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STOCK PURCHASE AGREEMENT
by and among
COLLAGENEX PHARMACEUTICALS, INC.
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
and
THE PURCHASERS NAMED HEREIN
Dated as of March 19, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I SALE AND PURCHASE OF SECURITIES...................................1
1.1 Sale and Purchase of Preferred Stock..............................1
1.2 Closing...........................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................3
2.1 Certificate of Incorporation Stock...............................3
2.2 Issuance of Series D Preferred Stock and Reservation of
Reserved Shares.................................................3
2.3 Organization and Qualification...................................3
2.4 Capitalization...................................................4
2.5 Authority Relative to this Agreement.............................5
2.6 Absence of Certain Changes.......................................5
2.7 Reports..........................................................6
2.8 Financial Reports................................................7
2.9 No Violation; Consents and Approvals.............................7
2.10 Brokerage Fees and Commissions...................................8
2.11 Litigation.......................................................8
2.12 Absence of Changes in Benefit Plans..............................8
2.13 ERISA Compliance.................................................8
2.14 Taxes...........................................................11
2.15 Permits; Environmental Matters..................................11
2.16 Contracts; Debt Instruments.....................................12
2.17 Title to Properties.............................................13
2.18 Intellectual Property...........................................14
2.19 Certain Agreements..............................................14
2.20 Indemnification Claims..........................................14
2.21 Antitakeover Statute; Shareholder Protection Rights Agreement...14
2.22 Protective Agreements...........................................15
2.23 Other Agreements Containing Non-Disclosure and Non-Competition
Provisions.....................................................15
2.24 Patents.........................................................16
2.25 Related Transactions............................................16
2.26 Amendments to Certificate of Incorporation......................16
2.27 Public Announcements............................................16
2.28 Use of Proceeds.................................................17
2.29 S-8 Amendment...................................................17
2.30 Disclosure......................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF INVESTOR AND PURCHASERS......17
3.2 Authority Relative to this Agreement; No Conflict................18
3.4 Investment Intent................................................18
3.4 Purchasers' Counsel..............................................18
3.5 Economic Risk....................................................18
3.6 Additional Representations.......................................19
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ARTICLE III-A COVENANTS.....................................................19
3A.1 Conduct of Business of the Company..............................19
3A.2 Existence; Maintenance of Property..............................21
3A.3 No Solicitation.................................................21
3A.4 Access to Information...........................................21
3A.5 Proxy Statement and Stockholder Meeting.........................22
3A.6 NASDAQ Listing..................................................22
3A.7 Reasonable Best Efforts.........................................22
3A.8 Shareholder Litigation..........................................23
3A.9 Financial Reports...............................................23
ARTICLE IV CONDITIONS TO CLOSING...........................................25
4.1 Conditions to Investor's Obligations for Closing.................25
4.2 Conditions to the Company's Obligations for the Closing..........27
ARTICLE V INDEMNIFICATION..................................................27
5.1 Indemnification by the Company...................................27
5.2 Indemnification by Investor and Purchasers.......................27
5.3 Procedure for Indemnification....................................28
5.4 Procedure for Indemnification....................................29
ARTICLE VI MISCELLANEOUS...................................................29
6.1 Termination; Effect of Termination; Expenses.....................29
6.2 Extension; Waiver................................................30
6.3 Entire Agreement; Assignment.....................................30
6.4 Enforcement of the Agreement; Governing Law; Jurisdiction........30
6.5 Validity.........................................................31
6.6 Notices..........................................................31
6.7 Descriptive Headings.............................................33
6.8 Parties in Interest..............................................33
6.9 Counterparts.....................................................33
6.10 Amendment.......................................................33
6.11 Survival........................................................33
6.12 Certain Definitions.............................................34
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EXHIBITS
Exhibit A Certificate of Designation, Preferences and Rights of Series D
Cumulative Convertible Preferred Stock
Exhibit B-1 Opinion of Counsel to the Company
Exhibit B-2 Opinion of Patent Counsel to the Company
Exhibit C List of Purchasers
Exhibit D Stockholders and Registration Rights Agreement
Exhibit E Notice Information for Purchasers
SCHEDULES
Schedule 2.3(a) List of Jurisdictions for Foreign Qualification
Schedule 2.4(c) List of Holders of Option Shares; List of Holders
Schedule 2.4(d) Warrants, Options, etc.
Schedule 2.6 Certain Changes
Schedule 2.12 Absence of Changes in Benefit Plans
Schedule 2.13 List of Benefit Plans
Schedule 2.15 Permits; Environmental Matters
Schedule 2.16(a) Material Contracts
Schedule 2.16(b) Indebtedness
Schedule 2.16(c) Agreements Involving the Payment of $50,000 or More per Year
Schedule 2.18 Intellectual Property
Schedule 2.19 Contracts that Limit the Company's Ability to Compete
Schedule 2.22 Protective Agreements with Directors, Officers and Employees
Schedule 2.23 Other Agreements Containing Non-Disclosure and
Non-Competition Provisions
Schedule 3A.1 Conduct of Business of the Company
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DEFINED TERMS
affiliate...................................................................34
Agreement....................................................................1
associate...................................................................34
beneficial owner............................................................34
Budget......................................................................24
Closing......................................................................2
Closing Date.................................................................2
COBRA........................................................................9
Code.........................................................................8
Common Stock.................................................................1
Company......................................................................1
confidential information....................................................15
control.....................................................................34
DGCL.........................................................................8
Employee Benefit Plans.......................................................8
Environmental Laws..........................................................11
Environmental Permits.......................................................12
ERISA........................................................................8
Exchange Act.................................................................6
Foundation..................................................................16
fully diluted...............................................................34
Governmental Entity..........................................................7
Hazardous Substance.........................................................12
indemnified party...........................................................28
Intellectual Property.......................................................13
Investor.....................................................................1
Investor Purchase Price......................................................1
Liens........................................................................3
Loss........................................................................27
Material Adverse Effect.....................................................34
NASDAQ.......................................................................1
NCA.........................................................................14
NDA.........................................................................14
NYSE........................................................................22
Opinion of the Company's Counsel............................................26
Opinion of the Company's Patent Counsel.....................................26
Patent Agreements...........................................................16
person......................................................................35
Protective Agreements.......................................................14
Proxy Statement.............................................................22
Purchaser Purchase Price,....................................................2
Related Transactions........................................................16
S-8 Amendment...............................................................17
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SEC Documents................................................................6
Securities Act...............................................................6
Series D Certificate of Designation.........................................16
Series D Preferred Stock.....................................................1
Shareholder Protection Rights Agreement.....................................14
subsidiary..................................................................35
Taxes.......................................................................11
Third Party Claim...........................................................28
Total Purchase Price.........................................................2
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STOCK PURCHASE AGREEMENT
THIS IS A STOCK PURCHASE AGREEMENT, dated as of March 19, 1999 (the
"Agreement."), by and between COLLAGENEX PHARMACEUTICALS, INC., a Delaware
corporation, having its principal office at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxx 00000 (the "Company"), OCM PRINCIPAL OPPORTUNITIES FUND, L.P., a
Delaware limited partnership, having its principal office at c/o Oaktree Capital
Management, LLC, 000 Xxxxx Xxxxx X0xxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000 (the "Investor") and the persons named on Exhibit C to this Agreement
(individually a "Purchaser" and collectively the "Purchasers").
BACKGROUND
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WHEREAS, the Company currently has issued and outstanding 8,587,204
shares of Common Stock, par value one-cent ($0.01) per share ("Common Stock").
The Company's Common Stock is currently traded on the Nasdaq National Market
("NASDAQ").
WHEREAS, the Company is engaged in the business of developing and
commercializing innovative proprietary therapies for the treatment of
periodontal disease and other pathologies;
WHEREAS, the Company intends to issue the Series D Cumulative
Convertible Preferred Stock, one-cent ($0.01) par value ("Series D Preferred
Stock"); and
WHEREAS, Investor and Purchasers desire to purchase the Series D
Convertible Preferred Stock, subject to the terms and conditions contained
herein.
TERMS
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NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE OF SECURITIES
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1.1 SALE AND PURCHASE OF PREFERRED STOCK.
(a) Subject to the terms and conditions set forth herein, at the
Closing (as defined in Section 1.2(a)), the Company will issue and sell to
Investor, and Investor will purchase from the Company, One Hundred Seventy-Seven
Thousand (177,000) shares of the Series D Preferred Stock. The aggregate
purchase price for the Series D Preferred Stock being purchased hereunder is
Seventeen Million Seven Hundred Thousand Dollars ($17,700,000) (the "Investor
Purchase Price").
(b) Subject to the terms and conditions set forth herein, at the
Closing, the Company will issue and sell to each Purchaser, and each Purchaser
will purchase from the Company, the number of shares of Series D Preferred Stock
set forth beside the name of each Purchaser on Exhibit C hereto. The aggregate
purchase price for the Series D Preferred Stock being purchased by each Purchase
is set forth on Exhibit C hereto (the "Purchaser Purchase Price," and together
with the Investor Purchase Price, the "Total Purchase Price").
(c) The total number of shares of Series D Preferred Stock to be
purchased from the Company by Investor is One Hundred Seventy-Seven Thousand
(177,000) and the total number of shares of Series D Preferred Stock to be
purchased from the Company by each Purchaser is set forth on Exhibit C hereto.
The per share purchase price for the Series D Preferred Stock to be paid by
Investor and each Purchaser pursuant to this Section 1.1 is One Hundred Dollars
($100) per share. At Closing, Investor shall pay the Investor Purchase Price for
the shares of Series D Preferred Stock purchased by Investor hereunder, and each
Purchaser shall pay the Purchaser Purchase Price for the shares of Series D
Preferred Stock purchased by such Purchaser, by wire transfer of immediately
available funds to an account designated by the Company not less than two (2)
business days prior to Closing.
