<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 23, 1997 Commission File No. 0-26034
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(Date of earliest event reported)
ORAVAX, INC.
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(Exact name of registrant as specified in its Charter)
DELAWARE 04-3085209
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
38 Sidney Street, Cambridge, Massachusetts 02139
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(Address of principal executive offices) (Zip Code)
(617) 494-1339
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On December 23, 1997, OraVax, Inc. (the "Company") completed a private
placement transaction pursuant to which it received aggregate gross proceeds of
$6.3 million from the issuance of 6,300 shares of the Company's 6% Convertible
Preferred Stock ("Convertible Preferred Stock") and related placement agent
warrants. Such transaction is referred to in this Current Report on Form 8-K as
the "1997 Private Placement," and the related securities issuances (including
shares of the Company's Common Stock ("Common Stock") issuable upon the
conversion of outstanding shares of Convertible Preferred Stock) are referred to
as the "1997 Private Placement Issuances." All of the securities sold in the
1997 Private Placement were sold in a private placement solely to accredited
investors (the "Investors").
Certain provisions relating to the conversion of shares of the
Convertible Preferred Stock allow for their conversion at prices discounted to
the trading price from time to time of the Common Stock on the Nasdaq Stock
Market, Inc. ("Nasdaq") National Market. Upon such conversion, these provisions
will result in dilution to holders of outstanding shares of Common Stock.
However, under the terms of the Convertible Preferred Stock, conversion of the
Convertible Preferred Stock into Common Stock generally is not permitted for a
period of 90 days from and after the closing of the 1997 Private Placement on
December 23, 1997.
The Company intends to seek stockholder approval of the 1997 Private
Placement (including the 1997 Private Placement Issuances) at a special meeting
called solely for this purpose to be held at the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts on or about March 10, 1998. The record
date for this special meeting has been set at January 15, 1998.
If the transaction is not approved by the Company's stockholders, the
1997 Private Placement will be unwound in part by redeeming, at a redemption
price equal to 110% of the liquidation preference of the Convertible Preferred
Stock, the smallest number of shares which is sufficient in the Company's
reasonable judgement, such that following such redemption, conversion of the
remaining shares of Convertible Preferred Stock will not constitute a breach of
the Company's obligations under applicable Nasdaq rules.
ITEM 7. EXHIBITS
4 Certificate of Designation of the Convertible Preferred Stock filed with
the Secretary of State of the State of Delaware on December 23, 1997.
10 Form of Preferred Stock Investment Agreement dated as of December 23,
1997 between the Company and the Investors.
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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.
Dated: January 21, 1998 ORAVAX, INC.
By: /s/ Keith S. Ehrlich
--------------------
Keith S. Ehrlich
Vice President, Finance and
Administration
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EXHIBIT 4
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
6% CONVERTIBLE PREFERRED STOCK
OF
ORAVAX, INC.
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-----------
ORAVAX, INC., a Delaware corporation (the "Corporation") certifies that
pursuant to the authority contained in Article Fourth of its Restated
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the Board of
Directors of the Corporation, at a meeting held on December 17, 1997, duly
adopted the following resolution, which resolution remains in full force and
effect on the date hereof:
RESOLVED, that, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation in accordance with the provisions
of its Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and hereby is established, consisting of 9,000 shares, $.001 par
value per share, to be designated the "6% Convertible Preferred Stock"
(hereinafter, the "6% Preferred Stock"); that the Board of Directors be and
hereby is authorized to issue such shares of 6% Preferred Stock from time to
time and for such consideration and on such terms as the Board of Directors
shall determine; and that, subject to the limitations provided by law and by the
Restated Certificate of Incorporation, the voting powers, preferences and
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions thereof shall be as set forth on Schedule I
attached hereto.
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IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly
executed by an authorized officer this 23rd day of December, 1997.
ORAVAX, INC.
By: /s/ Keith S. Ehrlich
--------------------
Keith S. Ehrlich
Vice President, Finance and
Administration, Treasurer and
Secretary
<PAGE> 3
SCHEDULE I
RESOLUTION ESTABLISHING PREFERENCES
OF
6% CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the Preferred Stock of
the Corporation designated "6% Convertible Preferred Stock"; that the number of
authorized shares of such series shall be 9,000 and that the rights and
preferences of such series (the "6% Preferred") and the limitations or
restrictions thereon, shall be as follows:
1. DIVIDENDS.
(a) The holders of the 6% Preferred shall be entitled to receive cumulative
dividends at the rate of $60.00 per share per annum, payable in shares of 6%
Preferred valued at $1,000 per share, when and as declared by the Board of
Directors. Such dividends shall accrue on any given share from the day of
original issuance of such share and shall accrue from day to day whether or not
declared. Dividends not theretofore paid shall be paid upon conversion of any
shares of the 6% Preferred and shares of 6% Preferred issued in payment of such
dividends shall be simultaneously converted into Common Stock together with the
shares on which such dividends have accrued.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the 6% Preferred
shall be entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of the Common Stock or any other class
or series of shares except any class or series which is entitled to priority
over the 6% Preferred, the amount of $1,000 per share plus any accrued but
unpaid dividends plus any amounts accrued but unpaid under Section 1.4(b)(iv) of
the Preferred Stock Investment Agreement under which shares of the 6% Preferred
were originally issued (the "Liquidation Preference").
(b) Subject to the last sentence of this Section, a consolidation or merger
of the Corporation with or into any other corporation or corporations, or a sale
of all or substantially all of the assets of the Corporation, shall at the
option of the holders of the 6% Preferred, be deemed a liquidation, dissolution
or winding up within the meaning of this Section 2 if the shares of stock of the
Corporation (along with all derivative securities) outstanding immediately prior
to such transaction represent immediately after such transaction less than a
majority of the voting power of the surviving corporation (or of the acquirer of
the Corporation's assets in the case
<PAGE> 4
of a sale of assets). Such option may be exercised by the vote or written
consent of holders of a majority of the 6% Preferred at any time within thirty
calendar days after written notice of the essential terms of such transaction
shall have been given to the holders of the 6% Preferred as provided in Section
5 hereof. Such notice shall be given by the Corporation immediately following
determination of such essential terms. If such option is exercised, the holders
of the 6% Preferred shall be entitled to receive, in cash, immediately upon the
occurrence of such transaction, an amount per share equal to the Liquidation
Preference. This Section shall not apply to a business combination in which
substantially all the Common Stock of the Corporation is converted into or
exchanged for voting common stock of the corporation surviving such business
combination, if (i) such common stock of the surviving corporation is listed and
traded on the NASDAQ National Market, the American Stock Exchange or the New
York Stock Exchange, and (ii) the Board of Directors of the Corporation
determines in good faith that the conversion rights and other rights and
preferences of the 6% Preferred are preserved and not rendered of less value by
the terms of such business combination.
3. MANDATORY CONVERSION.
On the fifth anniversary of the date of issuance, all then outstanding
shares of 6% Preferred including any accrued dividends thereon shall be
automatically converted into Common Stock at the Conversion Price on such
anniversary date and otherwise pursuant to the applicable provisions set forth
in Section 4 hereof.
4. CONVERSION. The holders of the 6% Preferred shall have optional conversion
rights as follows:
(a) ACCRUAL OF CONVERSION RIGHTS. The Conversion Period shall commence 3
calendar months after the date of issuance, or (if earlier) the date that a
Registration Statement covering resale of the underlying shares of Common Stock
has been declared effective by the Securities and Exchange Commission, and shall
continue thereafter for the life of the issue. Each holder of record of 6%
Preferred shares on the date of commencement of the Conversion Period (an
"Original Holder") shall be entitled to convert in any calendar month the
following percentage of the 6% Preferred shares held by such holder on the date
of commencement of the Conversion Period, on a cumulative basis following
commencement of the Conversion Period. The percentage for each calendar month
will be determined based on the highest of the daily low trading prices of the
Common Stock during such month, as follows:
<PAGE> 5
<TABLE>
<CAPTION>
Highest of daily low trading Percentage convertible
prices during month during such month
<S> <C>
$3.00 or less 20.0%
$3.01 to $3.50 25.0%
$3.51 to $4.00 30.0%
$4.01 to $4.50 35.0%
$4.51 to $5.00 40.0%
$5.01 to $5.50 45.0%
$5.51 or more 50.0%
</TABLE>
The number of shares which may be converted in any calendar month shall include
the number of shares which might have been but were not converted during earlier
calendar months. In the case of transfers of shares by an Original Holder the
Corporation shall make such notations on its stock ownership records and on the
certificates for shares issued upon transfer so as to reflect the portion (if
any) of the transferred shares which have become convertible pursuant to this
provision, or the Corporation may at its election issue certificates
representing the 6% Preferred shares in such form, or with such annotations, as
to reflect the time or times at which the shares represented by such
certificates will become convertible.
(b) REMOVAL OF LIMITATIONS. The limitations set forth in Section 4(a)
hereof, with respect to the percentage of 6% Preferred shares which may be
converted during certain time periods, shall terminate and all the 6% Preferred
shares shall thereafter be fully convertible if any of the following events or
conditions shall occur or exist: (i) an event described in Section 2(b) (subject
to the exclusion in the last sentence of such Section) shall occur, whether or
not the holders of 6% Preferred deem such event to be a liquidation; (ii)
proceedings for relief under any bankruptcy or similar law for the relief of
debtors are instituted by or against the Corporation or any of its significant
subsidiaries and, if instituted against the Corporation or such subsidiary, are
consented to or not dismissed within 30 days; (iii) the independent auditors of
the Corporation shall fail or be unwilling to express within 90 days after the
end of the Corporation's fiscal year a customary opinion on the financial
statements of the Corporation, or shall express such opinion subject to a "going
concern" qualification; (iv) the Common Stock of the Corporation shall cease to
be listed on either the NASDAQ National Market, the American Stock Exchange or
the New York Stock Exchange; or (v) there shall be a material breach by the
Corporation of any of its obligations hereunder or under the Preferred Stock
Investment Agreements pursuant to which the 6% Preferred was originally issued,
which breach has a material adverse effect on the holders of 6% Preferred.
