply with all
applicable laws, rules and regulations regarding the foregoing activities
and/or the financing of the Shares and Additional Shares, including all
applicable federal and state securities laws.
Very truly yours,
ARBCO ASSOCIATES, L.P., a California
Limited Partnership
OFFENSE GROUP ASSOCIATES, L.P.,
a California Limited Partnership
By: KAIM Non-Traditional, L.P., a
California Limited Partnership,
General Partner
By: Kayne, Anderson Investment
Management, Inc., a California
Corporation, General Partner
By: /s/ Jerry R.Welch
-------------------------------
Jerry R. Welch
Senior Vice President