1.2 CLOSING.
(a) The closing of the purchase and sale of the shares of Series
D Preferred Stock referred to in Section 1.1 above (the "Closing") will take
place as soon as practicable after the Company's 1999 Annual Meeting of
Stockholders and prior to June 30, 1999 at the offices of Dechert Price &
Xxxxxx, 4000 Xxxx Atlantic Tower, 0000 Xxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000-0000, on such date to be mutually agreed by the parties hereto (the
"Closing Date").
(b) At Closing, the Company will deliver to Investor a stock
certificate representing One Hundred Seventy-Seven Thousand (177,000) shares of
Series D Preferred Stock, registered in the name of Investor or an affiliate or
associate of Investor. Delivery is being made against payment of the Investor
Purchase Price therefor in cash, by wire transfer of immediately available
funds, with confirmed receipt.
(c) At Closing, the Company will deliver to each Purchaser a
stock certificate representing the number of shares of Series D Preferred Stock
set forth beside the name of each Purchaser on Exhibit C hereto, registered in
the name of each Purchaser. Delivery is being made against payment of the
Purchaser Purchase Price therefor in cash, by wire transfer of immediately
available funds, with confirmed receipt.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
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The Company hereby represents and warrants to Investor and each
Purchaser as follows:
2.1 CERTIFICATE OF INCORPORATION. The Company has filed with the
Secretary of State of the State of Delaware an amendment to its Certificate of
Incorporation incorporating the Certificate of Designation.
2.2 ISSUANCE OF SERIES D PREFERRED STOCK AND RESERVATION OF RESERVED
SHARES. Subject to the terms and conditions hereof, the Company has authorized
the issuance of the shares of Series D Preferred Stock; and the Company has also
authorized the reservation of the shares of Common Stock reserved for issuance
upon conversion of the Series D Preferred Stock and dividends, when declared,
with respect to the Series D Preferred Stock.
2.3 ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power to carry on its business as it is now being conducted.
The Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
result in a Material Adverse Effect (as defined in Section 6.12(e)). Schedule
2.3(a) attached hereto sets forth a list of jurisdictions in which the Company
is so qualified to do business and is in good standing as a foreign corporation.
(b) The only subsidiary of the Company is CollaGenex
International, Ltd., which is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power to carry on its business as it is now being conducted.
The subsidiary of the Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities make such
qualification necessary, except where the failure to be so qualified could not
be reasonably expected to result in a Material Adverse Effect. All of the
outstanding shares of capital stock of the subsidiary have been validly issued,
are fully paid and non-assessable and are owned by the Company free and clear of
all pledges, claims, equities, options, liens, charges, rights of first refusal,
"tag" or "drag" along rights, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens"). Except for the capital stock of its
subsidiary, the Company has never had, nor does it presently have, any
subsidiaries, nor has it owned, nor does it presently own, any capital stock or
other proprietary interest or other voting control, directly or indirectly, in
any corporation,
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association, trust, partnership, limited liability company, joint venture or
other entity. The Company is, however, currently evaluating whether to establish
two (2) separate Delaware Investment Holding Companies through which the Company
would separately hold and manage its intellectual property and its cash and
liquid investment balances.
(c) The Company has delivered to Investor complete and correct
copy of its Certificate of Incorporation, certified by the Secretary of State of
the State of Delaware, and a complete and correct copy of its Bylaws and the
comparable charters and bylaws or other organizational documents of its
subsidiary, in each case as amended to the date of this Agreement.
2.4 CAPITALIZATION. The authorized capital stock of the Company
immediately upon the consummation at Closing of the transactions contemplated
hereby, and giving effect thereto, shall consist of:
(a) Four Million Eight Hundred Thousand (4,800,000) shares of
undesignated preferred stock, $0.01 par value;
(b) Two Hundred Thousand (200,000) shares of Series D Preferred
Stock, of which One Hundred Seventy-Seven Thousand (177,000) shares have been
validly issued to Investor and of which Twenty-Three Thousand (23,000) shares
have been validly issued to Purchasers in the amounts set forth on Exhibit C at
Closing and are outstanding, fully paid and non-assessable upon receipt of the
Total Purchase Price pursuant to Section 1.1 hereof, with only limited liability
attaching solely to the ownership thereof under applicable state law;
(c) Twenty Five Million (25,000,000) shares of Common Stock, of
which (i) Eight Million Five Hundred Eighty-Seven Thousand Two Hundred Four
(8,587,204) shares are validly issued and outstanding, and fully paid and
non-assessable, and (ii) Two Million Two Hundred Seventy-Six Thousand Three
Hundred Sixty-Four (2,276,364) shares are duly reserved for issuance in
connection with the conversion of the Series D Preferred Stock and payment of
dividends on the Series D Preferred Stock as set forth in the Certificate of
Designation. Nine Million Seven Hundred Eighty Four Thousand Six Hundred
Sixty-Three (9,784,663) shares of Common Stock represent the Company's total
common equity on a fully-diluted basis (including without limitation shares
outstanding and shares issuable upon the exercise of the rights outstanding as
of the date of execution of this Agreement referred to in Schedule 2.4(d))
(Schedule 2.4(d) attached hereto lists all of the shares of Common Stock by
holder issuable upon exercise of such rights). Schedule 2.4(c) attached hereto
contains a list of (y) all holders of record owning five percent (5%) or more of
outstanding capital stock of the Company and (z) all other holders known to the
Company, of five percent (5%) or more of outstanding capital stock of the
Company and holders known to the Company to have filed a Schedule 13D or 13G
under the Exchange Act, including, for both (y) and (z) above, the number of
shares of outstanding capital stock of the Company held by each such holder; and
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(d) Schedule 2.4(d) attached hereto contains a list of all
outstanding warrants, options, agreements, convertible securities or other
commitments pursuant to which the Company or its subsidiary are or may become
obligated to issue any shares of their capital stock or other securities of the
Company or its subsidiary, which names all persons entitled to receive such
shares or securities and the shares of capital stock or other securities
required to be issued thereunder. There are no bonds, debentures, notes or other
indebtedness of the Company or its subsidiary having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company or its subsidiary may vote.
Except as set forth on Schedule 2.4(d), there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or its subsidiary is a party or by
which the Company or its subsidiary is bound obligating the Company or its
subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
directly or indirectly, additional shares of capital stock or other voting
securities of the Company or its subsidiary, or obligating the Company or its
subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Except
as set forth on Schedule 2.4(d), there are not any outstanding contractual
obligations of the Company or its subsidiary to repurchase, redeem or otherwise
acquire, or providing preemptive or registration rights with respect to, any
shares of capital stock of the Company or its subsidiary. The Company and its
subsidiary do not have outstanding any loans to any person (as defined in
Section 6.12(f)) in respect of the purchase of securities issued by the Company
and its subsidiary.
2.5 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company, and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by the Company, and, assuming this Agreement constitutes
a valid and binding obligation of each Investor and each Purchaser, this
Agreement constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
2.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents (as defined in Section 2.7 below) or as contemplated by this Agreement
or as set forth in Schedule 2.6 attached hereto, since December 31, 1997, no
event has occurred, and no circumstances exist, that could reasonably be
expected to result in a Material Adverse Effect (as defined in Section 6.12(e)
below). Except as disclosed in the Company's filings and reports under the
Exchange Act (as defined in Section 2.7 below) or as set forth in Schedule 2.6,
since December 31, 1997, there has not been (a) any declaration, setting aside
or payment of any dividend or other distribution in respect of the capital stock
of the Company or its subsidiary or any redemption or other acquisition by the
Company or its subsidiary of any shares of Common
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Stock or other equity securities of the Company or its subsidiary; (b) any entry
into any agreement, commitment or transaction by the Company or its subsidiary
which is material to the Company and its subsidiary taken as a whole, except
agreements, commitments or transactions in the ordinary course of business,
consistent with prior practice; (c) any split, combination or reclassification
of the Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; (d)(i) any granting by the Company or its
subsidiary to any officer of the Company or its subsidiary of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the SEC Documents,
(ii) any granting by the Company or its subsidiary to any such officer of any
increase in severance or termination pay, except as was required under
employment, severance or termination agreements in effect as of the date of the
most recent audited financial statements included in the SEC Documents, or (iii)
any entry by the Company or its subsidiary into any employment, severance or
termination agreement with any such officer; (e) any damage, destruction or
loss, whether or not covered by insurance, that could reasonably be expected to
have a Material Adverse Effect; or (f) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles, consistently applied.
2.7 REPORTS. Since June 25, 1996, the Company has filed all required
forms, reports and documents with the SEC required to be filed by it pursuant to
the federal securities laws and the rules and regulations promulgated thereunder
(collectively, the "SEC Documents"), all of which have complied as of their
respective filing dates in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder. None of such forms, reports or
documents at the time filed 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. Except to the extent that information contained
in any SEC Document has been revised or superseded by a later-filed SEC Document
filed and publicly available prior to the date hereof, none of the SEC Documents
contains any untrue statement of a material fact or omits to state any 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 with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its subsidiary as of the
dates thereof and the consolidated results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
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2.8 FINANCIAL REPORTS. The audited, consolidated financial statements
for the Company and its subsidiary for the period ended December 31, 1997; the
unaudited quarterly financial statements for the Company and its subsidiary for
each of the quarterly periods ended March 31, 1998, June 30, 1998 and September
30, 1998; and the unaudited monthly financial statements for the months ended
October, 1998, November, 1998, December, 1998 and January, 1999, and the draft
audited annual consolidated financial statements for 1998, previously provided
to Investor are true, correct and complete in all material respects, and comply
as to form in all material respects with applicable accounting requirements and
the rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except to the extent
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its subsidiary as
of the date thereof and the consolidated results of their operations and cash
flows for the periods then ended. Since the date of such financial statements,
there have been no changes that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except for
liabilities incurred in the ordinary course of business, which individually and
in the aggregate are not material, the Company and its subsidiary do not have
any liabilities or obligations of any nature (whether absolute, contingent or
otherwise) that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect other than such liabilities reflected on the
financial statements referred to hereinabove in this Section 2.8.