(c) RIGHT TO CONVERT. At and after the time it has become convertible, each
share of 6% Preferred shall be convertible, at the option of the holder thereof,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (i) the liquidation preference of the 6% Preferred share
determined pursuant to Section 2(a) hereof on the date the notice of conversion
<PAGE> 6
is given, by (ii) the Conversion Price determined as hereinafter provided in
effect on said date, provided however, that a share of 6% Preferred shall not be
converted into Common Stock if following such conversion the holder thereof
together with affiliates of such holder would be the beneficial owners (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 10% or more
of the Common Stock of the Corporation.
(d) MECHANICS OF CONVERSION. To convert shares of 6% Preferred into shares
of Common Stock, the holder shall give written notice to the Corporation (which
notice may be given by facsimile transmission) that such holder elects to
convert the same and shall state therein the number of shares to be converted
and the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. Promptly thereafter the
holder shall surrender the certificate or certificates representing the shares
to be converted, duly endorsed, at the office of the Corporation or of any
transfer agent for such shares, or at such other place designated by the
Corporation. The Corporation shall, immediately upon receipt of such notice,
issue and deliver to or upon the order of such holder, against delivery of the
certificates representing the shares which have been converted, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, and a certificate representing the shares of 6% Preferred not so
converted, if any. The Corporation shall effect such issuance immediately and
shall transmit the certificates by messenger or overnight delivery service to
reach the address designated by such holder within three trading days after the
receipt of such notice. Notice of conversion may be given by a holder at any
time of day up to 5:00 pm Los Angeles time, and such conversion shall be deemed
to have been made immediately prior to the close of business on the date such
notice of conversion is given (the "Conversion Date"). The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock at the close of business on the Conversion Date.
(e) DETERMINATION OF CONVERSION PRICE.
(i) Subject to the provisions of subsection (e)(iii) and subsection
(f) of this Section, on any Conversion Date, the Conversion Price shall be the
lowest trading price of the Common Stock for the 22 consecutive trading days
ending with the trading day prior to the Conversion Date, reduced by the
Applicable Percentage (as defined below) in effect on the Conversion Date.
(ii) The Applicable Percentage shall be as follows:
<TABLE>
<S> <C>
5.00% starting on the first day of the Conversion Period
6.125% starting on the first day of the fifth (5th) calendar month after Closing
7.250% starting on the first day of the sixth (6th) calendar month after Closing
8.375% starting on the first day of the seventh (7th) calendar month after Closing.
9.500% starting on the first day of the eighth (8th) calendar month after Closing.
10.625% starting on the first day of the ninth (9th) calendar month after Closing.
11.750% starting on the first day of the tenth (10th) calendar month after Closing.
12.875% starting on the first day of the eleventh (11th) calendar month after Closing.
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
14.000% starting on the first day of the twelfth (12th) calendar month after Closing.
15.125% starting on the first day of the thirteenth (13th) calendar month after Closing.
16.250% starting on the first day of the fourteenth (14th) calendar month after Closing.
17.375% starting on the first day of the fifteenth (15th) calendar month after Closing.
18.500% starting on the first day of the sixteenth (16th) calendar month after Closing.
19.750% starting on the first day of the seventeenth (17th) calendar month after Closing.
21.000% starting on the first day of the eighteenth (18th) calendar month after Closing.
</TABLE>
(iii) The Maximum Conversion Price ("Conversion Cap") shall be the
lesser of (i) 79% of the average of the daily low trade prices of the Common
Stock for the eighteenth calendar month after the Closing, (ii) 79% of the
average of the daily low trade prices of the Common Stock for the twenty-fourth
calendar month after the Closing, or (iii) 79% of the average of the daily low
trade prices of the Common Stock for the thirtieth calendar month after the
Closing. The provisions of clauses (i), (ii) and (iii) of the foregoing sentence
shall become effective at the end of the eighteenth, twenty-fourth and thirtieth
calendar months following the Closing, respectively.
(iv) The terms "low trading price" and "last sale price" of the Common
Stock on any day shall mean, respectively, (A) the lowest reported sale price
and the last reported sale price of the Common Stock on the principal stock
exchange on which the Common Stock is listed, or (B) if the Common Stock is not
listed on a stock exchange, the lowest reported sale price and the last reported
sale price of the Common Stock on the principal automated securities price
quotation system on which sale prices of the Common Stock are reported, or (C)
if the Common Stock is not listed on a stock exchange and sale prices of the
Common Stock are not reported on an automated quotation system, the lowest bid
price and the last bid price for the Common Stock as reported by National
Quotation Bureau Incorporated. If none of the foregoing provisions are
applicable, the "low trading price" and "last sale price" of the Common Stock on
a day will be the fair market value of the Common Stock on that day as
determined by a member firm of the New York Stock Exchange, Inc., selected by
the Board of Directors of the Corporation. The term "trading day" means (x) if
the Common Stock is listed on at least one stock exchange, a day on which there
is trading on the principal stock exchange on which the Common Stock is listed,
(y) if the Common Stock is not listed on a stock exchange but sale prices of the
Common Stock are reported on an automated quotation system, a day on which
trading is reported on the principal automated quotation system on which sales
of the Common Stock are reported, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by National Quotation
Bureau Incorporated. The "closing price" of the Common Stock on any day means
the "last sale price" as defined above. The term "lowest trading price" of the
Common Stock for a period of several trading days means the lowest of the low
trading prices for each of such trading days.
(v) In the event that during any period of consecutive trading days
provided for herein, the Corporation shall declare or pay any dividend on the
Common Stock payable in Common Stock or in rights to acquire Common Stock, or
shall effect a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, then the Conversion Price
shall be
<PAGE> 8
proportionately decreased or increased, as appropriate, to give effect to such
event, and like adjustment shall be made in any price per share specified in
dollars in Section 4(a) or elsewhere herein.
(f) GREEN FLOOR. If at any time the Conversion Price falls below a
price designated by the Corporation upon 30 days' prior notice given to the
holders of the 6% Preferred (the "Green Floor Price") the Corporation may at its
option give written notice ("Cash Conversion Notice") to the holders of the 6%
Preferred at least five trading days prior to the effective date specified in
such Notice (the "Effective Date") that the Corporation will honor any
conversion request otherwise properly made during the period that the Cash
Conversion Notice remains effective, at a Conversion Price lower than the Green
Floor Price then in effect, by a cash payment in lieu of the issuance of Common
Stock in an amount equal to the proceeds which would otherwise have been
received by the holder if conversion were in fact made into Common Stock and
such Common Stock were sold at the high trading price on the Conversion Date
(the "Cash Conversion Amount"). A Cash Conversion Notice shall constitute a
representation and warranty by the Corporation that it has funds available in
cash or cash equivalents to pay the Cash Conversion Amount (computed on the
basis of the Green Floor Price then in effect) upon conversion of all the 6%
Preferred shares eligible for conversion at that time, and that such funds will
be set aside and maintained for the exclusive purpose of satisfying the
Corporation's Cash Conversion obligations. The Cash Conversion Notice may (but
need not) specify an expiration date of such Notice, shall specify the Green
Floor Price that will be in effect until further notice is given, and shall be
given at least 5 trading days before the same becomes effective. The Corporation
may terminate the Cash Conversion Notice by a further five trading day notice to
the holders of 6% Preferred that the Cash Conversion Notice will not be in
effect after a specified date. The Corporation may re-establish the Green Floor
Price, at its option, by giving five trading days, notice to the holders of the
6% Preferred prior to the notice becoming effective. If notice of conversion
shall be given by a holder of 6% Preferred shares on a date that a Cash
Conversion Notice is in effect, the Corporation shall within 48 hours following
surrender of the share certificate as provided in Section 4(d) hereof make
payment of the Cash Conversion Amount to such holder by wire transfer of
immediately available funds in U.S. dollars pursuant to such wire transfer
instructions as may have been given by such holder, or in the absence of such
instructions by mailing by certified mail a bank cashier's or certified check
for the Cash Conversion Amount to the record address of such holder. A Cash
Conversion Notice shall cease to be effective if the Corporation fails to make
payment of the Cash Conversion Amount to any holder entitled thereto in the
manner and within the time specified in the foregoing sentence, time being of
the essence, and the Corporation's right to give Cash Conversion Notices will
thereupon terminate. If the Corporation falls to make payment of the Cash
Conversion Amount to any holder entitled thereto in the manner and within the
time specified above, time being of the essence, (i) such holder shall be
entitled to receive from the Corporation in cash an amount equal to 3% of the
Cash Conversion Amount, without prejudice to the right of such holder to assert
a claim for damages in a larger amount than such payment, and (ii) such holder
shall be entitled (A) to elect to receive the Common Stock that would have
<PAGE> 9
been issuable to him on the Conversion Date upon conversion of his 6% Preferred
shares if no Cash Conversion Notice had been given, such election to be made by
written notice to the Corporation not later than five trading days after the
date on which the holder receives notice that the Corporation has failed to make
payment to him of the Cash Conversion Amount, or (B) unless such holder has
elected the foregoing alternative (A), such holder shall be entitled to the
immediate return of the stock certificate or certificates representing the 6%
Preferred shares submitted by such holder for Cash Conversion, and then and
thereafter (whether or not such certificate or certificates have been returned)
such holder's notice of conversion shall be rescinded and of no further effect,
and such holder shall have the right to convert his 6% Preferred shares into
Common Stock of the Corporation without regard to the provisions of this
subsection (f). The number of shares that a holder is entitled to convert,
determined pursuant to subsections (a) and (b) of this Section 4, shall not be
affected by the giving or effectiveness of a Cash Conversion Notice. Any Cash
Conversion Notice shall be given as provided in Section 5 hereof.
(g) DISTRIBUTIONS. In the event the Corporation shall at any time or
from time to time make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any of its subsidiaries or other
property, other than cash dividends from earnings, then in each such event
provision shall be made so that the holders of 6% Preferred shall receive, upon
the conversion thereof, the securities or other property which they would have
received had they been the owners on the date of such event of the number of
shares of Common Stock issuable to them upon conversion.
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of any
adjustment or readjustment of the Conversion Price pursuant to Section 4(e)(v)
or Section 4(m) hereof, or any provision for distribution pursuant to Section
4(g) hereof, or any adjustment of the cash per-share prices specified herein,
the Corporation at its expense shall promptly compute such adjustment,
readjustment or provision in accordance with the terms hereof and prepare and
furnish to each holder of 6% Preferred a certificate setting forth such
adjustment, readjustment or provision and showing in detail the facts upon which
such adjustment, readjustment or provision is based. The Corporation shall, upon
the written request at any time of any holder of 6% Preferred, furnish or cause
to be furnished to such holder a like certificate prepared by the Corporation
setting forth (i) such adjustments and readjustments, and (ii) the number of
other securities and the amount, if any, of other property which at the time
would be received upon the conversion of 6% Preferred with respect to each share
of Common Stock received upon such conversion. If any holder disputes the
computation of such adjustment or provision the Corporation shall cause
independent public accountants selected by the Corporation to verify and, if
necessary, correct such computation.
(i) NOTICE OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than
<PAGE> 10
a cash dividend) or other distribution, any security or right convertible into
or entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
the Corporation shall give notice to each holder of 6% Preferred at least 10
days prior to such date specifying the date on which any such record is to be
taken for the purpose of such dividend, distribution, security or right and the
amount and character of such dividend, distribution, security or right.
(j) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
shares of 6% Preferred pursuant hereto; provided, however, that the Corporation
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the 6% Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the 6% Preferred, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the 6% Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval as promptly as practicable.
(l) FRACTIONAL SHARES. No fractional shares shall be issued upon the
conversion of any share or shares of 6% Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
6% Preferred by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of Directors of the
Corporation).
(m) REORGANIZATION OR MERGER. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person, and the holders of 6% Preferred do not elect to treat such transaction
as a liquidation, dissolution or winding up as provided in Section 2, then, as
part of such reorganization, consolidation, merger or sale, provision shall be
made so that each
<PAGE> 11
share of 6% Preferred shall thereafter be convertible into the number of shares
of stock or other securities or property (including cash) to which a holder of
the number of shares of Common Stock deliverable upon conversion of such share
of 6% Preferred would have been entitled upon the record date of (or date of, if
no record date is fixed) such event and, in any case, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of the 6% Preferred, to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as equivalent as is
practicable, in relation to any shares of stock or the securities or property
(including cash) thereafter deliverable upon the conversion of the shares of 6%
Preferred. The Corporation shall have no obligation to obtain the prior consent
of the holders of 6% Preferred, individually or as a class, except as expressly
provided herein or as provided by applicable law.
5. NOTICES. Any notice to be given to the holders of the 6% Preferred
shall be (i) mailed by first class mail postage prepaid to each holder of 6%
Preferred at the address shown on the records of the Corporation for such
holder, (ii) transmitted by telecopy or facsimile transmission to any holder
which has supplied a telecopy or facsimile address to the Corporation, and (iii)
unless receipted for by telecopy or facsimile on the date such notice is given,
shall be transmitted by an overnight delivery service or courier service for
delivery at the address shown on the records of the Corporation for such holder
on the first business day following the date such notice is given, or if
delivery in one business day to such address cannot be effected by such delivery
service, then on the earliest day on which such delivery can be made.
6. OTHER PROVISIONS. For all purposes of this Resolution, the term
"date of issuance" or "closing" shall mean the day on which shares of the 6%
Preferred are first issued by the Corporation, and the terms "trading price,"
"low trading price," "closing price," "last trade price," and "trading days"
shall have the meanings given them in Section 4(e) hereof. Any provision herein
which conflicts with or violates any applicable usury law shall be deemed
modified to the extent necessary to avoid such conflict or violation.
7. RESTRICTIONS AND LIMITATIONS. The Corporation shall not undertake
the following actions without the consent of the holders of a majority of the 6%
Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend
or change any of the rights, preferences, or privileges of the 6% Preferred,
(ii) authorize or issue any other equity security senior to the 6% Preferred, or
(iii) pay dividends in cash or property on, or purchase or otherwise acquire for
value, any Common Stock or other equity security of the Corporation either
junior to or on a parity with the 6% Preferred except from current or retained
earnings or from the net proceeds of sale of equity securities.
8. VOTING RIGHTS. Except as provided herein or as provided for by law,
the 6% Preferred shall have no voting rights.
<PAGE> 12
9. ATTORNEYS' FEES. Any holder of 6% Preferred shall be entitled to
recover from the Corporation the reasonable attorneys' fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Corporation hereunder, if such holder is the prevailing party
in an action or proceeding to compel such enforcement.
10. LIMITATION ON NUMBER OF CONVERSION SHARES. The Corporation shall
not be obligated to issue, in the aggregate, more than 2,016,163 shares of
Common Stock as presently constituted (the "NASD Cap") upon conversion of the 6%
Preferred, if issuance of a larger number of shares would constitute a breach of
the Rules of the NASD. Subject to the obligation to effect certain redemptions
pursuant to the last four sentences of this Section, if further issuances of
shares of Common Stock upon conversion of the 6% Preferred would constitute a
breach of the NASD Rules (i.e., all of the shares permitted to be issued under
the NASD Cap shall have been so issued), then so long thereafter as such
limitation shall continue to be applicable and any shares of 6% Preferred are
submitted for conversion such shares shall receive in cash an amount equal to
the Cash Conversion Amount determined as provided in Section 4(f) hereof, in
lieu of the Common Stock which such shares would otherwise be entitled to
receive upon conversion. Payment of the Cash Conversion Amount shall be made no
later than as specified in Section 4(f) and shall bear daily interest thereafter
at the rate of one-tenth of one percent per day until paid. The NASD Cap shall
be proportionately and equitably adjusted in the event of stock splits, stock
dividends, reverse stock splits, reclassifications or other such events, in such
manner as the Board of Directors of the Corporation shall reasonably determine.
If (A) the Corporation is unable to obtain the requisite shareholder approval
concerning the issuance of shares of Common Stock upon conversion of the 6%
Preferred to satisfy the NASD Rules prior to March 15, 1998, then (B) the
Corporation shall immediately redeem, at a "Special Redemption Price" equal to
110% of the liquidation preference of such shares, the smallest number of Shares
which is sufficient, in the Corporation's reasonable judgment, such that
following such redemption, conversion of the remaining shares of 6% Preferred
would not constitute a breach of the Corporation's obligations under the NASD
Rules. Any redemption effected pursuant to the preceding sentence shall require
15 days' notice and the Redemption Date shall be not more than 15 days after the
date specified in Clause A of the preceding sentence. Such redemption shall be
made pro-rata. If there shall be a default in payment of the Special Redemption
Price, the amount so payable shall bear daily interest from and after the
Redemption Date at the rate of one-twentieth of one percent per day until paid.
<PAGE> 1
EXHIBIT 10
PREFERRED STOCK INVESTMENT AGREEMENT
AGREEMENT dated as of December 23, 1997, between OraVax, Inc. (the
"Company") and the investor whose name is set forth at the foot of this
Agreement (the "Investor").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
Section 1.1 PURCHASE AND SALE OF PREFERRED STOCK. Upon the following
terms and conditions, the Company shall issue and sell to the Investor shares of
the Company's 6% Convertible Preferred Stock (the "Shares") having the rights,
designations and preferences set forth in Schedule I hereto, and the Investor
shall purchase from the Company the number of Shares designated on the signature
page hereof.
Section 1.2 PURCHASE PRICE. The purchase price for the Shares (the
"Purchase Price") shall be $1,000 per share.
Section 1.3 THE CLOSING.
(a) The closing of the purchase and sale of the Shares (the
"Closing"), shall take place at the offices of the Company, at 10:00 a.m., local
time on the later of the following: (i) 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 (ii) 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) On the Closing Date, the Company shall issue and countersign, or
cause to be issued and countersigned by its transfer agent, for delivery upon
the order of the Investor certificates representing the number of Shares being
purchased by the Investor, registered in the name of the Investor, or deposit
such Shares into accounts designated by the Investor, and the Investor shall
deliver to the Company the Purchase Price for such Shares by cashier's check or
wire transfer in immediately available funds to such account as shall be
designated in writing by the Company. The Investor shall also deliver a
Purchaser Questionnaire in the form furnished by the Company. In addition, each
party shall deliver all documents, instruments and writings required to be
delivered by such party pursuant to this Agreement at or prior to the Closing.
<PAGE> 2
Section 1.4 COVENANT TO REGISTER.
(a) For purposes of this Section, the following definitions shall
apply:
(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 in compliance with the
Act, and the declaration or ordering of effectiveness of such registration
statement or amendment thereto.
(ii) The term "Registrable Securities" means (A) the shares of
common stock issued or issuable upon conversion of the Shares, or (B) any
securities of the Company or securities of any successor corporation issued
pursuant to the provisions of Schedule I hereto 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, which in either case (i) have not been resold pursuant to an
effective registration statement or pursuant to Rule 144 under the Act or (ii)
may not be resold pursuant to Rule 144(k) under the Act. For purposes of this
Agreement, securities will be considered ineligible for resale pursuant to Rule
144(k) under the Act unless the Company's transfer agent has accepted an
instruction from the Company specifying that such securities are eligible for
sale pursuant to Rule 144(k).