2.9 NO VIOLATION; Consents and Approvals. Neither the execution and
delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will conflict with, or result in any violation
of or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any Liens upon
any of the properties or assets or the Company or its subsidiary under, (a) the
Certificate of Incorporation or Bylaws of the Company or its subsidiary, each as
amended, (b) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to the Company or its subsidiary or their properties or assets or (c)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or its subsidiary or their properties or
assets, other than, in the case of clauses (b) or (c), any such conflicts,
violations, defaults, rights or Liens that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect. No consent,
approval, order or authorization of, or registration, declaration or filing
with, (x) any Federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity" ), (y) NASDAQ, or (z) any third
party, is required by the Company or its subsidiary in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated by this Agreement, except for (i)
the filing with the SEC of a notice on Form D or such reports under Section
13(a) of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (ii) the filing of the
Series D Certificate of Designation (as such
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term is defined in Section 2.26) with the Secretary of State of the State of
Delaware pursuant to the Delaware General Corporation Law (the "DGCL"), (iii)
applicable state "blue sky" filings, if any, (iv) approval of the transactions
contemplated hereby by the stockholders of the Company, and (v) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, which have been obtained or made or the failure of which to be obtained
or made, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
2.10 BROKERAGE FEES AND COMMISSIONS. No person or entity, other than
BT Alex. Xxxxx Incorporated, is entitled to receive from the Company or its
subsidiary any investment banking, brokerage or finder's fee in connection with
this Agreement or the transactions contemplated hereby.
2.11 LITIGATION. There is no suit, action or proceeding pending or, to
the knowledge of the Company, threatened against the Company or its subsidiary
that could reasonably be expected to have a Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or its subsidiary that could
reasonably be expected to have a Material Adverse Effect.
2.12 ABSENCE OF CHANGES IN BENEFIT PLANS. Except as set forth in
Schedule 2.12, there has not been any adoption or amendment in any material
respect by the Company or its subsidiary of any collective bargaining agreement
or any Employee Benefit Plan, as defined in Section 2.13(a) of this Agreement.
2.13 ERISA COMPLIANCE.
(a) LIST OF PLANS. Set forth in Schedule 2.13 attached hereto is
an accurate and complete list of all employee benefit plans, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including any "multiemployer plan" as defined in Section 3(37) of
ERISA), and all other pension, retirement, supplemental retirement, deferred
compensation, excess benefit, profit sharing, bonus, incentive, stock purchase,
stock ownership, stock option, stock appreciation right, employment, severance,
salary continuation, termination, change-of-control, health, life, disability,
group insurance, vacation, holiday and fringe benefit plan, program, contract,
or arrangement (whether written or unwritten, qualified or nonqualified, funded
or unfunded and including any that have been frozen or terminated) maintained,
contributed to, or required to be contributed to, by the Company or any ERISA
Affiliate for the benefit of any employee, former employee, director or officer
of the Company or under which the Company or any ERISA Affiliate has any
liability with respect to any employee, former employee, director or officer of
the Company ("Employee Benefit Plans"). The term "ERISA Affiliate" means (i) any
corporation included with the Company in a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) any trade or business (whether or not incorporated)
which is under common control with the Company within the meaning of Section
414(c) of the
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Code; (iii) any member of an affiliated service group of which the Company is a
member within the meaning of Section 414(m) of the Code; or (iv) any other
person or entity treated as an affiliate of the Company under Section 414(o) of
the Code.
(b) STATUS OF PLANS. Each Employee Benefit Plan (including any
related trust) complies in form with, and has at all times been maintained and
operated in compliance with its terms and, the requirements of all applicable
laws, including, without limitation, ERISA, the Code and the Consolidated
Omnibus Budget Reconciliation Act ("COBRA"). No condition or circumstance exists
that would prevent the amendment or termination of any Employee Benefit Plan.
(c) LIABILITIES. No Employee Benefit Plan is now or at any time
has been subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA.
Neither the Company or any current ERISA Affiliate is, or within the seven years
immediately preceding the date of this Agreement was, required to contribute to
any multiemployer plan, as defined by section 3(37) of ERISA. Neither the
Company nor any ERISA Affiliate, while an ERISA Affiliate, has incurred any
withdrawal liability, within the meaning of Section 4201 of ERISA to any
multiemployer plan, which liability has not been fully paid as of the date
hereof. No Employee Benefit Plan which is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code or Section 607(1) of ERISA) is a
"multiple employer welfare arrangement," within the meaning of Section 3(40) of
ERISA. Neither the Company nor any of its subsidiaries maintains any Employee
Benefit Plan (whether qualified or non-qualified under Section 401(a) of the
Code) providing for post-employment or retiree health, life insurance and/or
other welfare benefits and having unfunded liabilities. Neither the Company nor
any of its subsidiaries has any unfunded liabilities pursuant to any employee
benefit pension plan (as defined in Section 3(2) of ERISA) that is not intended
to be qualified under Section 401(a) of the Code. No asset of the Company or any
of its subsidiaries is subject to any lien arising under Section 302(f) of ERISA
or Section 412(n) of the Code, and, to the knowledge of the Company, no event
has occurred and no condition or circumstance exists that is reasonably likely
to give rise to any such lien. Neither the Company nor any of its subsidiaries
has been required to provide any security under Section 307 of ERISA or Section
401(a)(29) or 412(f) of the Code, and, to the knowledge of the Company, no event
has occurred and no condition or circumstance exists that is reasonably likely
to give rise to any such requirement to provide any such security.
(d) ABSENCE OF LITIGATION. There are no actions, suits, claims,
or disputes pending, or, to the knowledge of the Company, threatened or
reasonably expected to be asserted against or with respect to any Employee
Benefit Plan or the assets of any such plan (other than routine claims for
benefits and appeals of denied routine claims) or with respect to any fiduciary
with respect thereto.
(e) CONTRIBUTIONS. Full payment has been timely made of all
amounts which the Company or any ERISA Affiliate is required, under applicable
law or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the
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Company or any ERISA Affiliate is a party, to have paid as contributions or
premiums thereto as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the Closing.
(f) TAX QUALIFICATION. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has, as currently in effect, been
determined to be so qualified by the IRS or an application for a determination
letter will be submitted to the IRS no later than the end of the applicable
remedial amendment period as described in Section 401(b) of the Code. Since the
date of each most recent determination referred to in this paragraph (f), no
event has occurred and no condition or circumstance has existed that resulted or
is reasonably likely to result in the revocation of any such determination or
that would adversely affect the qualified status of any such Employee Benefit
Plan or the exempt status of any such trust.
(g) TRANSACTIONS. Neither the Company nor any ERISA Affiliate nor
any of their respective directors, officers, employees or, to the knowledge of
the Company, other Persons who participate in the operation of any Employee
Benefit Plan or related trust or funding vehicle, has engaged in any transaction
with respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or obligations under Title I of ERISA that would subject any of
them to a tax, penalty or liability for prohibited transactions or breach of any
obligations under ERISA or the Code or would result in any claim being made
under, by or on behalf of any such Employee Benefit Plan by any party with
standing to make such claim.
(h) TRIGGERING EVENTS. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan or arrangement, whether or not
legally enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any payment (whether of
severance pay or otherwise), "parachute payment" (as such term is defined in
Section 280G of the Code), acceleration, vesting or increase in benefits to any
employee or former employee or director of the Company or any of its
subsidiaries. No Employee Benefit Plan provides for the payment of severance,
termination, change in control or similar-type payments or benefits.
(i) DOCUMENTS. The Company have delivered or caused to be
delivered to the Investor or its counsel true and complete copies of the
following documents in connection with each Employee Benefit Plan (where
applicable): (i) all Employee Benefit Plans as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan not set forth in writing, a written description thereof; (ii) all
current summary plan descriptions, summaries of material modifications, and
material communications; (iii) all current trust agreements, declarations of
trust and other documents establishing other funding arrangements (and all
amendments thereto and the latest financial statements thereof); (iv) the most
recent IRS determination letter, obtained with respect to each Employee Benefit
Plan intended to be qualified under Section 401(a) of the Code or exempt under
Section 501(a) of the Code; (v) the annual report on IRS Form 5500-series of
each of the last three years for each
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Employee Benefit Plan required to file such form; (vi) the most recently
prepared financial statements; (vii) all service provider agreements, insurance
contracts, annuity contracts, investment management agreements, subscription
agreements, participation agreements, and recordkeeping agreements and
collective bargaining agreements; and (viii) the most recent response to
auditors' reports for each Employee Benefit Plan.
2.14 TAXES.
(a) The Company and its subsidiary have filed all Federal income
tax returns and all other tax returns and reports (whether foreign, state or
local) required to be filed by them, the failure of which to file could have,
individually or in the aggregate, a Material Adverse Effect. All such returns
are complete and correct in all material respects. The Company and its
subsidiary have paid all taxes due for the periods for which such returns were
filed and all material taxes for which no return was required to be filed, and
the most recent financial statements contained in the SEC Documents reflect an
adequate reserve for all taxes payable by the Company and its subsidiary for all
taxable periods and portions thereof through the date of such financial
statements.
(b) No material deficiencies for any taxes have been proposed,
asserted or assessed against the Company or its subsidiary, and no requests for
waivers of the time to assess any such taxes are pending. No written
notification of intention to examine has been received from, and to the best
knowledge of the Company, no tax return of the Company is being examined by, the
United States Internal Revenue Service or any other taxing authority with regard
to Taxes. The Federal income tax returns of the Company and its subsidiary have
been properly and timely filed with the Internal Revenue Service for all years
through 1997.