(iii) Subject to the provisions of subsection 1.4(h) below, the
term "holder of Registrable Securities" includes any person who holds Shares
which are convertible into Registrable Securities.
(b) (i) The Company shall, as expeditiously as possible following the
Closing, file a registration statement on Form S-3, or if Form S-3 is not then
available, another appropriate form, covering the resale of all the Registrable
Securities under Rule 415 and, to the extent applicable, Rule 416. The number of
shares of Common Stock initially included in such registration statement shall
be not less than 200% of the number which would be issuable upon conversion of
the Shares including Shares subject to the Placement Agents' warrants if all
thereof were to be converted at a conversion price equal to the average closing
price of the Common Stock during the five trading days prior to the effective
date of the Registration Statement. The Company shall use its best efforts to
cause such registration statement to become effective by the 90th calendar day
after the Closing Date (the "Initial Registration"). In the event such
registration is not so declared effective or if at any time thereafter it does
not include at least 120% of the number of Registrable Securities which would
then be issuable upon conversion of the Shares (or any successor security) at
the conversion price then in effect, any holder of 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 (which may include adding such shares to an existing shelf
registration). The parties agree that if the holder of Registrable Securities
demands
<PAGE> 3
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, then so long as the Company is in
compliance with its obligations under Subsection (d)(i) through (v) hereof, the
demand registration rights granted pursuant to this Subsection (b)(i) shall not
be applicable. The Company shall provide holders of Registrable Securities
reasonable opportunity to review any such registration statement or amendment or
supplement thereto prior to the filing thereof. If the Registrable Securities
are registered initially on a form other than Form S-3, the Company shall
register the Registrable Securities on Form S-3 as soon as use of such form is
permissible.
(ii) The Company shall not be obligated to effect Demand
Registration under Subsection (b)(i) if all of the Registrable Securities held
by the holder of Registrable Securities which are demanded to be covered by the
Demand Registration are, at the time of such demand, included in an effective
registration statement and the Company is in compliance with its obligations
under Subsection (d)(i) through (v) hereof.
(iii) The Company may suspend the effectiveness of any such
registration effected pursuant to this Subsection (b) in the event, and for such
period of time as, such a suspension is required by the rules and regulations of
the Securities and Exchange Commission ("SEC"), and may suspend use of the
prospectus included in the Registration Statement if such prospectus ceases to
meet the requirements of Section 10 of the Act. The Company will immediately
advise the holders of the registered securities of any such suspension, and will
use its best efforts to cause such suspension to terminate at the earliest
possible date. The Investor agrees that following receipt of any such notice,
and until such suspension is terminated, the Investor will not make use of the
suspended prospectus and will make no sales requiring delivery of such
prospectus.
(iv) If the registration statement covering all Registrable
Securities is not effective by the 90th calendar day after the Closing Date, the
Company shall pay the Investor in cash an amount equal to 3% of the total
Purchase Price of the Shares purchased by the Investor for each 30 day period
thereafter until such registration statement is effective (pro-rata as to a
period of less than 30 days). An amount equal to 0.1% of the total Purchase
Price of Shares and any Registrable Securities then held by Investor shall also
be paid to the Investor in cash with respect to each day in excess of 30 days in
any calendar year that the effectiveness of the Registration Statement or use of
the prospectus is suspended as set forth in Section 1.4 (b)(iii) or the
prospectus is otherwise unavailable for use by sellers of Registrable
Securities. Any payment hereunder shall be made not later than ten business days
after the end of the period with respect to which such payment is due. The
"Purchase Price" of Registrable Securities shall be, in the case of Registrable
Securities derived from conversion or substitution of Shares, the Purchase Price
of such Shares. This subsection is in addition to the provisions of Section
7.2(a) hereof.
<PAGE> 4
(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 all Registrable Securities have not theretofore
been included in a registration statement under Subsection (b) which remains
effective, the Company shall, at such time, promptly give all holders of
Registrable Securities written notice of such registration. Upon the written
request of any 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 such 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 registration of a public offering for
the account of the Company, the managing underwriter of such public offering
reasonably notifies such holder(s) in writing of its determination that the
Registrable Securities or a portion thereof should be excluded therefrom. The
rights of the Investor and the obligations of the Company under this subsection
are subject to any prior registration rights of other shareholders of the
Company which are disclosed in Exhibit A hereto.
(d) Whenever required under this Section 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 as provided in Section 1.4(b)(i), and keep such
registration statement effective for so long as any holder of Registrable
Securities desires to dispose of the securities covered by such registration
statement, or, if earlier, until such Registrable Securities may be sold under
Rule 144(k) (provided that the Company's transfer agent has accepted an
instruction from the Company to such effect).
(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 and notify the holders of the filing and
effectiveness of such Registration Statement and any amendments or supplements.
(iii) Furnish to each holder of Registrable Securities such
numbers of copies of a current prospectus conforming with the requirements of
the Act, copies of the registration statement, any amendment or supplement
thereto and any documents incorporated by reference therein and such other
documents as such holder of Registrable Securities may reasonably require in
order to facilitate the disposition of Registrable Securities owned by such
holder of Registrable Securities.
(iv) Use its best efforts to register and qualify the securities
<PAGE> 5
covered by such registration statement under such securities or "Blue Sky" laws
of such jurisdictions as shall be reasonably requested by a holder of
Registrable Securities and keep such registration or qualification effective as
long as required to permit sale of Registrable Securities thereunder, 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 of
process in any such states or jurisdictions.
(v) Notify each holder of Registrable Securities immediately 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, and use its best efforts to promptly update and/or
correct such prospectus.
(vi) Furnish to each holder of Registrable Securities included
therein (1) an opinion of counsel to the Company covering compliance of the
registration statement, as to form, with the requirements of the Act and the
rules thereunder, and covering the matters covered in the opinion filed as an
exhibit to the registration statement, and (2) a "cold comfort" letter or
letters of the Company's independent public accountants in the form and of the
substance customarily supplied to underwriters in connection with a public
offering.
(vii) Use its best efforts to list the Registrable Securities
covered by such registration statement with any national market or 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 (as defined below) filed subsequent
to the Closing and require the Company's representatives to supply all
information reasonably requested by any holder of Registrable Securities in
connection with such registration statement.
(e) Each holder of Registrable Securities will furnish to the Company
in connection with any registration under this Section 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 reasonably required to effect the registration of the Registrable Securities
held by such holder of Registrable Securities. The Investor shall provide such
data prior to the closing. The intended method of disposition (Plan of
Distribution) of such securities as so provided by Investor shall be included
without alteration in the Registration Statement covering the Registrable
Securities and shall not be changed without written consent of the Investor.
(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) (each, a "Selling
Shareholder")
<PAGE> 6
and each of its officers, directors, employees, agents, partners or controlling
persons (within the meaning of the Act) (each, an "indemnified party") from and
against, and shall reimburse such indemnified party with respect to, any and all
claims, suits, demands, causes of action, losses, damages, liabilities, costs or
expenses ("Liabilities") to which such indemnified party 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
omission so made in strict conformity with information furnished by such
indemnified party in writing specifically for use in the registration statement;
PROVIDED FURTHER, 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 made in
any preliminary prospectus if (i) a Selling Shareholder under an obligation to
send or deliver a copy of the prospectus with or prior to the delivery of
written confirmation of the sale of Registrable Securities to the person
asserting such Liability who purchased such Registrable Securities which are the
subject thereof from such Selling Shareholder failed to do so and (ii) the
prospectus would have corrected such untrue statement or omission; and PROVIDED
FURTHER, that the Company shall not be liable in any such case to the extent
that any Liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission in the prospectus, if such
untrue statement or alleged untrue statement, omission or alleged omission is
corrected in an amendment or supplement to the prospectus and if, having
previously been furnished by or on behalf of the Company with copies of the
prospectuses so amended or supplemented and having been obligated to deliver
such prospectuses, the Selling Shareholder thereafter failed to deliver such
prospectus as so amended or supplemented, prior to or concurrently with the sale
of Registrable Securities to the person asserting such Liability who purchased
such Registrable Securities which are the subject thereof from such Selling
Shareholder.
(ii) In the event of any registration under the Act of
Registrable Securities pursuant to Subsections (b) or (c), each holder of such
Registrable Securities hereby severally agrees to indemnify, defend and hold
harmless the Company, and its officers, directors, employees, agents, partners,
or controlling persons (within the meaning of the Act) (each, an "indemnified
party") from and against, and shall reimburse such indemnified party with
respect to, any and all Liabilities to which such indemnified party 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, that such holders will be liable in
<PAGE> 7
any such case to the extent, and only 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 made in such registration statement, prospectus
or amendment or supplement thereto in reliance upon and in strict conformity
with written information furnished in an instrument duly executed by such holder
specifically for use in the registration statement.
(iii) Promptly after receipt by any indemnified party of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against another party (the "indemnifying party")
hereunder, notify such party in writing thereof, but the omission so to notify
shall not relieve the indemnifying party from any Liability which it may have to
the indemnified party other than under this section and shall only relieve it
from any Liability which it may have to the indemnified party under this section
if and to the extent it is actually prejudiced by such omission. In case any
such action shall be brought against any indemnified party and such indemnified
party shall notify the indemnifying party of the commencement thereof, the
indemnifying party 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 such indemnified party, and, after notice from the indemnifying
party to the indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to the indemnified
party under this section for any legal expenses subsequently incurred by the
indemnified party 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 indemnifying
party and such indemnified party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party 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 (subject to the
following sentence) the reasonable expenses and fees of such separate counsel
and other reasonable expenses related to such participation to be reimbursed by
the indemnifying party as incurred. If the Company is the indemnifying party it
shall pay the reasonable expenses and fees of only one separate counsel whose
selection is approved by the largest group of similarly situated indemnified
parties as measured by the aggregate par value of such Registrable Securities
owned by such group. Any indemnified party who chooses not to be represented by
the foregoing separate counsel shall be entitled, at its own expense, to be
represented by counsel of its own selection.
(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 Selling Shareholders
participating in such registration shall bear their own share of the
underwriting discounts and commissions, and transfer taxes if any, incurred by
them in connection with such
<PAGE> 8
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 NASDAQ National Market 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. Subject to
appropriate agreements as to confidentiality, and upon reasonable advance notice
from the holder or its counsel, the Company shall make available to counsel for
the holders of Registrable Securities its documents and personnel for due
diligence purposes. Fees and disbursements of counsel and accountants for the
Selling Shareholders shall be borne by the respective Selling Shareholders.
Nothing herein shall require the Company to postpone filing the registration
statement or delay its effectiveness.
(h) The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section may be assigned by Investor to a
transferee or assignee of all or a portion equal to 20% or more, in the
aggregate, of its Shares or the Registrable Securities derived from such Shares.
Any transferee asserting registration rights hereunder shall agree to be bound
by the applicable provisions of this Agreement.
(i) 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 such inclusion will not reduce the amount of the
Registrable Securities included therein.
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 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 material subsidiaries
except as listed in Exhibit A hereto or in the SEC Documents (as hereinafter
defined). The Company and each such subsidiary, if any, is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. "Material Adverse Effect" means any
adverse effect on the business,
<PAGE> 9
operations, properties, prospects, or financial condition of the Company and its
subsidiaries 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 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. The
Company's executive officers and directors have studied and fully understand the
nature of the securities being sold hereunder, and recognize that they have a
potential dilutive effect.
(c) CAPITALIZATION. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock; as of October 31, 1997 there were 10,080,820 shares of Common Stock and
no shares of preferred stock issued and outstanding; and, upon issuance of the
Shares in accordance with the terms hereof and pursuant to similar agreements of
like tenor, there will be approximately 7,000 shares of 6% Convertible Preferred
Stock issued and outstanding. 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 or as described in the SEC Documents, no
shares of Common Stock are entitled to preemptive rights or registration rights
and there are no outstanding options, convertible securities, 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 or made available to the Investor true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Charter"), 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 has been duly
authorized and, when paid for or issued in accordance with the terms hereof, the
Shares shall be validly issued, fully paid and non-assessable and entitled to
the rights and preferences set forth in Schedule I hereto. The Common Stock
issuable upon conversion of the Shares will be duly authorized and reserved for
issuance and, upon conversion in accordance with the Certificate of Designation
to be filed by the
<PAGE> 10
Company to establish the rights and preferences of the Shares, will be validly
issued, fully paid and non-assessable and not subject to any preemptive rights
or adverse claims, and the holders shall be entitled to all rights and
preferences accorded to a holder of Common Stock.
(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 Charter 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 or
any of its subsidiaries is a party, 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 any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect); 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 violations which either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States to obtain any
consent, authorization or order of, or make any filing (other than the filing of
a Certificate setting forth the terms of the Shares with the Delaware Secretary
of State) 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 in accordance with the terms hereof (other than any
SEC, NASD or state securities filings which may be required to be made by the
Company and any registration statement which may be filed pursuant hereto);
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. The Investors in the
Shares and the stock issuable upon conversion thereof, and the Placement Agent
as holder of warrants to purchase Shares, are not and will not become upon
conversion or exercise "Acquiring Persons" or otherwise be subject immediately
after the Closing or upon such conversion, as the case may be, to disabilities
or adverse treatment under any Shareholder Rights Plan of the Company, provided
that Section 3.5 hereof is complied with.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Securities 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
<PAGE> 11
statements and amendments thereto heretofore filed by the Company with the SEC
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company has delivered or made
available 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, 1995. 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 except as set forth
on Exhibit A 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
cases of unaudited statements, to normal year-end audit adjustments).
(g) NO MATERIAL ADVERSE CHANGE. Since the date through which the most
recent quarterly report of the Company on Form 10-Q has been prepared and filed
with the SEC, a copy of which is included in the SEC Documents, no event which
would have a Material Adverse Effect has occurred or exists with respect to the
Company or its subsidiaries except as otherwise disclosed or reflected in other
SEC Documents prepared through or as of a date subsequent thereto.
(h) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(i) NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor, to its knowledge, any person acting on its or their behalf
(including Cappello Capital Corp. (the "Placement Agent")), has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the
<PAGE> 12
Act) in connection with the offer or sale of the Shares.
(j) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor, to its knowledge, any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Shares under the Act.
(k) APPROVAL COMMITMENTS. The Company has received binding assurance
from Lance K. Gordon, Andre L. Lamotte and Medical Science Partners, L.P., in
the form annexed as Exhibit B, to the effect that such persons will vote all
their shares in favor of such approval of the transactions contemplated hereby
as may be necessary to comply with any rule or regulation of the NASD or any
other regulatory agency.
(l) STAND-OFF COMMITMENTS. The Placement Agent has received binding
assurances from the person named in subsection (k) above and from the Company's
other officers and directors that none of them as individuals will sell more
than 30,000 shares of Common Stock of the Company nor will Medical Science
Partners, L.P. and its affiliates sell more than 60,000 shares of Common Stock
of the Company, at a net price lower than $5.50 per share during the 12 month
period following the Closing Date without the prior written consent of the
Placement Agent. However, none of the persons or entities named in this
subsection (1) will sell any shares of Common Stock of the Company at any time
when the registration statement described in Section 1.4 is not effective and
useable.
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) Such 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 or partnership
action, and (iii) this Agreement constitutes a valid and binding obligation of
the Investor enforceable against the Investor 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.
(b) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the consummation by the Investor of the transactions contemplated
hereby do not and will not (i) result in a violation of the Investor's charter
documents or By-Laws or (ii) conflict with any agreement, indenture or
instrument to which Investor is a party, or (iii) result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to Investor. The business of the Investor is not
being conducted in violation of any law
<PAGE> 13
or regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not and will not have a Material Adverse
Effect. The Investor is not required to obtain any consent or authorization of
any governmental agency in order for it to perform its obligations under this
Agreement. The data to be provided by the Investor in connection with
registering the Registrable Securities under the Act will be true and correct in
all material respects.
(c) INVESTMENT REPRESENTATION. The Investor is purchasing the Shares
for its own account for investment and not with a view to distribution otherwise
than in compliance with the Act. Investor has no present intention to sell the
Shares and Investor has no present arrangement (whether or not legally binding)
to sell the Shares to or through any person or entity; provided, however, that
by making the representations herein, the Investor does not agree to hold the
Shares for any minimum or other specific term and reserves the right to dispose
of the Shares at any time in accordance with Federal and state securities laws
applicable to such disposition.
(d) ACCREDITED INVESTOR. The Investor is an accredited investor as
defined in Rule 501 promulgated under the Act. The Investor has such knowledge
and experience in financial and business matters in general, and investments in
particular, so that the Investor is able to evaluate the merits and risks of an
investment in the Shares and to protect its own interests in connection with
such investment. In addition (but without limiting the effect of the Company's
representations and warranties contained herein), the Investor has received such
information as it considers necessary or appropriate for deciding whether to
purchase the Shares pursuant hereto. The Investor acknowledges that no
representation or warranty is made by the Placement Agents or any persons
representing the Placement Agents with respect to the Company or sale of the
Shares.
(e) RULE 144. The Investor understands that there is no public trading
market for the Shares, that none is expected to develop, and that the Shares
must be held indefinitely unless such Shares or securities into which the Shares
are converted are 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.
ARTICLE III
COVENANTS
Section 3.1 SECURITIES COMPLIANCE.
(a) The Company shall notify the SEC and 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, for the legal and valid
issuance of
<PAGE> 14
the Shares and Common Stock issuable upon conversion thereof to the Investor or
subsequent holder.
(b) The Investor understands that the Shares are being offered and
sold 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 the Investor set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Investor to acquire the Shares.
Section 3.2 REGISTRATION AND LISTING. Until one (1) year after all Shares
have been converted into Common Stock, the Company will cause its Common Stock
(or other securities into which the Shares are convertible) 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
this Agreement and will not take any action or file any document (whether or not
permitted by the Act or the Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Acts, except as permitted herein. Until one (1) year
after all Shares have been converted into Common Stock the Company will use
commercially reasonable efforts to continue the listing or trading of its Common
Stock (or other securities into which the Shares are convertible) on NASDAQ and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of NASDAQ.
Section 3.3 STOCKHOLDER APPROVAL. The Company will use its best efforts to
notice and hold a stockholders meeting as promptly as practicable and in any
event not later than March 15, 1998 to obtain any stockholder approvals required
by the Company (including those required by all applicable agreements between
the Company and the NASD) to allow for issuance of Common Stock upon conversion
of the Shares.
Section 3.4 SALE RESTRICTIONS. Following conversion of the Shares into
Common Stock of the Company, Investor will not on any trading day offer or sell
publicly on NASDAQ or on the principal exchange on which the Common Stock is
traded, or on any other securities market or securities exchange, on a net
basis, more than the following number of such shares of Common Stock: the
greater of (i) 10% of the average daily trading volume of the Common Stock for
the five trading days immediately preceding such sale as reported by NASDAQ or
by such principal exchange, (ii) 4,000 shares, or (iii) 10% of the trading
volume of the Common Stock on the day of such sale, as reported by NASDAQ or by
such principal exchange.
Section 3.5 CONVERSION RIGHTS. Investor shall not be entitled to convert
any Share into Common Stock of the Company if following conversion of such Share
the Investor and its affiliates (within the meaning of the Exchange Act) shall
be the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of
10% or more of the Common Stock of the Company, or if a lesser percentage is set
forth after the
<PAGE> 15
name of the Investor on the signature page hereof, such lesser percentage. The
provisions of this Section cannot be amended.