(c) As used in this Agreement, "Taxes" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever.
(d) Neither the Company nor its subsidiary is a "real property
holding corporation" as defined in the Code.
2.15 PERMITS; ENVIRONMENTAL MATTERS. The Company and its subsidiary
have accrued or otherwise provided, in accordance with generally accepted
accounting principles, consistently applied, for all damages, liabilities,
penalties or costs that it may incur in connection with any claim pending or
threatened against them, or any requirement that is or may be applicable to
them, under any Environmental Laws, and such accrual or other provision is
reflected in the Company's most recent SEC Financial Statements, except as
disclosed in Schedule 2.15, which disclosed items could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company or its subsidiary:
(a) The Company and its subsidiary are in compliance with all
applicable laws, rules, regulations, ordinances, orders decrees and common law
relating to
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contamination, pollution or the protection or human health or the environment
("Environmental Laws"), and the Company and its subsidiary has all permits,
licenses, registrations and other governmental authorizations required under
such laws ("Environmental Permits") for their operations, and there are no
violations, investigations or proceedings pending or, to the knowledge of
Company or its subsidiary, threatened with respect to Environmental Laws or such
Environmental Permits except where the failure to have such Environmental
Permits or where the violation, investigation or proceeding relating thereto
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or its subsidiary.
(b) No notice, notification, demand, request for information,
citation, summons, complaint or order is pending or has been received by or, to
the knowledge of the Company or its subsidiary, is threatened by any person
against the Company or its subsidiary under any Environmental Laws or in respect
of any of the properties or facilities now or previously owned, leased or
operated by the Company or its subsidiary. No penalty has been assessed against
the Company or its subsidiary, and no liability has been imposed upon the
Company or its subsidiary, under Environmental Law with respect to any alleged
notification, demand, request for information, citation, summons, complaint or
order except where such matters have been fully resolved, or where resolution
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or its subsidiary or prevent or materially delay the consummation of
the transactions contemplated by this Agreement.
(c) No hazardous, toxic or regulated substance, waste, materials
or chemical ("Hazardous Substance") has been discharged, generated, treated,
manufactured, handled, stored, transported, emitted, released or is present at
any property now or previously owned, leased or operated by the Company or its
subsidiary in violation of any Environmental Law or under circumstance which,
individually or in the aggregate, would have in a Material Adverse Effect on the
Company or its subsidiary.
2.16 CONTRACTS; DEBT INSTRUMENTS.
(a) Except as disclosed in both the SEC Documents and Schedule
2.16(a), there is no contract or agreement that is material to the business,
financial condition or results of operations of the Company and its subsidiary.
Neither the Company nor its subsidiary is in violation of or in default under
(nor does there exist any condition which upon the passage of time or the giving
of notice, or both, would cause such a violation of or default under) any loan
or credit agreement, note, bond, mortgage, indenture, lease, or any other
contract, agreement, arrangement or understanding, to which they are a party or
by which they or any of their properties or assets are bound, except for
violations or defaults that could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(b) Set forth on Schedule 2.16(b) of the Agreement is (i) a list
of all loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the Company or
its subsidiary in an aggregate
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principal amount in excess of $100,000 is outstanding or may be incurred and
(ii) the respective principal amounts currently outstanding thereunder. For
purposes of this Section 2.16, "indebtedness" shall mean, with respect to any
person, without duplication, (A) all obligations of such person for borrowed
money, or with respect to deposits or advances of any kind to such person, (B)
all obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges are
customarily paid, (D) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such person,
(E) all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such person to creditors
for raw materials, inventory, services and supplies incurred in the ordinary
course of such person's business), (F) all capitalized lease obligations of such
person, (G) all obligations of others secured by any Lien on property or assets
owned or acquired by such person, whether or not the obligations secured thereby
have been assumed, (H) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (I) all
letters of credit issued for the account of such person (excluding letters of
credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business) and (J) all guarantees
and arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(c) Set forth on Schedule 2.16(c) of this Agreement is a list of
all of the contracts, agreement, leases, subleases, licenses or other similar
arrangements or understandings to which the Company or its subsidiary is a party
which involve payments of more than $50,000 in any one year.
2.17 TITLE TO PROPERTIES. The Company and its subsidiary have good,
valid and marketable title to, or valid leasehold interests in, all their
material properties and assets except for such as are no longer used or useful
in the conduct of their businesses or as have been disposed of in the ordinary
course of business and except for defects in title, easements, restrictive
covenants and similar encumbrances or impediments that, individually or in the
aggregate, do not and will not have a Material Adverse Effect on their ability
to conduct their businesses as currently conducted. All such material properties
and assets, other than properties and assets in which the Company or its
subsidiary has leasehold interests, are free and clear of all Liens, except for
Liens that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the ability of the Company or its subsidiary to
conduct business as currently conducted. The Company and its subsidiary have
complied in all material respects with the terms of all leases to which they are
a party and under which they are in occupancy, and all such leases are in full
force and effect. The Company and its subsidiary enjoy peaceful and undisturbed
possession under all such leases.
2.18 INTELLECTUAL PROPERTY. For purposes of this Agreement,
"Intellectual Property" shall mean all industrial and intellectual property
rights, including without limitation, patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service marks, service
xxxx applications, trade xxxx registrations, copyrights, copyright
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applications, copyright registrations, technology, know-how, licenses, trade
secrets, proprietary processes and formulae owned or licensed by the Company or
its subsidiary. A complete list of the Intellectual Property of the Company and
its subsidiary is set forth on Schedule 2.18 to this Agreement. The Company or
its subsidiary owns, is licensed by the owner or otherwise holds the right to
use and enjoy the rights under the Intellectual Property as set forth in
Schedule 2.18, except where the lack of ownership, license or right to use or
enjoy the rights under the Intellectual Property could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
and the consummation of the transactions contemplated by this Agreement will not
alter or impair any such rights. Except as set forth in Schedule 2.18, no claims
have been asserted by any person or Governmental Entity alleging that any of the
current or contemplated activities of the Company or its subsidiary infringe
upon or violate any patent, copyright, trademark, trade name, trade secret or
other proprietary right of any third party. No person or Governmental Entity has
undertaken a judicial challenge or judicially questioned the validity of the
Intellectual Property set forth in Schedule 2.18 or the effectiveness of any
license or agreement relating thereto to which the Company or its subsidiary is
a party and which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
2.19 CERTAIN AGREEMENTS. Except as set forth in Schedule 2.19, the
Company is not a party to, or bound by, any contract or agreement that
materially limits the ability of the Company directly or indirectly to compete
in any line of business or with any person in any geographic area during any
period of time.
2.20 INDEMNIFICATION CLAIMS. There are no indemnification, breach of
contract or similar claims by or against the Company or its subsidiary which are
filed or pending, and, to the best knowledge of the Company and its subsidiary,
there are no indemnification, breach of contract or similar claims by or against
the Company or its subsidiary threatened, in each case in excess of $100,000.00
in amount.
2.21 ANTITAKEOVER STATUTE; SHAREHOLDER PROTECTION RIGHTS AGREEMENT.
The Board of Directors of the Company has taken all action necessary to approve
the acquisition of shares of Series D Preferred Stock by Investor and each
Purchaser pursuant to this Agreement (which shares represent 15% or more of the
voting stock of the Company) in accordance with and pursuant to Section
203(a)(1) of the DGCL. The actions taken by the Company are sufficient to comply
with Section 203(a)(1) of the DGCL and will result in Investor and each
Purchaser being exempted from the restriction set forth in Section 203 of the
DGCL. The Board of Directors of the Company has taken all action necessary in
accordance with the Shareholder Protection Rights Agreement dated September 15,
1997, between the Company and the American Stock Transfer & Trust Company (the
"Shareholder Protection Rights Agreement") to guarantee that none of the stock
purchase rights distributed pursuant to the Shareholder Protection Rights
Agreement are or will become exercisable as a result of the transactions
contemplated by the Documents.
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2.22 PROTECTIVE AGREEMENTS. Schedule 2.22 hereto contains a list of
all directors, officers and employees of the Company or its subsidiary that have
entered into the standard form of Non-Competition Agreement (the "NCA") and the
standard form of Non-Disclosure Agreement (the "NDA" and together with the NCA,
the "Protective Agreements"), with the Company or its subsidiary, as the case
may be, copies of which have been provided previously to Investor. Each of the
Protective Agreements is (i) in full force and effect; and (ii) enforceable by
the Company against the respective director, officer or employee who is a party
thereto in accordance with its terms, except that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses, if any, and to the discretion of the court before which any
proceeding therefor may be brought. No breach of or event of default under any
Protective Agreement has occurred or is continuing with respect to each
director, officer or employee who is a party to a Protective Agreement and the
Company has not waived any defenses nor allowed any defense to lapse or toll.
2.23 OTHER AGREEMENTS CONTAINING NON-DISCLOSURE AND NON-COMPETITION
PROVISIONS.
(a) Schedule 2.23 attached hereto contains a true, correct and
complete list of all persons (other than directors, officers and employees of
the Company or its subsidiary) who have entered into agreements with the Company
or its subsidiary containing mutual confidentiality and non-use agreements,
mutual non-disclosure agreements, and non-disclosure agreements, which
provisions, individually or in the aggregate, have not had, and are not
reasonably expected to have, a Material Adverse Effect. The Company and its
subsidiary hereby represent and warrant that the Company and its subsidiary have
entered into agreements with all persons with whom the Company or its subsidiary
has shared, disclosed or otherwise made available its confidential information
(as defined below) pursuant to which such persons are bound contractually to
protect from disclosure and keep confidential such information and not to use
any such confidential information for any purpose except as set forth in such
agreements. Each such agreement is (i) in full force and effect; and (ii)
enforceable by the Company or its subsidiary against each respective person who
is a party thereto in accordance with its terms, except that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses, if any, and to the discretion of the court before
which any proceeding therefor may be brought. No breach or event of default
under any such agreement has occurred or is continuing with respect to each
person who is a party thereto and the Company has not waived any defenses nor
allowed any defense to lapse or toll. For purposes of this Section 2.23,
"confidential information" shall mean the Company's or its subsidiary's trade
secrets, business plans, technology, procedures, manuals, confidential reports
and communications, lists of potential customers and clients, any information
and materials received by the Company or its subsidiary from third parties in
confidence (or subject to non-disclosure or similar covenants), production
processes, product designs, marketing techniques and arrangements, mailing
lists, purchasing information, pricing policies, quoting procedures, financial
information, customer and prospect names and requirements, employee, customer,
supplier and distributor data and other materials or information relating to the
Company's
-15-
business and activities and the manner in which the Company does business,
discoveries, concepts, and ideas, including, without limitation, the nature and
results of research and development activities, processes, formulas, inventions,
techniques and "know-how," any other materials or information related to the
business or activities of the Company which are not generally known to others
engaged in similar businesses or activities and all ideas which are derived from
or relate to the Company's access to any of the above mentioned materials and
information.
(b) Neither the Company nor its subsidiary has nor shall disclose
any confidential information of the Company or its subsidiary except pursuant to
those non-disclosure and non-competition provisions described above in this
Section 2.23 or in Section 2.22, or as otherwise may be required to be disclosed
by applicable law; provided, however, to the extent possible, the Company shall
use its best efforts to avoid such disclosures consistent with the exercise of
reasonable business judgment.
2.24 PATENTS. The Company has an exclusive worldwide license to make,
have made, use, sell and have sold the subject matter which is disclosed and
claimed in U.S. Patent Nos. 4,666,897 entitled Inhibition of Mammalian
Collagenolytic Enzymes by Tetracycline, and Re 34,656 entitled Use of
Tetracycline to Enhance Bone Protein Synthesis and/or Treatment of Bone
Deficiency. The license to the above patents was granted pursuant to the option
exercised by the Company in its September 6, 1995 letter to the Research
Foundation of the State University of New York, (the "Foundation"), said option
being granted pursuant to the option granted by the Amended and Restated
Agreement between the Company and the Foundation, effective January 13, 1992, as
amended by the Addendum to Amended and Restated Agreement, dated April 1, 1996,
and the Second Addendum to the Amended and Restated Agreement, dated April 18,
1996 (individually and collectively the "Patent Agreements"). The Company has
not, to the best of its knowledge, breached any provision of the Patent
Agreements and to the best knowledge of the Company there has been no event of
default or claim brought under any of the Patent Agreements. Each of the Patent
Agreements is in full force and effect and is enforceable by the Company in
accordance with its respective terms and may be assigned by the Company, in
whole or in part, without the consent of any other person.
2.25 RELATED TRANSACTIONS. No current or former stockholder, director,
officer or employee of the Company (other than Investor and Purchasers) nor any
relative or "associate" (as defined in the rules and regulations promulgated
under the Exchange Act) of any such Person, is presently, directly or indirectly
through his or its affiliation with any other person or entity, a party to any
transaction with the Company providing for the furnishing of services (other
than employment of such individuals by the Company) by or to, or the sale of
products by or to, or rental of real or personal property from or to, or
otherwise requiring cash payments by or to, any such Person in excess of an
aggregate of $60,000. For purposes of this Agreement, a transaction of the type
described in this Section 2.25 is sometimes herein referred to as a "Related
Transaction."
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2.26 AMENDMENTS TO CERTIFICATE OF INCORPORATION. Prior to the Closing,
the Board of Directors of the Company and its subsidiary will have taken all
actions necessary to adopt the resolutions set forth in Exhibit A to this
Agreement, and the Company will have filed a Certificate of Designation,
Preferences and Rights of Series D Cumulative Convertible Preferred Stock in the
form of Exhibit A hereto (the "Certificate of Designation" ) with the Secretary
of State of the State of Delaware.
2.27 PUBLIC ANNOUNCEMENTS. The Company and its subsidiary shall
consult with Investor and obtain the prior approval and consent of Investor
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, except as may be required by
law, in which case the Company or its subsidiary shall use its good faith
efforts to review the contents of any such announcement with Investor and obtain
the approval and consent of Investor reasonably in advance of the public release
of such announcement.
2.28 USE OF PROCEEDS. The net proceeds received by the Company from
the sale of the shares of Series D Preferred Stock contemplated herein shall be
used by the Company: (i) to repay in full principal and unpaid accrued interest
of that certain 12% Senior Secured Convertible Note due March 18, 2000, issued
by the Company in favor of Investor pursuant to the terms and conditions of that
certain Convertible Loan and Security Agreement, by and between the Company and
Investor, of even date herewith and (ii) for working capital and other general
corporate purposes.
2.29 S-8 AMENDMENT. No future amendment by the Company of its Form S-8
(Registration Statement No. 333-31229) with respect to the registration of
shares on behalf of officers of the Company (the "S-8 Amendment") shall have,
individually or in the aggregate, a Material Adverse Effect on the transactions
contemplated by this Agreement, and the total number of shares subject to the
S-8 Amendment shall at no time exceed Two Hundred Twenty-Seven Thousand
(227,000) shares. The Company shall cause any directors and officers of the
Company who would otherwise be entitled to sell shares of Common Stock pursuant
to such S-8 Amendment to enter into an agreement with the Company, in form and
substance reasonably acceptable to Investor and the Company, whereby such
directors and officers shall be precluded from selling shares in excess of the
amounts that they would otherwise be entitled to sell in accordance with Rule
144(e) promulgated under the Securities Act.
2.30 DISCLOSURE. No representation or warranty by the Company in this
Agreement, and no exhibit, document, statement, certificate or Schedule or
written information furnished by the Company or to be furnished by the Company
to Investor pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained herein or therein not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF INVESTOR AND PURCHASERS
--------------------------
Investor and each Purchaser, severally and not jointly, hereby
represent and warrant as to itself, himself or herself only to the Company as
follows:
3.1 ORGANIZATION.
(a) Investor is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power to carry on its business as it is now being conducted.
(b) Each Purchaser is duly organized, validly existing and in
good standing under the laws of the state of its organization and has the
requisite power to carry on its business as it is now being conducted. Exhibit C
sets forth the state of organization of each Purchaser.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NO CONFLICT. Investor and
each Purchaser has the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby without the
consent of any other person (except for such consents as have heretofore been
obtained). This Agreement has been duly and validly executed and delivered by
Investor and each Purchaser and, assuming this Agreement constitutes a valid and
binding obligation of the Company, this Agreement constitutes a valid and
binding agreement of Investor and each Purchaser, enforceable against Investor
and each Purchaser in accordance with its terms, and will not conflict with any
other agreement to which Investor or such Purchaser is a party.
3.3 INVESTMENT INTENT. The shares of Series D Preferred Stock being
purchased by Investor and each Purchaser are being purchased by Investor and
each Purchaser for investment for its, his or her own account, and not with a
view to any distribution thereof that would violate the Securities Act, or the
applicable state securities laws of any state. Investor and each Purchaser will
not distribute the shares of Preferred Stock in violation of the Securities Act
or the applicable securities laws of any state. Investor and each Purchaser will
not "sell short" the Common Stock of the Company, but Investor and each
Purchaser may purchase the Company's Common Stock in the open market for long
term investment purposes and as to such purchases, if any, the Company makes no
representations or warranties.
3.4 PURCHASERS' COUNSEL. Each Purchaser hereby represents and warrants
on its own behalf that such Purchaser is not represented by Dechert Price &
Xxxxxx or Xxxxxxxx Xxxxxxxxx Professional Corporation.
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3.5 ECONOMIC RISK. Investor and each Purchaser is well versed in
financial matters, has had extensive dealings over the years in securities and
is fully familiar with the operating history and financial results of the
Company and is fully capable of understanding the type of investment being made
pursuant to this Agreement and the risks involved in connection therewith.
Investor and each Purchaser is financially able to hold the Series D Preferred
Stock for long-term investment, believes that the nature and amount of the
Series D Preferred Stock being acquired by Investor and each such Purchaser are
consistent with Investor's and each Purchaser's overall investment program and
financial position, and recognizes that there are substantial risks involved in
the acquisition of the Series D Preferred Stock.
3.6 ADDITIONAL REPRESENTATIONS. Investor and each Purchaser: (i) is an
accredited investor within the meaning of Rule 501(a) under the Securities Act,
(ii) is aware of the limits on resale imposed by virtue of the nature of the
transactions contemplated by this Agreement and is aware that the certificates
representing such Investor's or Purchaser's respective ownership of Series D
Preferred Stock will bear related restrictive legends; (iii) is acquiring the
shares of the Company hereunder without registration under the Securities Act in
reliance on the exemption from registration contained in Section 4(2) of the
Securities Act; (iv) has been given the opportunity to ask questions of, and
receive answers from, the officers of the Company regarding the Company, its
current and proposed business operations and the Series D Preferred Stock, and
the officers of the Company have made available to the Investor and each such
Purchaser all documents and information that the Investor and each such
Purchaser has requested relating to an investment in the Company; (v) has access
to all of the Company's public filings with the Securities and Exchange
Commission; (vi) acknowledges that the Company is entering into this Agreement
in reliance upon Investor's and each such Purchaser's representations and
warranties and other covenants and agreements contained herein; and (vii)
acknowledges that Investor and each of the Purchasers, as the case may be, is
entering into this Agreement in reliance upon Investor's or each such other
Purchaser's, as the case may be, representations and warranties and other
covenants and agreements contained herein.