Section 3.6 HEDGING RESTRICTIONS. Investor agrees not to engage in any
short sales, swaps, purchasing of puts, or other hedging activities that involve
the direct or indirect use of the Common Stock to hedge its investment in the
Shares. The Investor may write call options at an exercise price not less than
the lower of the Conversion Price on the date the call is written, or the market
price on that date. This Section shall not apply to transactions not solicited
or directed by Investor and in which Investor has no beneficial interest made on
behalf of third-party clients who are not holders of Shares. This Section shall
not apply to short sales made within 3 days of Conversion of Shares in amounts
not greater than the number of shares issued upon conversion.
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 to the Investor is subject to the satisfaction, at or before the Closing,
of each of the 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'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor shall be true and correct in all
material respects.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Investor at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) MINIMUM INVESTMENT. The total investment by the Investor and other
purchasers of shares of the Company's 6% Convertible Preferred Stock at the
Closing shall be not less than $4,000,000.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTOR TO
PURCHASE THE SHARES. The obligation hereunder of the Investor to acquire and pay
for the Shares is subject to the satisfaction, at or before the Closing, of each
of the conditions set forth below. These conditions are for the Investor's sole
benefit and
<PAGE> 16
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 all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing.
(c) LISTING. The Company's Common Stock shall remain listed and
continue to trade on NASDAQ. Prior to the Closing Date, trading in the Company's
Common Stock shall not have been suspended by the SEC or the NASD (other than a
temporary suspension of not more than one day) 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.
(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 Investor shall have
received an opinion of counsel to the Company in the form attached 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 and, if appropriate, securities
issued upon conversion thereof, 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 EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
<PAGE> 17
The Company agrees to reissue certificates representing the Shares or, if
applicable, the securities issued upon conversion thereof without the legend set
forth above at such time as (i) the holder thereof is permitted to dispose of
such Shares (or securities issued upon conversion thereof) pursuant to Rule 144
under the Act, (ii) the securities are sold to a purchaser or purchasers who (in
the opinion of counsel to such purchasers, in form and substance reasonably
satisfactory to the Company and its counsel) are able to dispose of such shares
publicly without registration under the Act, or (iii) such securities are
included in an effective registration statement under the 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 written consent of the Company
and the Investor.
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 if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement.
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 the tenth business day following the date of this
Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.1 FEES AND EXPENSES. Except as otherwise set forth in Section 1.4
hereof, 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. The Company will compensate the Placement Agent
and will indemnity it against certain liabilities. The Placement Agent's
compensation includes a cash payment and the issuance of warrants to the
Placement Agent. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the Shares pursuant hereto.
<PAGE> 18
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 jurisdiction of the United States District Court and other courts
of the United States sitting in New York 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 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; AMENDMENT. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby 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: Mr. Keith S. Ehrlich, Chief Financial Officer
OraVax, Inc.
38 Sidney Street
<PAGE> 19
Cambridge, MA 02139-4169
Fax: (617) 494-1741
with a copy to: John M. Westcott, Jr., Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Fax: (617) 526-5000
to the Investor: At the address set forth at the foot of this
Agreement, with copies to
Investor's counsel as set
forth at the foot of this
Agreement or as specified
in writing by Investor
with a copy to: Gerard K. Cappello
Cappello Capital Corp.
1299 Ocean Avenue, Suite 306
Santa Monica, California 90401
Fax: (310) 393-4838
Any party hereto may from time to time change its address for notices 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. Except as otherwise provided herein,
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.
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 New York without
regard to such state's principles of conflict of laws.
<PAGE> 20
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, III, V and VII 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 the manually
executed signature page(s) to be physically delivered to the other party within
five days of the execution hereof.
Section 7.12 PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
OraVax, Inc.
By:
--------------------------------
Name: Keith S. Ehrlich
Its: Chief Financial Officer
Number of Shares THE INVESTOR
By:
- -------------------- --------------------------------
Name:
Dollar Amount at Its:
$1,000 per share Investor's address:
$ Percentage limitation, if desired _______
-------------------
Name and address of Investor's counsel:
<PAGE> 21
SCHEDULE I
RESOLUTION ESTABLISHING PREFERENCES
OF
6% CONVERTIBLE PREFERRED STOCK
RESOLVED that there shall be a series of shares of the Preferred Stock of
the Corporation designated "6% Convertible Preferred Stock"; that the number of
authorized shares of such series shall be 9,000 and that the rights and
preferences of such series (the "6% Preferred") and the limitations or
restrictions thereon, shall be as follows:
1. DIVIDENDS.
(a) The holders of the 6% Preferred shall be entitled to receive
cumulative dividends at the rate of $60.00 per share per annum, payable in
shares of 6% Preferred valued at $1,000 per share, when and as declared by the
Board of Directors. Such dividends shall accrue on any given share from the day
of original issuance of such share and shall accrue from day to day whether or
not declared. Dividends not theretofore paid shall be paid upon conversion of
any shares of the 6% Preferred and shares of 6% Preferred issued in payment of
such dividends shall be simultaneously converted into Common Stock together with
the shares on which such dividends have accrued.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the 6% Preferred
shall be entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of the Common Stock or any other class
or series of shares except any class or series which is entitled to priority
over the 6% Preferred, the amount of $1,000 per share plus any accrued but
unpaid dividends plus any amounts accrued but unpaid under Section 1.4(b)(iv) of
the Preferred Stock Investment Agreement under which shares of the 6% Preferred
were originally issued (the "Liquidation Preference").
(b) Subject to the last sentence of this Section, a consolidation or
merger of the Corporation with or into any other corporation or corporations, or
a sale of all or substantially all of the assets of the Corporation, shall at
the option of the holders of the 6% Preferred, be deemed a liquidation,
dissolution or winding up within the meaning of this Section 2 if the shares of
stock of the Corporation (along with all derivative securities) outstanding
immediately prior to such transaction represent immediately after such
transaction less than a majority of the voting power of the surviving
corporation (or of the acquirer of the Corporation's assets in the case
<PAGE> 22
of a sale of assets). Such option may be exercised by the vote or written
consent of holders of a majority of the 6% Preferred at any time within thirty
calendar days after written notice of the essential terms of such transaction
shall have been given to the holders of the 6% Preferred as provided in Section
5 hereof. Such notice shall be given by the Corporation immediately following
determination of such essential terms. If such option is exercised, the holders
of the 6% Preferred shall be entitled to receive, in cash, immediately upon the
occurrence of such transaction, an amount per share equal to the Liquidation
Preference. This Section shall not apply to a business combination in which
substantially all the Common Stock of the Corporation is converted into or
exchanged for voting common stock of the corporation surviving such business
combination, if (i) such common stock of the surviving corporation is listed and
traded on the NASDAQ National Market, the American Stock Exchange or the New
York Stock Exchange, and (ii) the Board of Directors of the Corporation
determines in good faith that the conversion rights and other rights and
preferences of the 6% Preferred are preserved and not rendered of less value by
the terms of such business combination.
3. MANDATORY CONVERSION.
On the fifth anniversary of the date of issuance, all then outstanding
shares of 6% Preferred including any accrued dividends thereon shall be
automatically converted into Common Stock at the Conversion Price on such
anniversary date and otherwise pursuant to the applicable provisions set forth
in Section 4 hereof.
4. CONVERSION. The holders of the 6% Preferred shall have optional
conversion rights as follows:
(a) ACCRUAL OF CONVERSION RIGHTS. The Conversion Period shall commence
3 calendar months after the date of issuance, or (if earlier) the date that a
Registration Statement covering resale of the underlying shares of Common Stock
has been declared effective by the Securities and Exchange Commission, and shall
continue thereafter for the life of the issue. Each holder of record of 6%
Preferred shares on the date of commencement of the Conversion Period (an
"Original Holder") shall be entitled to convert in any calendar month the
following percentage of the 6% Preferred shares held by such holder on the date
of commencement of the Conversion Period, on a cumulative basis following
commencement of the Conversion Period. The percentage for each calendar month
will be determined based on the highest of the daily low trading prices of the
Common Stock during such month, as follows:
<PAGE> 23
<TABLE>
<CAPTION>
Highest of daily low trading Percentage convertible
prices during month during such month
<S> <C>
$3.00 or less 20.0%
$3.01 to $3.50 25.0%
$3.51 to $4.00 30.0%
$4.01 to $4.50 35.0%
$4.51 to $5.00 40.0%
$5.01 to $5.50 45.0%
$5.51 or more 50.0%
</TABLE>
The number of shares which may be converted in any calendar month shall include
the number of shares which might have been but were not converted during earlier
calendar months. In the case of transfers of shares by an Original Holder the
Corporation shall make such notations on its stock ownership records and on the
certificates for shares issued upon transfer so as to reflect the portion (if
any) of the transferred shares which have become convertible pursuant to this
provision, or the Corporation may at its election issue certificates
representing the 6% Preferred shares in such form, or with such annotations, as
to reflect the time or times at which the shares represented by such
certificates will become convertible.
(b) REMOVAL OF LIMITATIONS. The limitations set forth in Section 4(a)
hereof, with respect to the percentage of 6% Preferred shares which may be
converted during certain time periods, shall terminate and all the 6% Preferred
shares shall thereafter be fully convertible if any of the following events or
conditions shall occur or exist: (i) an event described in Section 2(b) (subject
to the exclusion in the last sentence of such Section) shall occur, whether or
not the holders of 6% Preferred deem such event to be a liquidation; (ii)
proceedings for relief under any bankruptcy or similar law for the relief of
debtors are instituted by or against the Corporation or any of its significant
subsidiaries and, if instituted against the Corporation or such subsidiary, are
consented to or not dismissed within 30 days; (iii) the independent auditors of
the Corporation shall fail or be unwilling to express within 90 days after the
end of the Corporation's fiscal year a customary opinion on the financial
statements of the Corporation, or shall express such opinion subject to a "going
concern" qualification; (iv) the Common Stock of the Corporation shall cease to
be listed on either the NASDAQ National Market, the American Stock Exchange or
the New York Stock Exchange; or (v) there shall be a material breach by the
Corporation of any of its obligations hereunder or under the Preferred Stock
Investment Agreements pursuant to which the 6% Preferred was originally issued,
which breach has a material adverse effect on the holders of 6% Preferred.