ARTICLE III-A
COVENANTS
---------
3A.1 Conduct of Business of the Company. During the period from the
date of execution of this Agreement to the Closing Date, the Company and its
subsidiary will each conduct its operations according to its ordinary and usual
course of business and consistent with past practice. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, neither the Company nor its subsidiary shall, without the prior
written consent of the Investor:
(a) issue, sell or pledge, or authorize or propose the issuance,
sale or pledge of:
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(i) additional shares of capital stock of any class, or
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or other convertible securities, or grant or
accelerate any right to convert or exchange any securities of the Company for
shares, other than shares of Common Stock issuable pursuant to the terms of any
option grants under the Company's current stock option plans or commitments
disclosed in Section 2.4(d) and Section 2.13 hereof, or
(ii) any other securities in respect of, in lieu of or in
substitution for shares of Common Stock outstanding on the date thereof;
(b) purchase or otherwise acquire, or propose to purchase or
otherwise acquire, any of its outstanding capital stock or other equity debt
securities;
(c) declare or pay any dividend or distribution on any shares of
capital stock of the Company;
(d) enter into any merger or consolidation or make any
acquisition of a material amount of assets or securities, any disposition
(including by way of mortgage, license, encumbrance or any Lien) of a material
amount of assets or securities, or enter into a material contract, not in the
ordinary course of business, consistent with past practice, or release or
relinquish any material contract rights not in the ordinary course of business,
consistent with past practice, or make any amendments, or modifications thereto;
(e) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or its
subsidiary, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing; or (ii) make any loans, advances of capital contributions to,
or investments in, any other person;
(f) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the SEC Documents filed prior to the date of
this Agreement or incurred since the date of such financial statements in the
ordinary course of business consistent with past practice;
(g) propose or adopt any amendments to the Certificate of
Incorporation, as amended, or Bylaws of the Company (or any such similar
organizational documents of its subsidiary), except as contemplated hereby;
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(h) enter into any new employment agreements with any officers,
directors or key employees or grant any material increases in the compensation
or benefits to officers, directors and key employees;
(i) take any of the actions set forth in Section 2.6 (Absence of
Certain Changes) not otherwise specified herein;
(j) settle the terms of any material litigation affecting the
Company or its subsidiary;
(k) make any tax election or settle or compromise any income tax
liability;
(l) make or agree to make any new capital expenditures which
individually are in excess of $300,000 or which in the aggregate are in excess
of $300,000; or
(m) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty in this
Agreement untrue or incorrect.
3A.2 EXISTENCE; MAINTENANCE OF PROPERTY. Between the date of execution
of this Agreement and the Closing Date, the Company and its subsidiary shall do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its respective corporate existence, material rights, licenses,
permits and franchises and comply with all laws and regulations applicable to
the conduct of its respective business and the ownership of its respective
property; at all times maintain and preserve all material property necessary in
the conduct of the business and keep the same in good repair, working order and
condition, and from time to time make, or cause to be made, all needed and
proper repairs, renewals and replacements thereto, so that the business carried
on in connection therewith may be properly conducted at all times.
3A.3 NO SOLICITATION. On or before the Closing Date, the Company and
its subsidiary shall not, nor shall the Company or its subsidiary authorize or
permit any officer, director or employee of or any investment banker, attorney
or other advisor or representative of the Company or its subsidiary to, directly
or indirectly, solicit, initiate or encourage (including by way of furnishing
confidential or non-public information with respect to the business of the
Company or its subsidiary or permitting access to the assets and properties or
books and records of the Company or its subsidiary), receive, negotiate, assist
or otherwise facilitate any offers or inquiries from any person or entity, other
than Investor or its affiliates, concerning any proposal that constitutes or may
reasonably be expected to lead to any direct or indirect acquisition or takeover
proposal or any financing of the business of the Company or its subsidiary,
other than trade financing in the ordinary course of business consistent with
past practice.
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3A.4 ACCESS TO INFORMATION. Between the date of execution of this
Agreement and the Closing Date, the Company will upon reasonable notice (i) give
Investor and its authorized representatives access during regular business hours
to all of the Company's plants, offices, warehouses and other facilities and to
all books and records of it, (ii) permit Investor to make such inspections as it
may require (and the Company shall cooperate with Investor in any inspections,
including, without limitation, environmental due diligence), and (iii) cause its
officers and those of its subsidiary to furnish Investor with such financial and
operating data and other information with respect to the business and properties
of the Company and its subsidiary as Investor may from time to time request.
Investor shall maintain the confidentiality of any confidential and proprietary
information so obtained by it which is not otherwise available from other
sources that are free from similar restrictions; provided, however, that the
foregoing shall in no way limit or otherwise restrict the ability of Investor or
such authorized representatives to disclose any such information concerning the
Company or its subsidiary which it may be required to disclose (a) to its
partners, board members or stockholders, to the extent required to satisfy its
fiduciary obligations to such persons, or (b) otherwise pursuant to or as
required by law.
3A.5 PROXY STATEMENT AND STOCKHOLDER MEETING. As promptly as
practicable after the execution and delivery of this Agreement, the Company will
prepare and file with the SEC preliminary proxy materials relating to the
adoption of this Agreement and the approval of the transactions contemplated
hereby by the stockholders of the Company. As promptly as practicable after
comments are received from the SEC on the preliminary proxy material, the
Company will file with the SEC the definitive Proxy Statement. As used herein,
"Proxy Statement" means the letter to stockholders, notice of meeting, proxy
statement and form of proxy (and any schedule required to be filed with the SEC
in connection therewith) to be distributed to stockholders of the Company in
connection with the Stockholder Meeting (as defined below). The Company will
make all necessary filings with respect to the transactions contemplated by this
Agreement under the Securities Act, the Exchange Act and the rules and
regulations thereunder, and applicable state securities laws, and will use all
reasonable efforts to obtain any required approvals or clearances with respect
thereto. The Proxy Statement will include the recommendation of the Board of
Directors of the Company in favor of the approval of the transactions
contemplated hereby.
3A.6 NASDAQ LISTING. Between the date of execution of this Agreement
and the Closing Date, the Company shall take all actions necessary or
appropriate to ensure that the shares of Common Stock are listed or authorized
to be quoted on NASDAQ or listed on any national securities exchange on which
shares of Common Stock are then listed and the Company shall take all actions
necessary or appropriate to ensure that it maintains a public market for its
Common Stock on the American Stock Exchange, NASDAQ or the New York Stock
Exchange ("NYSE").
3A.7 REASONABLE BEST EFFORTS.
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(a) Subject to the terms and conditions herein, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
Such reasonable best efforts shall include, without limitation, (i) the
obtaining of all necessary consents, approvals or waivers from third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, and (ii) opposing vigorously, to the extent
commercially reasonable, any litigation or administrative proceeding relating to
this Agreement or the transactions contemplated hereby, including, without
limitation, to the extent commercially reasonable, promptly appealing any
adverse court or agency order. Notwithstanding the foregoing or any other
provisions contained in this Agreement to the contrary, neither Investor nor any
of its affiliates shall be under any obligation of any kind to enter into any
negotiations or to otherwise agree with any Governmental Entity, including but
not limited to any governmental or regulatory authority with jurisdiction over
the enforcement of any applicable federal, state, local and foreign antitrust,
competition or other similar laws, or any other party to sell or otherwise
dispose of, hold separate (through the establishment of a trust or otherwise)
particular assets or categories of assets or businesses of any of the Company,
Investor or any of Investor's affiliates.
(b) Between the execution of this Agreement and the Closing Date,
the Company shall give and make all required notices and reports to the
appropriate persons with respect to the Environmental Permits that may be
necessary for the consummation of the transactions contemplated hereby.
(c) Between the execution of this Agreement and the Closing Date,
the Company and its Board of Directors shall (i) take all action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to this Agreement or any of the transactions contemplated
hereby, and (ii) if any state takeover statute or similar statute or regulation
becomes applicable to this Agreement or any of the transactions contemplated
hereby, take all action necessary to ensure that the transactions contemplated
by this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the transactions contemplated by this Agreement.
3A.8 STOCKHOLDER LITIGATION. Between the date of execution of this
Agreement and the Closing Date, the Company shall give Investor the opportunity
to participate in the defense or settlement of any stockholder litigation
against the Company and its directors relating to any of the transactions
contemplated by this Agreement until Closing. Thereafter, with regard to such
stockholder litigation that commences after the date of execution but before the
Closing of this Agreement, the Company shall give Investor the opportunity to
participate in the defense
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of such litigation, and if settlement of such litigation could have a Material
Adverse Effect, then no such settlement shall be agreed to without Investor's
consent, which consent shall not be unreasonably withheld. In addition, no
settlement requiring a payment by a director shall be agreed to without such
director's consent, which consent shall not be unreasonably withheld.
3A.9 FINANCIAL REPORTS. Between the date of execution of this
Agreement and the Closing Date, the Company shall furnish Investor with the
following:
(a) PERIODIC REPORTS. As soon as practicable, and in any case
within thirty (30) calendar days after the end of each calendar month, the
Company shall furnish Investor with monthly unaudited financial statements (all
prepared in accordance with generally accepted accounting principles
consistently applied), including (A) an unaudited balance sheet as of the last
day of such month, (B) an unaudited statement of income for such month, together
with a cumulative statement of income from the first day of the then current
fiscal year to the last day of such month, (C) a cash flow statement for such
month, together with a cash flow statement from the first day of the then
current fiscal year to the last day of such month, (D) a schedule showing all
prescription data known to the Company on new and existing users, (E) an aging
schedule (or summary thereof) of all accounts receivable and accounts payable,
and (F) a comparison between the actual figures for such month, the comparable
figures (with respect to clauses (A), (B) and (C) only) for the prior year
period and the comparable figures in the Budget. For the purposes of this
Agreement, "Budget" shall mean the Company's annual operating and capital budget
with monthly breakdowns prepared by management and signed by the President or
the Chief Financial Officer of the Company. As soon as practicable and in any
case within ninety (90) calendar days after the end of the fiscal year ending
December 31, 1998, the Company shall furnish Investor with a balance sheet as of
the end of such fiscal year, a statement of income and a statement of cash flows
of the Company for such year, setting forth in each case in comparative form the
figures from the Company's previous fiscal year, all prepared in accordance with
generally accepted accounting principles consistently applied and audited by
independent auditors. With the annual financial statements referred to in
Section 3A.9(a), there shall be delivered to Investor a certificate of the form
of certified public accountants auditing such financial statements of the
Company, in each case, to the effect that no knowledge has been obtained of any
violation or default by the Company in the performance of its agreements or
covenants contained herein, in the Certificate of Incorporation or in any other
material agreement to which the Company is a party or of the occurrence of any
condition, event or act which, with or without notice or lapse of time, or both,
would constitute a violation or an event of default, or, if such firm or officer
shall have obtained knowledge of any such violation, condition, event or act, it
or he (as the case may be) shall specify in such certificate all such
violations, conditions, events and acts and the nature and status thereof. The
foregoing financial statements shall be certified by the President or Chief
Financial Officer of the Company to the effect that such statements fairly
present the financial position and financial results of the Company for the
fiscal period covered, and shall be accompanied by a written explanation of (A)
any material differences between the operating and financial results and the
Budget, (B) an analysis of any significant problems, changes, events and
achievements, including without limitation, those
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involving sales and marketing activities and staffing and (C) a commentary on
developing changes in the business outlook of the Company, together with a
statement as to their anticipated effect on future operations and previous
forecasts.
(b) AUDITOR'S LETTERS. No later than five (5) business days
following receipt by the Company, the Company shall furnish Investor with each
audit response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company.
(c) NOTICE OF ACTIONS. No later than five (5) business days after
the commencement thereof, the Company shall furnish Investor with written notice
of all actions, suits, claims, proceedings, investigations and that could have,
individually or in the aggregate, a Material Adverse Effect.
(d) OTHER INFORMATION. Promptly, from time to time, the Company
shall furnish Investor with such other information regarding the business,
prospects, financial condition, operations, property or affairs of the Company
as Investor reasonably may request.
(e) Subsidiaries. If for any period the Company shall have any
subsidiary or subsidiaries whose accounts are consolidated with those of the
Company, then in respect of such period, the Company shall furnish Investor with
the financial statements, letters, notices and other information delivered
pursuant to the foregoing Sections 3A.9(a) through (d) shall be the consolidated
financial statements of the Company and all such consolidated subsidiaries and
the letters, notices and other information relating to the Company and all such
subsidiaries, as well.
ARTICLE IV
CONDITIONS TO CLOSING
---------------------
4.1 CONDITIONS TO INVESTOR'S AND PURCHASERS' OBLIGATIONS FOR CLOSING. The
obligations of Investor and each Purchaser to effect the purchase of shares of
Series D Preferred Stock contemplated by Section 1.1(a) of this Agreement are
subject to the satisfaction or written waiver of the following conditions in
Investor's and each Purchaser's reasonable discretion:
(a) the representations and warranties of the Company contained
in this Agreement shall be true, correct and complete in all material respects,
on and as of the Closing Date (irrespective of any notice delivered after the
date hereof), and the Company shall have performed in all material respects all
of its obligations under this Agreement required to be performed prior to the
Closing Date;
(b) there shall not have occurred any Material Adverse Effect;
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(c) there shall not have occurred any event of default on any of
the Company's indebtedness (as defined in Section 2.16);
(d) there shall not have occurred any violation of law by the
Company which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(e) Investor shall have received a certificate of the President,
Chief Executive Officer or Chief Financial Officer of the Company, on behalf of
the Company, certifying as to the fulfillment of the conditions set forth in
clauses (a) through (d) above;
(f) no statute, rule, regulation, judgment, order or injunction
shall be enacted, entered, promulgated or enforced (i) challenging the
transactions contemplated hereby, seeking to restrain or prohibit the
transactions contemplated hereby or seeking any damages material in relation to
the Company or Investor, (ii) seeking to impose limitations on the ability of
Investor to acquire or hold, or exercise full rights of ownership of any shares
of Series D Preferred Stock, including the right to vote such shares or (iii)
which otherwise could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(g) Investor shall have been provided with evidence satisfactory
to Investor in its reasonable discretion that (i) the Board of Directors of the
Company has approved the transactions contemplated by this Agreement for
purposes of Section 203 of the DGCL, and (ii) the Board of Directors of the
Company has taken all necessary action to guarantee that none of the stock
purchase rights distributed pursuant to the Shareholder Protection Rights
Agreement are or will become exercisable as a result of the transactions
contemplated by this Agreement and excluding any future purchases of the
Company's securities by Investor or any of the Purchasers.
(h) Investor and each Purchaser shall have received a
certificate, dated the Closing Date, duly executed by the Secretary of the
Company certifying as to (i) the attached copy of resolutions of the Board of
Directors of the Company authorizing and approving the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby and stating that such resolutions have not been modified,
amended, revoked or rescinded, and (ii) the incumbency, authority and specimen
signature of each officer of the Company executing this Agreement and any other
document or instrument contemplated hereby;
(i) Investor and each Purchaser shall have received a certificate
of the Secretary of State of the State of Delaware certifying as to the
Company's due organization, valid existence and good standing as a domestic
corporation in the State of Delaware as of a date not more than two (2) business
days prior to the Closing Date;
(j) Investor shall have received an opinion of counsel to the
Company (the "Opinion of the Company's Counsel") and an opinion of patent
counsel to the Company (the "Opinion of the Company's Patent Counsel"), each
dated the Closing Date, in the form attached hereto as Exhibit B-1 and Exhibit
B-2, respectively;
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(k) the Company shall have received (and furnished to Investor
evidence thereof reasonably satisfactory to Investor) any necessary or required
approvals or consents from all Governmental Entities and other third parties
(including the Company's stockholders as contemplated in the Proxy Statement at
the Company's 1999 Annual Stockholders Meeting (the "Stockholder Meeting")
necessary or required to complete the transactions contemplated hereby, and such
approvals and consents shall not have been withdrawn or expired as of the
Closing Date and the Series D Certificate of Designation shall have been duly
filed with the Secretary of State of the State of Delaware;
(l) the Company shall have executed and delivered to Investor the
Stockholders and Registration Rights Agreement; and
(m) the Company shall pay Investor's reasonable costs and
expenses in connection with the transactions contemplated hereby, including, but
not limited to: (i) Investor's out-of-pocket costs and expenses related to
Investor's business due diligence, including but not limited to the fees and
expenses of a consultant to evaluate the Company's business and marketing plan,
up to a limit of $25,000; (ii) the reasonable fees and expenses of Investor's
outside counsel incurred in connection with the transactions contemplated
hereby, including Investor's due diligence; and (iii) the reasonable fees of
Investor's patent counsel incurred in connection with Investor's due diligence
investigation and related matters (the costs and expenses referred to in clauses
(i), (ii) and (iii) referred to collectively as the "Investor's Expenses").
4.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS FOR THE CLOSING. The
obligations of the Company to effect the sale of shares of Series D Preferred
Stock contemplated by Section 1.1(a) of this Agreement are subject to the
satisfaction or written waiver of the following conditions:
(a) the representations and warranties of Investor and each
Purchaser contained in this Agreement shall be true and correct in all material
respects, on and as of the Closing Date (irrespective of any notice delivered
after the date hereof), and Investor and each Purchaser shall have performed in
all material respects all of their respective obligations under this Agreement
required to be performed prior to the Closing Date;
(b) the Company shall have received certificates from the
authorized officer of Investor, and from each Purchaser certifying as to the
fulfillment of the condition set forth in clause (a) above; and
(c) the Company shall have obtained all requisite stockholder
approval for the transactions contemplated hereby at the Stockholder Meeting or
otherwise; provided, however, that the Company shall use its best efforts to
obtain stockholder approval by a date no later than June 30, 1999.
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ARTICLE V
INDEMNIFICATION
---------------
5.1 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify,
defend and hold harmless Investor, each Purchaser and their respective
affiliates and their respective partners, shareholders, directors, officers,
employees and agents from and against any loss, liability, claim, damage or
expense (including court and arbitration fees and costs, and reasonable fees and
expenses of legal counsel, investigators, expert witnesses, consultants,
accountants and other professionals) (a "Loss") suffered or incurred by any such
indemnified party in connection with a third party claim arising from (i) any
untruth, inaccuracy or breach of any representation or warranty of the Company
contained in this Agreement, or (ii) any breach of any covenant or obligation of
the Company contained in this Agreement.
5.2 INDEMNIFICATION BY INVESTOR AND PURCHASERS. Investor and each
Purchaser shall, severally and not jointly, indemnify and hold harmless the
Company and its affiliate and their respective partners, shareholders,
directors, officers, employees and agents from an against any Loss suffered or
incurred by any such indemnified party in connection with a third party claim
arising from (i) any untruth, inaccuracy or breach of any representation or
warranty of Investor or Purchasers contained in this Agreement, or (ii) any
breach of any covenant or obligation of Investor or any Purchaser contained in
this Agreement.