(c) RIGHT TO CONVERT. At and after the time it has become convertible,
each share of 6% Preferred shall be convertible, at the option of the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing (i) the liquidation preference of the 6% Preferred
share determined pursuant to Section 2(a) hereof on the date the notice of
conversion
<PAGE> 24
is given, by (ii) the Conversion Price determined as hereinafter provided in
effect on said date, provided however, that a share of 6% Preferred shall not be
converted into Common Stock if following such conversion the holder thereof
together with affiliates of such holder would be the beneficial owners (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 10% or more
of the Common Stock of the Corporation.
(d) MECHANICS OF CONVERSION. To convert shares of 6% Preferred into
shares of Common Stock, the holder shall give written notice to the Corporation
(which notice may be given by facsimile transmission) that such holder elects to
convert the same and shall state therein the number of shares to be converted
and the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. Promptly thereafter the
holder shall surrender the certificate or certificates representing the shares
to be converted, duly endorsed, at the office of the Corporation or of any
transfer agent for such shares, or at such other place designated by the
Corporation. The Corporation shall, immediately upon receipt of such notice,
issue and deliver to or upon the order of such holder, against delivery of the
certificates representing the shares which have been converted, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, and a certificate representing the shares of 6% Preferred not so
converted, if any. The Corporation shall effect such issuance immediately and
shall transmit the certificates by messenger or overnight delivery service to
reach the address designated by such holder within three trading days after the
receipt of such notice. Notice of conversion may be given by a holder at any
time of day up to 5:00 pm Los Angeles time, and such conversion shall be deemed
to have been made immediately prior to the close of business on the date such
notice of conversion is given (the "Conversion Date"). The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock at the close of business on the Conversion Date.
(e) DETERMINATION OF CONVERSION PRICE.
(i) Subject to the provisions of subsection (e)(iii) and
subsection (f) of this Section, on any Conversion Date, the Conversion Price
shall be the lowest trading price of the Common Stock for the 22 consecutive
trading days ending with the trading day prior to the Conversion Date, reduced
by the Applicable Percentage (as defined below) in effect on the Conversion
Date.
(ii) The Applicable Percentage shall be as follows:
<TABLE>
<S> <C>
5.00% starting on the first day of the Conversion Period
6.125% starting on the first day of the fifth (5th) calendar month after Closing
7.250% starting on the first day of the sixth (6th) calendar month after Closing
8.375% starting on the first day of the seventh (7th) calendar month after Closing.
9.500% starting on the first day of the eighth (8th) calendar month after Closing.
10.625% starting on the first day of the ninth (9th) calendar month after Closing.
11.750% starting on the first day of the tenth (10th) calendar month after Closing.
12.875% starting on the first day of the eleventh (11th) calendar month after Closing.
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
14.000% starting on the first day of the twelfth (12th) calendar month after Closing.
15.125% starting on the first day of the thirteenth (13th) calendar month after Closing.
16.250% starting on the first day of the fourteenth (14th) calendar month after Closing.
17.375% starting on the first day of the fifteenth (15th) calendar month after Closing.
18.500% starting on the first day of the sixteenth (16th) calendar month after Closing.
19.750% starting on the first day of the seventeenth (17th) calendar month after Closing.
21.000% starting on the first day of the eighteenth (18th) calendar month after Closing.
</TABLE>
(iii) The Maximum Conversion Price ("Conversion Cap") shall be
the lesser of (i) 79% of the average of the daily low trade prices of the Common
Stock for the eighteenth calendar month after the Closing, (ii) 79% of the
average of the daily low trade prices of the Common Stock for the twenty-fourth
calendar month after the Closing, or (iii) 79% of the average of the daily low
trade prices of the Common Stock for the thirtieth calendar month after the
Closing. The provisions of clauses (i), (ii) and (iii) of the foregoing sentence
shall become effective at the end of the eighteenth, twenty-fourth and thirtieth
calendar months following the Closing, respectively.
(iv) The terms "low trading price" and "last sale price" of the
Common Stock on any day shall mean, respectively, (A) the lowest reported sale
price and the last reported sale price of the Common Stock on the principal
stock exchange on which the Common Stock is listed, or (B) if the Common Stock
is not listed on a stock exchange, the lowest reported sale price and the last
reported sale price of the Common Stock on the principal automated securities
price quotation system on which sale prices of the Common Stock are reported, or
(C) if the Common Stock is not listed on a stock exchange and sale prices of the
Common Stock are not reported on an automated quotation system, the lowest bid
price and the last bid price for the Common Stock as reported by National
Quotation Bureau Incorporated. If none of the foregoing provisions are
applicable, the "low trading price" and "last sale price" of the Common Stock on
a day will be the fair market value of the Common Stock on that day as
determined by a member firm of the New York Stock Exchange, Inc., selected by
the Board of Directors of the Corporation. The term "trading day" means (x) if
the Common Stock is listed on at least one stock exchange, a day on which there
is trading on the principal stock exchange on which the Common Stock is listed,
(y) if the Common Stock is not listed on a stock exchange but sale prices of the
Common Stock are reported on an automated quotation system, a day on which
trading is reported on the principal automated quotation system on which sales
of the Common Stock are reported, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by National Quotation
Bureau Incorporated. The "closing price" of the Common Stock on any day means
the "last sale price" as defined above. The term "lowest trading price" of the
Common Stock for a period of several trading days means the lowest of the low
trading prices for each of such trading days.
(v) In the event that during any period of consecutive trading
days provided for herein, the Corporation shall declare or pay any dividend on
the Common Stock payable in Common Stock or in rights to acquire Common Stock,
or shall effect a stock split or reverse stock split, or a combination,
consolidation or reclassification of the Common Stock, then the Conversion Price
shall be
<PAGE> 26
proportionately decreased or increased, as appropriate, to give effect to such
event, and like adjustment shall be made in any price per share specified in
dollars in Section 4(a) or elsewhere herein.
(f) GREEN FLOOR. If at any time the Conversion Price falls below a
price designated by the Corporation upon 30 days' prior notice given to the
holders of the 6% Preferred (the "Green Floor Price") the Corporation may at its
option give written notice ("Cash Conversion Notice") to the holders of the 6%
Preferred at least five trading days prior to the effective date specified in
such Notice (the "Effective Date") that the Corporation will honor any
conversion request otherwise properly made during the period that the Cash
Conversion Notice remains effective, at a Conversion Price lower than the Green
Floor Price then in effect, by a cash payment in lieu of the issuance of Common
Stock in an amount equal to the proceeds which would otherwise have been
received by the holder if conversion were in fact made into Common Stock and
such Common Stock were sold at the high trading price on the Conversion Date
(the "Cash Conversion Amount"). A Cash Conversion Notice shall constitute a
representation and warranty by the Corporation that it has funds available in
cash or cash equivalents to pay the Cash Conversion Amount (computed on the
basis of the Green Floor Price then in effect) upon conversion of all the 6%
Preferred shares eligible for conversion at that time, and that such funds will
be set aside and maintained for the exclusive purpose of satisfying the
Corporation's Cash Conversion obligations. The Cash Conversion Notice may (but
need not) specify an expiration date of such Notice, shall specify the Green
Floor Price that will be in effect until further notice is given, and shall be
given at least 5 trading days before the same becomes effective. The Corporation
may terminate the Cash Conversion Notice by a further five trading day notice to
the holders of 6% Preferred that the Cash Conversion Notice will not be in
effect after a specified date. The Corporation may re-establish the Green Floor
Price, at its option, by giving five trading days, notice to the holders of the
6% Preferred prior to the notice becoming effective. If notice of conversion
shall be given by a holder of 6% Preferred shares on a date that a Cash
Conversion Notice is in effect, the Corporation shall within 48 hours following
surrender of the share certificate as provided in Section 4(d) hereof make
payment of the Cash Conversion Amount to such holder by wire transfer of
immediately available funds in U.S. dollars pursuant to such wire transfer
instructions as may have been given by such holder, or in the absence of such
instructions by mailing by certified mail a bank cashier's or certified check
for the Cash Conversion Amount to the record address of such holder. A Cash
Conversion Notice shall cease to be effective if the Corporation fails to make
payment of the Cash Conversion Amount to any holder entitled thereto in the
manner and within the time specified in the foregoing sentence, time being of
the essence, and the Corporation's right to give Cash Conversion Notices will
thereupon terminate. If the Corporation falls to make payment of the Cash
Conversion Amount to any holder entitled thereto in the manner and within the
time specified above, time being of the essence, (i) such holder shall be
entitled to receive from the Corporation in cash an amount equal to 3% of the
Cash Conversion Amount, without prejudice to the right of such holder to assert
a claim for damages in a larger amount than such payment, and (ii) such holder
shall be entitled (A) to elect to receive the Common Stock that would have
<PAGE> 27
been issuable to him on the Conversion Date upon conversion of his 6% Preferred
shares if no Cash Conversion Notice had been given, such election to be made by
written notice to the Corporation not later than five trading days after the
date on which the holder receives notice that the Corporation has failed to make
payment to him of the Cash Conversion Amount, or (B) unless such holder has
elected the foregoing alternative (A), such holder shall be entitled to the
immediate return of the stock certificate or certificates representing the 6%
Preferred shares submitted by such holder for Cash Conversion, and then and
thereafter (whether or not such certificate or certificates have been returned)
such holder's notice of conversion shall be rescinded and of no further effect,
and such holder shall have the right to convert his 6% Preferred shares into
Common Stock of the Corporation without regard to the provisions of this
subsection (f). The number of shares that a holder is entitled to convert,
determined pursuant to subsections (a) and (b) of this Section 4, shall not be
affected by the giving or effectiveness of a Cash Conversion Notice. Any Cash
Conversion Notice shall be given as provided in Section 5 hereof.
(g) DISTRIBUTIONS. In the event the Corporation shall at any time or
from time to time make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any of its subsidiaries or other
property, other than cash dividends from earnings, then in each such event
provision shall be made so that the holders of 6% Preferred shall receive, upon
the conversion thereof, the securities or other property which they would have
received had they been the owners on the date of such event of the number of
shares of Common Stock issuable to them upon conversion.
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of any
adjustment or readjustment of the Conversion Price pursuant to Section 4(e)(v)
or Section 4(m) hereof, or any provision for distribution pursuant to Section
4(g) hereof, or any adjustment of the cash per-share prices specified herein,
the Corporation at its expense shall promptly compute such adjustment,
readjustment or provision in accordance with the terms hereof and prepare and
furnish to each holder of 6% Preferred a certificate setting forth such
adjustment, readjustment or provision and showing in detail the facts upon which
such adjustment, readjustment or provision is based. The Corporation shall, upon
the written request at any time of any holder of 6% Preferred, furnish or cause
to be furnished to such holder a like certificate prepared by the Corporation
setting forth (i) such adjustments and readjustments, and (ii) the number of
other securities and the amount, if any, of other property which at the time
would be received upon the conversion of 6% Preferred with respect to each share
of Common Stock received upon such conversion. If any holder disputes the
computation of such adjustment or provision the Corporation shall cause
independent public accountants selected by the Corporation to verify and, if
necessary, correct such computation.
(i) NOTICE OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than
<PAGE> 28
a cash dividend) or other distribution, any security or right convertible into
or entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
the Corporation shall give notice to each holder of 6% Preferred at least 10
days prior to such date specifying the date on which any such record is to be
taken for the purpose of such dividend, distribution, security or right and the
amount and character of such dividend, distribution, security or right.
(j) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
shares of 6% Preferred pursuant hereto; provided, however, that the Corporation
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the 6% Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the 6% Preferred, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the 6% Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval as promptly as practicable.
(l) FRACTIONAL SHARES. No fractional shares shall be issued upon the
conversion of any share or shares of 6% Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
6% Preferred by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of Directors of the
Corporation).
(m) REORGANIZATION OR MERGER. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person, and the holders of 6% Preferred do not elect to treat such transaction
as a liquidation, dissolution or winding up as provided in Section 2, then, as
part of such reorganization, consolidation, merger or sale, provision shall be
made so that each
<PAGE> 29
share of 6% Preferred shall thereafter be convertible into the number of shares
of stock or other securities or property (including cash) to which a holder of
the number of shares of Common Stock deliverable upon conversion of such share
of 6% Preferred would have been entitled upon the record date of (or date of, if
no record date is fixed) such event and, in any case, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of the 6% Preferred, to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as equivalent as is
practicable, in relation to any shares of stock or the securities or property
(including cash) thereafter deliverable upon the conversion of the shares of 6%
Preferred. The Corporation shall have no obligation to obtain the prior consent
of the holders of 6% Preferred, individually or as a class, except as expressly
provided herein or as provided by applicable law.
5. NOTICES. Any notice to be given to the holders of the 6% Preferred
shall be (i) mailed by first class mail postage prepaid to each holder of 6%
Preferred at the address shown on the records of the Corporation for such
holder, (ii) transmitted by telecopy or facsimile transmission to any holder
which has supplied a telecopy or facsimile address to the Corporation, and (iii)
unless receipted for by telecopy or facsimile on the date such notice is given,
shall be transmitted by an overnight delivery service or courier service for
delivery at the address shown on the records of the Corporation for such holder
on the first business day following the date such notice is given, or if
delivery in one business day to such address cannot be effected by such delivery
service, then on the earliest day on which such delivery can be made.
6. OTHER PROVISIONS. For all purposes of this Resolution, the term
"date of issuance" or "closing" shall mean the day on which shares of the 6%
Preferred are first issued by the Corporation, and the terms "trading price,"
"low trading price," "closing price," "last trade price," and "trading days"
shall have the meanings given them in Section 4(e) hereof. Any provision herein
which conflicts with or violates any applicable usury law shall be deemed
modified to the extent necessary to avoid such conflict or violation.
7. RESTRICTIONS AND LIMITATIONS. The Corporation shall not undertake
the following actions without the consent of the holders of a majority of the 6%
Preferred: (i) modify its Certificate of Incorporation or Bylaws so as to amend
or change any of the rights, preferences, or privileges of the 6% Preferred,
(ii) authorize or issue any other equity security senior to the 6% Preferred, or
(iii) pay dividends in cash or property on, or purchase or otherwise acquire for
value, any Common Stock or other equity security of the Corporation either
junior to or on a parity with the 6% Preferred except from current or retained
earnings or from the net proceeds of sale of equity securities.
8. VOTING RIGHTS. Except as provided herein or as provided for by law,
the 6% Preferred shall have no voting rights.
<PAGE> 30
9. ATTORNEYS' FEES. Any holder of 6% Preferred shall be entitled to
recover from the Corporation the reasonable attorneys' fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Corporation hereunder, if such holder is the prevailing party
in an action or proceeding to compel such enforcement.
10. LIMITATION ON NUMBER OF CONVERSION SHARES. The Corporation shall
not be obligated to issue, in the aggregate, more than 2,016,163 shares of
Common Stock as presently constituted (the "NASD Cap") upon conversion of the 6%
Preferred, if issuance of a larger number of shares would constitute a breach of
the Rules of the NASD. Subject to the obligation to effect certain redemptions
pursuant to the last four sentences of this Section, if further issuances of
shares of Common Stock upon conversion of the 6% Preferred would constitute a
breach of the NASD Rules (i.e., all of the shares permitted to be issued under
the NASD Cap shall have been so issued), then so long thereafter as such
limitation shall continue to be applicable and any shares of 6% Preferred are
submitted for conversion such shares shall receive in cash an amount equal to
the Cash Conversion Amount determined as provided in Section 4(f) hereof, in
lieu of the Common Stock which such shares would otherwise be entitled to
receive upon conversion. Payment of the Cash Conversion Amount shall be made no
later than as specified in Section 4(f) and shall bear daily interest thereafter
at the rate of one-tenth of one percent per day until paid. The NASD Cap shall
be proportionately and equitably adjusted in the event of stock splits, stock
dividends, reverse stock splits, reclassifications or other such events, in such
manner as the Board of Directors of the Corporation shall reasonably determine.
If (A) the Corporation is unable to obtain the requisite shareholder approval
concerning the issuance of shares of Common Stock upon conversion of the 6%
Preferred to satisfy the NASD Rules prior to March 15, 1998, then (B) the
Corporation shall immediately redeem, at a "Special Redemption Price" equal to
110% of the liquidation preference of such shares, the smallest number of Shares
which is sufficient, in the Corporation's reasonable judgment, such that
following such redemption, conversion of the remaining shares of 6% Preferred
would not constitute a breach of the Corporation's obligations under the NASD
Rules. Any redemption effected pursuant to the preceding sentence shall require
15 days' notice and the Redemption Date shall be not more than 15 days after the
date specified in Clause A of the preceding sentence. Such redemption shall be
made pro-rata. If there shall be a default in payment of the Special Redemption
Price, the amount so payable shall bear daily interest from and after the
Redemption Date at the rate of one-twentieth of one percent per day until paid.
<PAGE> 31
EXHIBIT A
As of November 30, 1997, options to purchase an aggregate of
approximately 1,175,933 shares of Common Stock were outstanding.
The Company is in various stages of negotiations with potential
corporate partners concerning joint ventures and corporate partnerships, any of
which, if consummated, could include the issuance by the Company of equity
securities or rights to equity securities.
<PAGE> 32
December 19, 1997
To: Prospective Purchasers of 6% Preferred
Stock of Oravax, Inc.
Ladies and Gentlemen:
The undersigned are stockholders of Oravax, Inc. (the "Company"). This
letter is written with the understanding that in purchasing shares of the 6%
Preferred Stock of the Company, you will rely on the promises contained in this
letter.
The stock which you are purchasing is convertible into Common Stock of
the Company. We approve of the issuance to you of the full number of shares of
Common Stock to which you may be entitled upon conversion of your 6% Preferred
Stock, and we hereby undertake to cause a meeting of the shareholders of the
Company to be held as soon as practicable and no later than March 15, 1998 for
the purpose of approving such issuance and removing any limitation on the number
of shares of Common Stock so issuable.
We will vote our personal shares in favor of approving such matters
and in the event that (i) one or all of us are not present at any stockholders'
meeting, or (ii) prior to such a meeting, we have not given a written proxy in
favor of approving issuance of the full number of shares of Common Stock
issuable upon conversion of the 6% Preferred Stock and removing any limitation
on the number of shares of Common Stock so issuable, then each of us hereby
irrevocably authorizes any holder of the 6% Preferred Stock (a) to vote as proxy
for each of the undersigned all the shares the undersigned are entitled to vote
in favor of such matters, and (b) to introduce as proxy for the undersigned a
motion to that effect at any meeting of the Company's stockholders.
Very truly yours,
- ---------------------------- --------------------------
Lance K. Gordon Jean J. Deleage
- ----------------------------
Andre L. Lamotte
MEDICAL SCIENCE PARTNERS, L.P.
By:
-------------------------
EXHIBIT B