5.3 PROCEDURE FOR INDEMNIFICATION.
(a) In order for a party (the "indemnified party") to be entitled
to any indemnification provided for under this Agreement in respect of, arising
out of or involving a claim or demand, made by any person against the
indemnified party (a "Third Party Claim"), such indemnified party must notify
the indemnifying party in writing of the Third Party Claim within thirty (30)
calendar days after receipt by such indemnified party of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any expenses
incurred during the period in which the indemnified party failed to give such
notice). Thereafter, the indemnified party shall deliver to the indemnifying
party, within five (5) business days after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim.
(i) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party; provided, such counsel is not reasonably
objected to by the indemnified party; and provided, further, that the
indemnifying party first notifies the indemnified party of its intention to
assume such defense within thirty (30) calendar days of receipt of notice of a
Third Party Claim. Should
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the indemnifying party so elect to assume the defense of a Third Party Claim,
the indemnifying party will not be liable to the indemnified party for any legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party elects to assume the defense of a
Third Party Claim, the indemnified party (x) will cooperate in all reasonable
respects with the indemnifying party in connection with such defense, (y) will
not admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without the indemnifying party's prior written consent and (z)
will agree to any settlement, compromise or discharge of a Third Party Claim
which the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim, which does not obligate the indemnified
party to take or forbear to take any action, and which would not adversely
affect the business, operations or properties of the Company.
(ii) In the event the indemnifying party shall assume the
defense of any Third Party Claim as provided above, the indemnified party shall
be entitled to participate in (but not control) such defense with its own
counsel at its own expense. If the indemnifying party does not so assume the
defense of any such Third Party Claim, the indemnified party may defend the same
in such manner as it may deem appropriate including, but not limited to,
settling such claim or litigation after giving notice of same to the
indemnifying party on such terms as the indemnified party may deem appropriate,
and the indemnifying party promptly will reimburse the indemnified party upon
written request.
(iii) Anything contained in this Agreement to the contrary
notwithstanding, the indemnifying party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable for counsel's fees and
expenses incurred by the indemnified party in defending such Third Party Claim)
if the Third Party Claim seeks an order, injunction or other equitable relief or
relief for other than money damages against the indemnified party that the
indemnified party reasonably determines, after conferring with its outside
counsel, cannot be separated from any related claim for money damages and which,
if successful, would adversely affect the business, operations or properties of
the indemnified party; provided, however, that if such equitable relief portion
of the Third Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages.
5.4 PERIOD OF INDEMNITY. The indemnities contained in this Article VII
shall expire six (6) years from the Closing Date, except with respect to the
untruth, inaccuracy or breach of any representation or warranty of the Company
contained in Sections 2.12 (Changes in Benefit Plans) and 2.14 (Taxes), in which
cases the indemnification period shall be extended until the running of the
statute of limitations applicable to the taxable period to which a particular
claim relates; or Sections 2.3 (Organization and Qualification), 2.4
(Capitalization), 2.13 (ERISA Compliance), 2.21 (Antitakeover Statute;
Shareholder Protection Rights Agreement), 2.22 (Protective Agreements), 2.23
(Other Agreements Containing Non-Disclosure and Non-
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Competition Provisions) and 2.24 (Patents), in which case the indemnification
period shall not terminate at any time.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 TERMINATION; EFFECT OF TERMINATION; EXPENSES.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(i) by mutual written consent of the Company and Investor;
(ii) by Investor, if the Closing does not occur by June 30,
1999; provided, however, that the right to terminate this Agreement pursuant to
this Section 6.1(a) shall not be available to any party whose failure to fulfill
any of its obligations under this Agreement results in the failure of any such
condition; or
(iii) by either party if any court of competent jurisdiction
or any other governmental body shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated hereby and such order, decree, ruling
or other action shall have become final and nonappealable.
(b) In the event of termination and abandonment of this Agreement
pursuant to Section 6.1(a), this Agreement, except for the provisions of Section
3A.4 (only with respect to confidentiality), Section 6.1(c) and Article V, shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers or shareholders. Nothing in this Section
6.1(b) shall relieve any party to this Agreement of liability for breach of this
Agreement.
(c) In the event of termination or abandonment of this Agreement
pursuant to Section 6.1(a) above, the Company's liability to pay Investor's
Expenses shall be limited to Seventy Five Thousand Dollars ($75,000.00) in the
aggregate.
6.2 EXTENSION; WAIVER. The parties hereto, may (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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6.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Schedules and Exhibits hereto) and the other documents and instruments
contemplated hereby, (a) constitute the entire agreement among the parties with
respect to the subject matter hereof, and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof, and (b) shall not be assigned by operation
of law or otherwise; provided, that Investor may assign any of its rights and
obligations hereunder to any affiliate of Investor prior to Closing and after
Closing to any person, but no such assignment shall relieve Investor of its
obligations hereunder unless such assignee or transferee agrees in writing to be
bound by the terms hereof as though an original signatory hereto. Either
Investor or any affiliate or associate of Investor may purchase shares of Series
D Preferred Stock under this Agreement.
6.4 ENFORCEMENT OF THE AGREEMENT; GOVERNING LAW; JURISDICTION. The
parties hereto agree that Investor would suffer 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 by the Company.
It is accordingly agreed that Investor shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any state court located in the State of New
York, or the United States District Court for the Southern District of New York
or any federal court in the State of New York (as to which the Company agrees to
submit to jurisdiction for the purposes of such or any other action), this being
in addition to any other remedy to which Investor is entitled at law or in
equity. This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of Delaware regardless of the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
6.5 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
6.6 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram, facsimile transmission
with confirmation of receipt, or telex, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
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if to Investor:
OCM Principal Opportunities Fund, L.P.
c/o Oaktree Capital Management, LLC
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Principal
Phone: 000-000-0000
Xxxxxxx X. Xxxxxx, Vice President
Phone: 000-000-0000
Fax: 000-000-0000
with a required copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
If to Purchasers:
See Exhibit E attached hereto
if to the Company:
CollaGenex Pharmaceuticals, Inc.
000 Xxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx,
Vice President and Chief Financial Officer
Phone: 000-000-0000
Fax: 000-000-0000
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with a required copy to:
Xxxxxxxx Xxxxxxxxx Professional Corporation
Princeton Xxxxxxxxx Center
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
6.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
6.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
6.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
6.10 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
6.11 SURVIVAL. The representations, warranties, covenants and
agreements of the Company, Investor and each Purchaser contained in this
Agreement, and all statements contained in this Agreement or any exhibit,
attachment or Schedule hereto or any certificate, financial statement or report
or other document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby, shall be deemed incorporated in this Agreement
and shall constitute representations, warranties, covenants and agreements of
the respective Party delivering the same. All such representations, warranties,
covenants and agreements shall survive the Closing and (i) with respect to the
representations and warranties in Section 2.12. and 2.14, terminate when the
applicable statute of limitations with respect to the Tax liabilities in
question have expired; (ii) with respect to the representations and warranties
in Sections 2.3, 2.4, 2.13, 2.21, 2.22, 2.23 and 2.24 shall not terminate at any
time; and (iii) with respect to all other representations, warranties, covenants
and agreements, terminate at the close of business on the fourth (4th)
anniversary of the Closing Date. The Company acknowledges that
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its representations and warranties in this Agreement shall not be affected or
mitigated by any investigation conducted by Investor, each Purchaser or their
representatives prior to the Closing or any knowledge of Investor or any
Purchaser.
6.12 Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them below:
(a) "affiliate" of a person shall mean (i) a person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first-mentioned person and (ii) an
"associate", as that term is defined in Rule 12b-2 promulgated under the
Exchange Act as in effect on the date of execution of this Agreement.
(b) "beneficial owner" (including the term "beneficially own" or
correlative terms) with respect to any securities means a person that shall be
deemed to be the beneficial owner of such securities (i) that such person or any
of its affiliates beneficially owns, directly or indirectly, (ii) that such
person or any of its affiliates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) that are beneficially owned, directly or indirectly, by
any other person with which such person or any of its affiliates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any of such securities.
(c) "control" (including the terms "controlling", "controlled by"
and "under common control with" or correlative terms) shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through ownership of voting
securities, by contract, or otherwise.
(d) "Documents" means this Agreement, the Stockholders and
Registration Rights Agreement, the Certificate of Designation, the Convertible
Loan and Security Agreement dated as of the date hereof between the Company and
Investor, and the Convertible Note.
(e) "fully diluted" in reference to the shares of Common Stock
means all outstanding securities entitled generally to vote in the election of
directors of the Company on a fully diluted basis, after giving effect to the
exercise or conversion of all options, rights and securities exercisable or
convertible into such voting securities.
(f) "Material Adverse Effect" shall mean (i) any adverse change
in the condition (financial or otherwise), assets (including without limitation,
patents and licenses to patents), liabilities, business, or results of
operations or prospects of the Company and its subsidiary, which change,
individually or in the aggregate, is material to the Company or its subsidiary,
or (ii) any event, matter, condition or effect which impairs the ability of the
Company or its
-34-
subsidiary to perform on a timely basis its obligations under this Agreement or
the consummation of the transactions contemplated by this Agreement. Materiality
under clauses (i) or (ii) hereof shall be as determined in good faith by
Investor.
(g) "person" shall mean a natural person, company, corporation,
partnership, association, trust or any unincorporated organization.
(h) "Stockholders and Registration Rights Agreement" means the
Stockholders and Registration Rights Agreement dated as of the date hereof,
among the Company, Investor and Purchasers.
(i) "subsidiary" shall mean, when used with reference to a person
means a corporation the majority of the outstanding voting securities of which
are owned directly or indirectly by such person.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, on the day
and year first above written.
COLLAGENEX PHARMACEUTICALS, INC,
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President and Chief Financial Officer
OAKTREE PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC, its
general partner
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Principal
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
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PURCHASERS:
/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxxx
MARQUETTE VENTURE PARTNERS II, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:
MVP II AFFILIATES FUND, L.P.
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
PEBBLEBROOK PARTNERS LTD
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title:
